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Sujata V. Manohar, J. The only narrow question in this appeal is whether in respect of an agreement of lease dated 13-6-1994 executed by the respondents in favour of the appellants, stamp duty under Article 36 of the Bombay Stamp Act, 1958 is payable. Article 36 deals with lease including an under-lease or sub-lease and any agreement to let or sub-let or any renewal of lease. Explanation III of Article 36 which was in force at the material time, makes it clear that an agreement of lease shall number be chargeable as a lease unless there is an immediate and present demise. In the present case, the document is on the face of it an agreement to create a lease in future. It is, however, submitted by the respondents that in substance the document itself creates a lease. The document demises immediately and presents an interest in the land in favour of the appellants. If we examine the agreement under Clause 1 of the agreement of lease, there is a clear provision that during the period of three years from the date of possession, the licensees as the appellants are described , shall have a licence and authority only to enter upon the land for the purpose of erecting a building or buildings for the purpose of housing its offices and numberother purpose, and until the grant of a lease, the licensee shall be deemed to be a bare licensee only of the said land at the same rent and subject to the same terms including liability for payment of rates, land revenue and taxes, as if the lease had been actually executed. Clause 2 expressly provides that the agreement does number demise any interest in land in favour of the appellants. Clause 2 is as follows 2 Not a demise.-Nothing companytained in these presents shall be companystrued as a demise in law of the said land hereby agreed to be demised or any part thereof so as to give to the licensee any legal interest therein until the lease hereby companytemplated shall be executed and registered, but the licensee shall only have a licence to enter upon the said land for the purpose of performing this agreement. Clause 7 of the agreement is as follows Grant of lease.-As soon as the said officer has certified that the building and works have been erected in accordance with the terms thereof and if the licensee shall have observed all the stipulations and companyditions hereinbefore companytained, the authority shall grant, and the licensee or his numberinee subject to the following companyditions shall accept a lease which shall be executed by the parties in duplicate of the said land and the building erected thereon for the term of 80 years from the date of possession on payment of ground rent at the following rates Ground rent The lessee shall have to pay annual ground rent at the following rates, payable annually in advance, without any deductions whatsoever, on the 10th of January in each and every year -------------------------------------------------------------------------- No. Year of lease Rate of Rate of ground rent ground rent payable by payable by lessee of lessee of land to be land to be used for used for companymercial residential and para companymercial purpose purpose and public amenities. -------------------------------------------------------------------------- From the Commencement Nil Nil of the terms of lease up to the end of 3 years From the 4th year up 1 of the premium Nil year up amount to the 20th year of the term of lease. 3 From the 21st year up 2 of the premium Nil term of lease, amount From the 51st year of 3 of the premium Nil the term of amount lease up to the end of the term of lease. -------------------------------------------------------------------------- Clause 8 requires that the lease, as and when executed in terms of Clause 7, shall be prepared in duplicate and all companyts, charges and expenses in that companynection as also in companynection with the execution of the agreement and its duplicate shall be paid by the licensee alone. Therefore, there is a clear intention of the parties to execute a document of lease in future. Until such document is executed, the status of the appellants is that of a licensee. In fact, we are informed by the appellants that pursuant to this agreement, a lease has, in fact, number been executed between the parties on 8.4.1999 and stamp duty amounting to Rs. 5,45,30,600 has been paid by the appellants on the document of lease. Our attention has been drawn to a decision of this Court in Associated Hotels of India v. R.N. Kapoor where this Court has made a distinction between a lease and a licence. Referring to Section 105 of the Transfer of Property Act, this Court has observed that it defines a lease of immovable property as a transfer of a right to enjoy such property made for a certain time in companysideration for a price paid or promised. A lease is, therefore, a transfer of an interest in land and the interest transferred is called the leasehold interest. It follows that the lessee gets that right to the exclusion of the lessor. Whereas Section 52 of the Indian Easements Act, defines a licence thus Where one person grants to another, or to a definite number of other persons, a right to do, or companytinue to do, in or upon the immovable property of the grantor, something which would, in the absence of such right, be unlawful, and such right does number amount to an easement or an interest in the property, the right is called a licence. Therefore, is a document gives only a right to use the property in a particular way or under certain terms, while it remains in possession and companytrol of the owner thereof, it will be a licence. In the present case, the licensee has been put in possession only for the purpose of companystructing a building or buildings. Under this document, numberinterest in the land is companyveyed in favour of the appellants. The agreement does number create a lease, number does it demise any interest in land in favour of the appellants. In this companynection, a reference may also be made to subsequent decision of this Court in State of Maharashtra v. Atur India P Ltd. where this Court has made a distinction between a lease and an agreement for lease. Although it has been companytended by the respondents that there is a demise of interest in the land under the said agreement, the agreement does number demise any such interest in the land. Clause 2 expressly sets out that this agreement is number to be companystrued as a demise in law of the said land so as to give to the licensee any legal interest in the land.

LORD JUSTICE EVANS: The judge began his judgment with the following paragraph, which I agree with and would entirely endorse - "Antedated and false bills of lading are a cancer in international trade. A bill of lading is issued in international trade with the purpose that it should be relied upon by those into whose hands it properly comes - consignees, bankers and endorsees. A bank, which receives a bill of lading signed by or on behalf of a ship owner (as one of the documents presented under a letter of credit), relies upon the veracity and authenticity of the bill. Honest commerce requires that those who put bills of lading into circulation do so only where the bill of lading, as far as they know, represents the true facts." This requirement of honest commerce is stringently enforced by the English Courts. If a false bill of lading is knowingly issued by the master or agent of the shipowner, and if the claimant was intended to rely on it as being accurate, did rely upon it and as a result of doing so has suffered loss, then the shipowner is liable in damages for the tort of deceit. The rule in Derry v. Peek (1889) 14 App. Cas. 337 applies, and it is no defence to the charge of knowingly making a false statement that the master or agent believed that he was justified in doing so or that in the circumstances no harm would result : Brown Jenkinson v. Percy Dalton (London) Ltd. [1957] 2 Q.B. 621. It follows from this that a bank which pays the seller the price of goods under a letter of credit against presentation of bill of lading which falsely records that the goods were shipped on the carrying vessel by the specified date, when they were not, has no difficulty in recovering damages from the shipowner sufficient to idemnify it against loss, whether or not it can obtain repayment from the seller. For the first time, so far as reported cases are concerned, this appeal raises another issue : does the same rigorous standard as to the accuracy of statements made in the course of the letter of credit transaction apply to the bank, as it applies to the master and agents of the shipowner? If it does, and the bank is liable or potentialy liable for deceitful conduct, what is the effect, if any, on the bank's right to recover damages from the shipowner? It should be made clear at the outset that the judge acquitted the bank, Standard Chartered Bank ("SCB."), and its servants of fraudulent or dishonest conduct, using these terms in the sense relevant to the criminal law. There is no appeal against that finding. But the appellants alleged that the evidence was clear that SCB knowingly deceived the Vietnamese bank by whom the letter of credit was issued, Incombank, as to the date when the documents were presented to it for payment. In fact, the presentation was late, outside the terms of the credit, and if Incombank had been told this, they would have been entitled to reject the documents on that ground. They did reject them, but on other grounds of discrepancy, with the result that, as will appear below, the problems of causation of SCB's loss become even more complex than they would have been in any event. The appeal is from a judgment of Cresswell J. given on 1 April 1998 after an extended trial in the Commercial Court. SCB recovered damages from the shipowners, Pakistan National Shipping Corporation ("PNSC"), and from other defendants, including its customer Oakprime Ltd to whom the payment under the letter of credit was made, and Mr Arvind Mehra, a director of Oakprime. Oakprime is in liquidation and took no part in the trial or the appeal. PNSC and Mr Mehra both appeal against the judgment, raising the issues described generally above, and Mr Mehra further contends that the judge was wrong to hold him personally responsible for his activities as a director of Oakprime. Proceedings were also brought against shipping brokers who acted for PNSC, Seaways Maritime Ltd. ("Seaways"), and the judge entered judgment against them. Seaways have played no part in the appeal. The appeal has been attractively and persuasively argued by Mr Timothy Young Q.C. for the shipowners and Mr John Cherryman Q.C. for Mr Mehra and also by Mr Jeffrey Gruder Q.C. for the bank. Each was ably assisted by junior counsel and we are grateful to them. Facts The facts are fully set out in the judgment of Cresswell J. reported at [1998] 1 Lloyd's Rep. 684 at 687-695. The letter of credit was opened by Vietnamese buyers from Oakprime of 20,000 tonnes of bitumen to be delivered in two shipments c.i.f. named Vietnamese ports. Under the credit as finally amended, the latest date for shipment was 25 October 1993 and the last date for negotiation for documents was 10 November. The letter of credit was issued by Incombank and was duly confirmed by SCB. Oakprime chartered two vessels from PNSC. The first, m.v. Lalazar, was chartered on 2 September and eventually berthed for loading at Bandar Abbas on 18 October. Loading proceeded slowly and with interruptions and in the result was not completed until 5 December. By 25 October, the latest date for shipment under the credit, only 1644 mt.tons were loaded. The second vessel m.v. Hunza also loaded at Bandar Abbas. Documents relating to that shipment were also presented to SCB. How they were handled by SCB is relevant as evidence of the bank's practices, but not otherwise. The judgment at pages 688-694 spells out in devastating detail the steps which Mr Mehra on behalf of Oakprime then took in order to obtain a bill of lading and other documents which falsely stated that a full cargo answering to the contract description was loaded by 25 October. To satisfy the requirements of the letter of credit, Oakprime had to present to SCB not only a bill of lading but also surveyor's certificates and the like. The brokers, Seaways, and surveyors (S.G.S.) became involved. There was a blatant attempt to produce false, and in some cases forged documents so that an appearance of conforming documents could be achieved by the latest date for presentation, 10 November. The judge was left in no doubt but that the falsity was deliberate and that Mr Mehra's evidence denying it, which he rejected, was manifestly false (p.700). Two of his findings should also be quoted :- "It is clear that PNSC, Seaways and Mr Mehra appreciated that what they were doing amounted to deliberate deception of SCB and any other bank to whom the bills of lading, might be presented in order to obtain payment" (690"). "PNSC for their part were willing to participate in what their brokers admitted to be "maritime fraud" provided they received a payment on account of freight and demurrage"(690). There was some suggestion by the brokers that occasionally bills might be backdated, if other parties agreed, but their managing director accepted that this transaction showed a complete breach of the principle of the Baltic Exchange that there should be honest and truthful dealing between members (691). The parties to this unlawful agreement recognised that the falsity was not limited to the bill of lading alone. In the result, "the certificate of origin, invoice and packing list contained false information to the knowledge of Mr Mehra" (694). PNSC was not involved in falsifying those other documents, but without the antedated bill of lading they would have been of no avail. So it came about that on 9 November documents purporting to record shipment by 25 October in compliance with the credit were presented to SCB under cover of a letter from Oakprime, signed by Mr Mehra as managing director on its behalf. The letter reads in part :- "We enclose herewith all the documents required under the above Letter of Credit No. 0801C931C1025 with the exception of the S.G.S. Certificate which will be delivered to you within in [sic] the next few days. .......... We will deliver the S.G.S. Certificate as soon as issued at which time, we would request you to discount the draft, value of USD 1,215,660.00 and pay the discounted proceeds to our account with National Westminster Bank.... ." The letter was date-stamped as received by the bank on the same date, 9 November. The bill of lading was dated 25 October and stated that 55132 steel drums of bitumen with gross/net weights 8683.290 mt/8269.800 mt were shipped by that date on board m.v. Lalazar. A further letter, dated 10 November but not received until 11 November, states that the SGS Certificates were enclosed with it, but it also suggests that the certificates were not then available :- "Please note that due to the time differences between Iran and the U.K., and the fact that SGS (Iran) is closed over the next two days, being the Iranian (Islamic) weekend. SGS (Iran) will communicate the reports to SGS (London) via SGS (London) via SGS (Geneva) on their next working day which is this Saturday, and UK/Switzerland being closed that day, being the Saturday/Sunday weekend. We are concerned that we will not be able to get the SGS Certificate till this coming Monday,. 15 November '93. We would be deeply obliged if you could please permit us up to that time to submit these remaining documents." For present purposes, this letter is significant because it establishes beyond any doubt that the documents presented before expiry of the letter of credit on 10 November were incomplete. The Certificates required by the credit were not presented until 11 November at the earliest, and possibly not until 15 November. The bank's internal document "Drawing under Letter of Credit" records on 12 November "SGS certs. taken to be amended" which the judge found was probably necessary because of a typographical error (judgment page 694 col.2). They were re-presented by November 15, which was a Monday. An internal document entitled "Drawing under letter of credit" is dated 10 November, suggesting that it was brought into existence on that date. It includes - "PRESENTATION : 10/11 EXPIRY : 10/11 Document checked : 12/11 Discrepancies noted .... " followed by ten (10) numbered discrepancies, all of which were struck through in ink. There were three checks by different checkers in accordance with the bank's standard practice when the payment to be made was more than $500,000. These checks were carried out by Mr Scott Shepherd on 12 November, Mr Vincent Holley on 15 November and Mr Stephen Thompson (who described himself as the supervisor of a team of document checkers) on the same day. Also on 15 November, Mr Thompson initialled the box marked "payment authorised", and there was evidence that he transferred the document to the export import department. This was for two purposes. First, so that it could put in motion the machinery for payment of the sum due to Oakprime (the discounted amount of the bill of exchange drawn by Oakprime on the buyer of the goods under the contract of sale). Secondly, so that it could send forward the bank's claim for payment to the issuing bank, Incombank. Both of these things were done. They were handled by Mrs Sharon Johnson whom the judge found was an entirely reliable witness. She said in her written statement that her duties were ministerial only :- "Indeed, once documents were received by me in such circumstances, payment had already been approved by the document checking section and I simply completed the formality of paying the beneficiary and sending the documents to the issuing bank." Mrs Johnson sent the documents to Incombank under cover of a letter in standard form, produced by a computer and signed by her on behalf of the bank. The text included this paragraph - ""Unless otherwise stated, documents were presented to us prior to the L/C expiry date and within the time allowed in accordance with UCP article 47 a (or article 48 as appropriate)." The reference was to UCP 400 (the 1983 revision). Article 46 is in clear terms - "Article 46 a.All credits must stipulate an expiry date for presentation of documents for payment, acceptance or negotiation. b.Except as provided in Article 48(a), documents must be presented on or before such expiry date." The statement in the letter that the documents were presented in due time was untrue, but Mrs Johnson was unaware of this. The documents, including the "Drawing" form completed by Mr Thompson and the other two checkers, did not record the incomplete or late presentation, as they ought to have done. By way of contrast, the corresponding form in respect of the second shipment on m.v. `Hunza' did record "L/C expired" as the first discrepancy, thus making it apparent from the bank's records that that had occurred. Mr Shepherd and Mr Holley were the checkers on that occasion also. The fact that the letter to Incombank was dated 10 November has given rise to much concern, because it was clear from other evidence that the letter was in fact prepared and sent on 16 November and not earlier. There was a possible explanation, which was that the computer printed out the date of expiry of the credit rather than the date when the letter was produced, but in the result the discrepancy was not significant. Mr Thompson knew that the letter would be sent to Incombank on 16 November and that it would contain the statement as to timeous presentation, which was false. The earlier date on the letter, although it coincided with the expiry date of the credit, did not alter that fact. When it received the documents, Incombank was unaware both that the bill of lading was false and that the documents were presented and negotiated outside the credit period. It knew nothing of the discrepancies which were noted by the bank's checkers but not relied upon by them as a ground for rejecting the tender. In the result, it refused payment by reference to other discrepancies which had not been noted by the bank, but which the bank now accepts were material (judgment p.702). The documents were returned to the bank which in due course sold the cargo for $500,000 (gross). The judge found, and the bank does not dispute, that the three checkers who acted on behalf of the bank were incompetent and negligent to a remarkable degree. PNSC alleged that they, or at least Mr Shepherd or Mr Thompson, must have been "suborned" by Mr Mehra, but this was rejected by the judge. There remains, however, the question whether they were responsible for the bank making a false statement to Incombank, either knowingly or recklessly, with the intention that it should be relied upon by Incombank, so that a liability for the tort of deceit might arise. Was the bank's conduct deceitful? Because Incombank refused payment by reference to discrepancies, which it is admitted were material so as to justify rejection of the documents, without knowing that they were presented after the credit expired, it did not suffer any loss which could give rise to a claim for damages for deceit against SCB. But if SCB knowingly or recklessly made a false statement in order to induce payment by Incombank, then its conduct was such as to expose itself to liability for the tort of deceit, if the false statement was relied upon and damage resulted. Subject to that qualification, making the false statement was an unlawful act. The statement was contained in SCB's letter to Incombank, sent on 16 November though wrongly dated 10 November. It was untrue, and untrue to the knowledge of Mr Thompson, who knew that the letter was being sent and caused it to be sent. These facts were accepted by Mr Thompson and the other SCB personnel. According to Mr Holley, there was a "conscious decision" not to tell the transmittal department (Mrs Johnson) about the late presentation (day 5, p.116), and Mr Thompson said that he would not have wanted Incombank to know about the late tender of documents (day 2 p.142). He said that he did not give the matter any thought. These facts are not, or not seriously, in dispute. Much of the evidence, and large parts of the written and oral submissions to us, were taken up with the reasons why three SCB employees engaged in work of this sort had caused or permitted the false statement to be made to the issuing bank. The judge found that they were "low level bank employees" ; Mr Shepherd "had very limited experience" of document checking, and neither he nor Mr Holley "had any formal qualifications in banking". He doubted whether they had received adequate training. They were "undoubtedly negligent", but they were "not in any sense fraudulent or guilty of fraudulent misrepresentation" (p.703 paras. 5-8.) He concluded :- "They were almost certainly inadequately supervised. They acted incompetently and misguidedly but they were not fraudulent" (p.704 para.12). Their reasons and motives were thoroughly explored. Parts of their evidence were quoted by the judge : Mr Thompson "It was a standard thing that we did to accept late presentation up to a day or two and we were a little more lenient in this case "(698) ; Mr Shepherd "...said he would not necessarily reject a set of documents outright because a document was a day or so late. The whole basis of checking documents in the department was that he would not necessarily reject a set of documents outright for that reason .... when asked how often the ethos of leniency extended to three working days" he said "Three working days is pushing the boundaries of it, so very, very rarely" (p.698). Mr Holley "....the whole point of accepting (documents presented late) is because we are trying to speed up trade flows, not reject documents for the sake of it .... Most of the time there is an actual trade transaction behind a letter of credit, and it is in the interests of buyer and seller for the documentation to be speeded up ....." (p.699). The judge commented "Given the tension between the strict requirements of UCP 400 and a perhaps understandable concern to "facilitate trade" coupled perhaps with some pleading on the part of Mr Mehra to accept late presentation, it is possible to see how the most regrettable failures to comply with Art. 46 of UCP 400 came about" (p.703 para.9). None of this, however, is inconsistent with the appellants' submission that SCB's letter contained a statement which was false to the knowledge of its employees who caused it to be sent. The conditions of liability for the tort of deceit were established in Derry v. Peek (above) :- "....fraud is proved when it is shown that a false representation has been made (i) knowingly, (ii) without belief in its truth, or (iii) recklessly, careless whether it be true or false ...." (per Lord Herschell at 374). It is not necessary that the maker of the statement was "dishonest" as that word in used in the criminal law. The relevant intention is that the false statement shall be acted upon by a person to whom it is addressed. If the false statement was made knowingly and that intention is proved, then the basis for liability for the tort of deceit is established. That conduct and state of mind was described as "dishonest" in Derry v. Peek and may also be called "fraudulent" ; but that is not necessarily using those words in their criminal sense. The majority judgments in Brown Jenkinson show that neither the prevalence of a practice of issuing antedated bills of lading (per Morris L.J. at 632-3) nor the fact the person who proposed to issue the false bill "not being actuated by bad intentions, did not realise the viciousness of the transaction" (p.634) prevents the liability from arising : it was possible to approach that case "with a measure of sympathetic understanding for them" (p.635) ; and Pearce L.J. said "The real difficulty .. is due to the fact that the plaintiffs, whatever may have been the defendants'[sic] intentions, appear from the evidence not to have contemplated that anybody would ultimately be defrauded. Theirs was a slipshod and unthinking extension of a known commercial practice to a point where it constituted fraud in law" (p.638). It is clear, in my judgment, that the shipowner would have no defence to the bank's claim if the master or agent issued a false ante-dated bill of lading in the genuine though careless belief that it would facilitate the particular transaction or maritime trade generally. In my judgment, the same standard of commercial honesty is required by the law from other parties to the letter of credit transaction, including and perhaps especially from a bank. I find it surprising that a leading commercial bank is suggesting that some lower standard of honesty should be applied to it. SCB's submission, as I understand it, is two-fold. First, the document checkers were prepared to waive the late payment, as they were entitled to do on behalf of SCB, and having done so they ceased to regard it as a discrepancy which should be notified to Incombank. Secondly, "The Bank accepts that it could be criticised for sending a misleading letter. But this was a regrettable human error, not a product of fraudulent conspiracy" (Skeleton Argument, para.21). Coupled with the second submission is a contention that, because Mrs Johnson in the transmittal department was unaware that the letter dated 10 November (sent on 16 November) was false, as regards the date when the documents were presented, SCB could not be held liable in deceit for a false statement made by her ; the maker of the statement did not have the requisite guilty knowledge. Once Mr Thompson admitted in evidence, as he did, that he knew that the letter would be sent to Incombank in the ordinary course of business and that it would contain a statement to the effect that the documents were presented in time, which he knew to be false (even if he thought it to be somehow irrelevant or unimportant) then, in my judgment, a false statement was made by SCB (on whose behalf the letter was signed) which was false to the knowledge of the person who authorised it to be sent (Mr Thompson). In those circumstances, SCB is liable if the remaining elements of the tort of deceit were established, and it is not a case such as Armstrong v. Strain [1952] 1 K.B. 232, where a principal was sought to be held liable in fraud for a statement made by one innocent agent which was false to the knowledge of another agent who did not know that the statement was being made. For these reasons, I would hold on what are mostly undisputed facts that the false statement made by SCB in its letter (dated 10 November) to Incombank that the documents were presented within the period limited by the credit was false to the knowledge of the maker, or was made recklessly, in circumstances which exposed SCB to liability in deceit, if the statement was acted upon by Incombank who thereby suffered loss. This does not detract from the judge's findings that SCB's employees were not fraudulent or dishonest, for he was using those words in a different sense from their relevance to the tort of deceit. There remains one aspect of this issue to which, rightly, much attention was paid. The clear inference from the evidence given by the SCB employees was that the responsible department in the bank operated on the relaxed basis, as regards late presentation of documents, which they described in the passages I have quoted above. Mr Thompson himself used the word "ethos" (witness statement para.121 ; judgment p.698). By letter dated 23 January 1997 SCB's solicitors said that its employees "adopted a practice" to that effect. PNSC asked for discovery but no order was made because counsel for SCB informed the Court that no such practice was relied upon. This was confirmed by some remarkable Particulars served on 5 September 1997 which listed various "practices" which "the Plaintiff will not seek to contend" had existed. When the witness statements were delivered, including Mr Thompson's, it was manifest that their evidence was to the effect that a practice existed, and their evidence confirmed this. I do not find it necessary to consider further whether the Particulars were accurate or misleading. They can stand as an example of tortuous and ultimately unhelpful pleading. Having regard to the evidence given, the Particulars ought to have stated that there was a practice within SCB of acting contrary to the requirements of UCP 400 (Art.46). Reliance Mr Cherryman Q.C. for Mr Mehra submitted that SCB failed to prove that its employees relied upon the inaccurate statement of the loading date in the bill of lading, and therefore an essential ingredient of their tort of deceit was not made out. This bold submission, which was not supported by Mr Young Q.C. on behalf of PNSC, does not challenge the judge's emphatic findings that Mr Thompson and his team of document checkers did rely upon the accuracy of the bill of lading date (judgment 704). Mr Cherryman relies upon the rule of law, reflected in UCP 400, that a confirming bank is not concerned with the veracity of documents, but only with the question of whether the documents tendered under the credit complied with the terms of the credit, citing United City Merchant v. Royal Bank of Canada [1982] 1 A.C. 168 at 184-8 (Lord Diplock). That is correct, but it does not follow that the bank does not rely upon the customers' implied representation that the documents presented are, to his knowledge, both genuine and truthful. As against Mr Mehra, SCB relied on the accuracy not only of the bill of lading but also of other documents and upon Mr Mehra's breach of this undertaking in both respects (judgment 704). It is on that basis that the bank proceeds to consider whether or not the documents are in conformity with the credit. Illegality The appellant's second main contention is that SCB's conduct towards Incombank was unlawful and that SCB is therefore disentitled to recover damages from them for its loss, on grounds of illegality. They rely upon the principle most recently asserted in Tinsley v. Milligan [1994] 1 AC 340 where the House of Lords held unanimously (though the decision itself was by a majority) that "a party is not entitled to rely on his own fraud or illegality in order to assist a claim" (per Lord Jauncey at 366D). The underlying principle was stated by Lord Mansfield C.J. in Holman v. Johnson (1775) 1 Cowp. 341 - "No Court will lend its aid to a man who founds his cause of action upon an immoral or an illegal act. If, from the plaintiff's own stating or otherwise, the cause of action appears to arise ex turpi causa, or the transgression of a positive law of this country, there the court says he has no right to be assisted" (343) (See per Lord Goff [1994] 1 A.C. at 54). The principle has been applied by this Court to defeat a claim for damages in tort (Clunis v. Camden and Islington Health Authority [1998] 2 WLR 902) and the appellants submit that it operates to defeat SCB's claim in the present case. In my judgment, as will appear below, proper resolution of this issue depends upon establishing the cause or causes of SCB's loss, as well as upon the nature of its claim to recover damages from the appellants, and so I will consider the question of causation first. Causation First, it is necessary to identify the loss. The claim is for damages equivalent to the payment made by SCB to Oakprime, giving credit for the proceeds of sale of the goods. Mr Gruder submits that the loss was suffered when the payment was made and therefore it preceded both the rejection of the documents by Incombank signifying its refusal to indemnify SCB, and the later discovery by SCB itself that the documents were falsely dated. In my judgment, that submission is correct insofar as it identifies the loss as occurring at that time ; the fact that SCB was expecting or even entitled to recover an indemnity from Incombank does not alter this. Compare Banque Keyser Ullman etc. v. Westgate Ins. Co. Ltd. [1991] 2 A.C. 249 per Lord Templeman at 275C and see SAAMCO (Banque Bruxelles S.A. v. Eagle Star [1997] AC 191) per Lord Hoffmann at 215. It remains necessary, however, to establish what the cause or causes were of that loss. Here, the distinction must be made between factual or `commonsense' causes, on the one hand, and the cause or causes which the law regards as relevant for the purposes of the particular claim. This emerges from recent House of Lords judgments, including SAAMCO (above), Smith New Court Securities Ltd v. Citibank N.A. [1997] A.C.254 and Platform Home Loan Ltd v. Oyston Shipways Ltd. [1999] 2 WLR 518. In particular, there is a different legal test for causation when fraud is proved than when the claim is for damages for negligence (Smith New Court at 280D and 285F (Lord Steyn)). In the present case, therefore, SCB as claimants against PNSC for damages for the tort of deceit have the benefit of the rule in Edgington v. Fitzmaurice (1888) 29 Ch. Div. 459 that "It is not necessary to shew that the (deceitful) misstatement was the sole cause of acting as he did" (per Cotton L.J. at 481) and that it was sufficient for the claimant to show that it "materially contributed to his so acting" (per Bowen L.J. at 482). This rule does not mean that there were no other contributory causes which, fraud apart, would be capable of affecting the claimant's right to recover damages. Negligence by the claimant himself is the prime or most usual example. At common law, where the claimant's own negligence contributed to his loss, his claim for damages failed (Clerk & Lindsell 17 ed.para.3-09). But the claimant's position was ameliorated, and a fairer rule established, by the Law Reform (Contributory Negligence) Act 1945. In fraud cases, the claimant's negligence is ignored, notwithstanding that it was or may have been a contributory cause (cf. Edgington v. Fitzmaurice (above)). The policy reasons for imposing full liability on the fraudulent defendant are analysed in Lord Steyn's speech in Smith New Court (above). In the present case, on the factual level, there were, in my judgment, two causes of SCB's loss, which cannot be regarded as too remote to be capable of being relevant as a matter of law. The first was SCB's reliance on the accuracy of the documents presented to it. The second was its own decision to accept the documents under the credit and to pay Oakprime when it was not obliged to do so. The fact that SCB made what was essentially a voluntary payment distinguishes the case, in my view, from the normal situation, where the documents are in order and are presented in accordance with the terms of the credit and the notifying or confirming bank pays because it is satisfied that it is bound to do so. In such a case, the fact that it expects, in due course, be indemnified by the issuing bank is not relevant to causation. If the documents are presented late, then usually no payment would be made unless the issuing bank agreed that the lateness should be waived. This was what SCB did, with Incombank, when the Hunza documents were presented late. Not so in the case of the Lalazar. By waiving the late presentation, SCB took the risk that Incombank, if and when it discovered the defect would refuse to indemnify it or would seek to recover the indemnity, if already paid. This is another way of saying, in my opinion, that SCB's decision to make the payment when it knew that it was not obliged to do so was a contributory cause of the loss it suffered when the payment was made to Oakprime. And it was a part of this decision that Incombank was not to be notified of the late presentation, which SCB was prepared to waive. As Mr Thompson said, he did not want Incombank to know about it (day 2 p.142). The decision to pay Oakprime was infected by that intended deceit. A possible third cause, which has not been explored in argument, was SCB's failure to observe the discrepancies later relied upon by Incombank to justify payment, and which SCB accepts were material. If the failure was negligent, then in my view this too was a contributory cause of the loss which SCB sustained. There is no express finding of negligence in this respect, though it may well be covered by the judge's references to incompetence and gross negligence quoted above. Without a finding, this failure can only be identified as a possible third cause. Even if it was negligent, it does not provide a defence to the claim for damages for deceit, for the reasons given above. Illegality (cont'd.) The judge summarised the present state of the law, in my view impeccably, in eight paragraphs under the heading ex turpi causa ([1998] 1 Ll.R. at 705-6). He properly distinguished between cases where the defence is raised to a claim in contract and those where damages are claimed in tort. In contract cases, the claimant cannot "found his claim" on an unlawful act (Tinsley v. Milligan (above)). The quality of wrongdoing which may disentitle him from asserting his rights is not defined by the "public conscience" test, decisively rejected by the House of Lords in that case, but the authorities support the "pragmatic approach" described by Bingham L.J. in Saunders v. Edwards [1987] 1 W.L.R. 1116 - "Where the plaintiff's action in truth arises directly ex turpi causa, he is likely to fail .... Where the plaintiff has suffered a genuine wrong, to which the allegedly unlawful conduct is incidental, he is likely to succeed" (1134). Applying the principle to cases in tort, the judge said this - "2. Evidence that the plaintiff is himself a wrongdoer will not of itself constitute a defence to an action in tort. The illegality or immorality of the plaintiff's own actions gives rise to a defence only where his claim arises directly ex turpi causa (Clerk & Lindsell on Torts. 17th ed. para.3-02 and see para.6 below). A defence occasionally, and conveniently labelled ex turpi causa applies in tort. The nature of the test applicable to the defence remains unclear. Two theories referred to in the authorities should be mentioned. (1) There are circumstances in which the nature of the plaintiff's conduct and its connections with the alleged tortious conduct make it contrary to public policy to afford a remedy to the plaintiff. The Court must consider whether to afford relief to the plaintiff "would affront the public conscience or ... shock the ordinary citizen. (2) The nature of the plaintiff's conduct makes it impossible to set the appropriate standard of care (Clerk & Lindsell on Torts, 17th ed. para.3-04) . 7. Whatever theory founds a defence of ex turpi, the defendant must establish (a) that the plaintiff's conduct is so clearly reprehensible as to justify its condemnation by the Court, and (b) that the conduct is so much part of the claim against the defendant (see 6 above) as to justify refusing any remedy to the plaintiff. Criminal conduct by the plaintiff most easily fulfils condition (a). The ex turpi causa defence is not however confined to criminal conduct (Kirkham v. Chief Constable of Greater Manchester Police [1990] 2 QB 283 at p.291B. Lord Justice Lloyd) While exceptionally conduct other than criminal conduct will give rise to a defence of ex turpi, it is extremely difficult to identify categories of conduct sufficiently reprehensible or grossly immoral as to justify denial of a remedy (Clerk & Lindsell on Torts, 17th ed. para.3-05). 8. However reprehensible the plaintiff's own wrongdoing, a plea of ex turpi will only succeed if the plaintiff's conduct is sufficiently connected with the injury of which he complains (see 6 above). The approach of the Courts tend to be pragmatic and dependent on the facts of the particular case (Clerk & Lindsell on Torts. 17th ed. para.3-06). Since then, the Court of Appeal's judgment in Clunis v. Camden and Islington H.A. (above) has been reported. The claimant was convicted of manslaughter on grounds of diminished responsibility and was sentenced to detention accordingly. He had a history of mental disorder and, prior to the killing, was detained in a mental hospital from which he was released. He claimed damages from the health authority who, he said, were negligent in discharging him when they did. The claim failed. The claim arose out of the commission of a serious criminal offence (p.910H) for which the claimant was responsible, notwithstanding the statutory defence of diminished responsibility, and the Court was precluded from entertaining his claim. "In the present case we consider the defendant has made out its plea that the plaintiff's claim is essentially based on his illegal act of manslaughter .... The Court ought not to allow itself to be made an instrument to enforce obligations alleged to arise out of the plaintiff's own criminal act ..... "(911H). The Court held specifically that the defence arises in cases of tort - ""We do not consider that the public policy that the Court will not lend its aid to a litigant who relies on his own criminal or immoral act is confined to particular causes of action" (908F). The claim arose out of the criminal act of manslaughter for two reasons. It was the kind of act which it was alleged the defendants ought to have foreseen. "Further the foundation of the injury, loss and damage alleged is that, having been convicted of manslaughter .... the plaintiff will in consequence be detained under the Mental Act 1983 for longer than he otherwise would have been" (908G). This judgment, in my view, is entirely consistent with the principles stated by Cresswell, J. in the present case. Application The judge having found that SCB's employees were not guilty of unlawful conduct, and in particular that they had not acted fraudently towards Incombank, proceeded to apply the principles of law to that factual situation. He held - "(5) The three document checkers were not guilty of any criminal conduct. Nor were they guilty of conduct sufficiently reprehensible or grossly immoral as to justify denial of a remedy .... (6) SCB's claim is not founded on an immoral or illegal act. SCB's claim does not arise "directly ex turpi causa". SCB has suffered a genuine wrong to which the conduct criticized by the defendants is incidental. The actions of the three checkers were not directly relevant to the harm of which SCB complains in connection with contract (v) above and the discounting. SCB's claim is not founded on an illegal act or agreement. Contracts (iii) and (v) above are not tainted by illegality. The nature of the conduct of the three document checkers and its connection with the tortious conduct of the first, second and fifth defendants does not make it contrary to public policy to afford a remedy to SCB. To afford relief to SCB would not affront the public conscience or shock the ordinary citizen. The conduct of the three document checkers is not so much part of the claim against the first, second and fifth defendants as to justify refusing any remedy to SCB. The conduct of the three document checkers is not sufficiently connected with the damage of which SCB complains." He also observed that if the true position as to the antedated and false bill of lading been revealed to SCB at the time of presentation, then "SCB would (as I find) have rejected the documents at the outset and might well have informed the police. There would have been no question of accepting the document or discounting [the bill drawn by Oakprime]" (706). If SCB did mislead Incombank, knowingly or recklessly, as to the date of presentation, with the intention that Incombank should be unaware that the documents having been presented late did not conform to the terms of the credit, then the unlawful act was committed which exposed SCB to liability in tort, if the statement was relied upon and damage resulted to Incombank. Since, in my judgment, this is what occurred, it becomes necessary to consider what effect, if any, SCB's unlawful or potentially unlawful conduct has upon its claim for damages for deceit against the appellants. Mr Young, supported by Mr Cherryman, submitted that the quality of the acts of the SCB employees was such that the Court should take notice of it, and that the acts were, in the judge's words, "sufficiently connected" with the loss for which SCB claims damages from the appellants for the defence ex turpi causa to apply. As regards causation, he submitted that SCB's decision to make a voluntary payment to Oakprime, which it was not bound to make against late presentation, was such as to mean that its loss could not be regarded as the, or a, consequence of the misrepresentations made by PNSC and Mr Mehra. Mr Gruder for SCB submitted that the defence can only be relied upon when the unlawful acts of the claimant are "directly connected" with the claim in deceit and when the claimant is forced to rely upon his own wrong as a foundation for his claim. He relied upon Clerk & Lindsell on Torts (17th ed.) para.3-02 - "The illegality, or immorality, of the plaintiff's own actions give rise to a defence only where his conduct is directly relevant to the harm of which he complains". As regards causation, Mr Gruder's submission was that SCB's cause of action was complete when it paid Oakprime in reliance on the false bill of lading. The presentation to Incombank, truthful or otherwise, came later and was of no relevance to the loss for which SCB is entitled to recover damages from the appellants. He relied upon the rule that where the claim is for damages for fraud "the court does not allow examination into the relative importance of contributory causes" (Barton v. Armstrong [1976] AC 104 at 118 ; cf. Smith New Court (above)), hence the holding in Alliance and Leicester v. Edgestop [1993] 1 W.L.R. 1462 that contributory negligence is no defence to a claim in fraud). The rule applies a fortiori, he submitted, where what is relied upon as a contributory cause of SCB's loss is its later failure to recover an indemnity from a third party, Incombank. Conclusions The resolution of these submissions depends as so often, in my view, on establishing the cause, or causes, of SCB's loss. For the reasons I have already given, it seems to me that these were at least two : its reliance on the genuineness and accuracy of the bill of lading and other documents presented to it, and its own decision to pay Oakprime in circumstances where, due to late presentation, it was not bound to do so. If the payment was made without regard to SCB's prospects of recovering an indemnity from Incombank, then it was made at SCB's own risk and the matter would have rested there. But that was not the case. In order to claim the indemnity, SCB falsely represented, knowingly or recklessly, to Incombank that the documents were presented in due time. The decision, conscious or otherwise, to claim the indemnity on this false basis was an integral part of the decision to make the payment to Oakprime. It was as influential a reason for making the payment as the assumption, for which the appellants were responsible, that the bill of lading and other documents were correct. I would hold, therefore, that SCB's voluntary payment was a contributory cause of its loss, though not sufficient, as Mr Young submitted, to break the chain of causation flowing from the falsity of the documents. The relevant factor is not, as Mr Gruder suggested, the subsequent failure to recover an indemnity, but SCB's decision, which preceded payment, to seek the indemnity on a false basis. The fact that the attempt failed, for whatever reason, is not relevant. What then is the situation in law where the claimant's loss was caused partly by the defendant's false statement and partly by its own decision to seek an indemnity, without which it would not make the payment, by unlawful means? The reason why the courts have applied a strict rule of causation in fraud cases, disregarding contributory causes including even the claimant's own negligence, is essentially the moral disapproval spelt out in Edgington v. Fitzmaurice and most recently in Smith New Court. But there is no decided case, so far as I am, aware, where the rule has been applied in favour of a claimant whose own deceitful conduct was a contributory cause of his loss. When the rule derived from ex turpi causa non oritur actio applies, then the claimant necessarily fails altogether. Losses arising from the transaction lie where they fall, regardless of the degrees of turpitude which the claimant and maybe the defendant also have displayed. This can be a harsh result for the claimant, but it is a necessary consequence of the Court's unwillingness to become involved in enforcing the bargain or to provide a remedy in tort for the claimant's loss. And it means that the rule is likely to be applied sparingly, so as not to defeat in particular cases what are perceived to be just or genuine claims. This leads to the conclusion that the requirements for the rule to apply should be strictly construed, whether the requirements are that the claim is "founded upon" the illegality or that it "arises directly ex turpi causa" rather than being incidental to it (per Bingham L.J. (above)). Mr Young submitted that the rule could apply even if there was no causal connection between SCB's loss and its deceitful conduct, but I would reject that submission in the circumstances of this case. (Clunis shows that other factors may arise.) However, in my view a causal connection is shown, and SCB's decision to pay Oakprime when it was not obliged to do so, whilst looking for an indemnity by means of a false statement to Incombank, was a contributory cause of the loss which it seeks to recover from the appellants. The question therefore is, whether the fact that SCB, acting deceitfully though not towards the appellants, was partly the cause of its own loss, disentitles it from recovering full damages for deceit from them. The maxim ex turpi causa has to be applied. The pragmatic distinction described by Bingham L.J. has to be drawn. It becomes inevitable, in my view, that the relative turpitude of SCB's and of the appellants' conduct has to be taken into account, as well as the extent to which each was responsible for SCB's loss. We have not been concerned with the contribution proceedings which also came before the judge, but we do have the judge's findings as between the parties in relation to the ex turpi causa issue (pp. 706-708). Having found that SCB had not conducted itself unlawfully, he naturally found that the balance weighed heavily against the appellants and in favour of SCB. The balance has to be re-struck if, as I have found, SCB was itself guilty of deceitful conduct, though not towards the appellants. It seems to me that the situation of PNSC should be considered separately from that of Mr Mehra and Oakprime. The fraudulent scheme was devised and orchestrated by Mr Mehra, for his and the company's financial benefits, although PNSC became parties to it, again for their own financial reasons (judgment page 690). But the question is whether either of them can rely on the ex turpi causa defence against the claim by SCB. In my judgment, applying the test restrictively and in accordance with Tinsley v. Milligan they cannot do so. The conduct of SCB was not so egregious, though potentially unlawful, and its share of responsibility for its own loss was not so weighty that the Court should refuse to entertain the claim. I therefore would agree with the judge's conclusion that the defence fails. The result, however, to my mind is profoundly unsatisfactory, if SCB is entitled to recover full damages from the appellants, because they were deceitful, when its own deceitful conduct was in part responsible for its loss. The pot calls the kettle black, and the law prevents the kettle from answering back, except in extreme cases. In the interests of condemning the deceitful defendant, the law is prepared to countenance and overlook deceitful conduct by the claimant which is incidental to but not wholly removed from his loss, and partly causative of it. This is a further example of the common law's reluctance to apportion damages between wrongdoers, which has been remedied by statute so far as negligence is concerned. It has been held that contributory negligence is no defence to an action for damages for deceit (Alliance and Leicester v. Edgestop) (above)) and that the Law Reform (Contributory Negligence) Act 1945 does not apply (Nationwide Building Society v. Thimbleby & Co. Blackburne, J. 1 March 1999 Ch. 1995 N No. 727, currently under appeal to this Court). But there remains the question whether contributory deceit disentitles the claimant from relying on the special rules of causation which favour innocent claimants against fraudulent defendants (Edgington v. Fitzmaurice), and so far as I am aware there is no authority on this point. If contributory deceit does have that effect, so that contributory causes may be recognised in an action for deceit, then there may be scope for the 1945 Act to apply. If it does not, then the pre-1945 common law rule as regards negligence might operate to bar the claim, but that would be inconsistent with the limited scope given to the ex turpi causa defence. In compelling the Courts to reach an all-or-nothing conclusion, where the claimant has behaved unlawfully, the rule makes it necessary for them to adopt artificial views of causation such as resulted in the "last opportunity" so-called principle before 1945 in the field of negligence. The present case, I should add, is not one where the claimant was deceitful towards the defendants, in circumstances where a counterclaim for damages might arise. These matters have not been raised before us. For my part, I would prefer not to dismiss the appeals, and thus hold the appellants fully liable for SCB's loss, without first giving them an opportunity to argue the issue before us, if they are so advised. Mr Mehra's personal responsibility I agree with the judgment of Aldous L.J. and that we should allow Mr Mehra's appeal against the judge's finding that - "In the present case Mr Mehra authorised, directed and procured the acts complained of with full knowledge that the acts complained of were tortious. He is accordingly personally liable"." The representations giving rise to liability in deceit were made by the company, notwithstanding that they were contained in letters signed by Mr Mehra on behalf of the company or that they arose from his conduct in presenting the documents on behalf of the company, as he did. Even when the director makes the false statement, and the requisite knowledge of its falsity and the intention that it shall be acted upon are both his, nevertheless the fact remains that for the purposes of civil liability (the position in criminal law may be different) the statement is attributed to the company. The question then arises whether in such a case the director is free from personal liability This is the converse of vicarious liability. The question is whether the director may be held liable for the company's tort. The mere fact that he is a director at the material time does not suffice, but he may be personally liable when he ordered or procured the acts of other persons which render the company liable : C. Evans Ltd. v. Spritebrand Ltd. [1985] 1W.L.R. 317, quoted by Aldous L.J.. It can well be argued that, if the director is liable when he orders or procures acts on behalf of the company by others of its agents or employees, then manifestly he must be liable when he commits those acts on behalf of the company himself. If this is correct, however, it becomes necessary to consider why the same principle was not applied so as to render the director liable in Williams [1998] 1 WLR 830. The House of Lords held that the relationship necessary to found a claim in negligence had existed only between the plaintiffs and the company defendant. The director was a stranger to that relationship (per Lord Steyn at 838H, rejecting a submission that the director and the company could be regarded as joint tortfeasors). The decision was concerned with the question whether the director owed a duty of care to the plaintiffs in the circumstances of that case. It appears to exclude, however, any suggestion that the director is necessarily personally liable whenever his acts are sufficient to make the company liable in tort. The judge applied the principles stated in Clerk & Lindsell on Torts (17th ed.) para. 4.49 and C. Evans Ltd v. Spritebrand. He referred also to Williams but his judgment was given before the Court of Appeal's majority judgment was reversed by the House of Lords, on 30 April 1998. The House of Lords' judgment is based on the pre-eminence given to the separate legal personality of the company : see the commentary by Ross Grantham and Charles Rickett Director's Tortious Liability : Contract Tort or Company Law? (199) 62 M.L.R. 133. It is thus necessary, in my view, to apply the principles of tortious liability strictly in accordance with this rule of company law. The pleaded allegation by SCB was that misrepresentations were made by Oakprime and Mr Mehra and that both were liable accordingly (Amended Points of Claim, paras. 29, 31 and 32). The judge's finding I have quoted above. It rested upon the distinct head of procurement liability which Mr Gruder accepts was not pleaded against Mr Mehra at the trial. Because the allegation is one of fraud, I agree with my Lords that leave to amend the claim should not be given now. The separate claim for damages for conspiracy could give rise to different considerations, but it is unnecessary to reach a conclusion in this case. Conclusion Subject to one reservation (paragraph 61), I would dismiss the appeal by P.N.S.C. but allow the appeal by Mr Mehra. LORD JUSTICE ALDOUS: On this appeal against the judgment of Cresswell ([1998] 1 Lloyd's Reports 684), four questions arise for decision by this Court. Has the Standard Chartered Bank (SCB) a good cause of action in deceit? Is SCB's action in deceit enforceable against PNSC? Has SCB a good cause of action against Mr Mehra? Can PNSC obtain a contribution from SCB and, if so, how much? I will consider those issues in turn. 1. Has SCB a good cause of action in deceit? Evans LJ has set out in full the facts and submissions of the parties. For the reasons he has given, I reject the submission by Mr Mehra that SCB did not rely upon the false statements made in the tendered documents. SCB established the elements of a cause of action in deceit. 2. Is SCB's action in deceit enforceable against PNSC? Mr Young QC who appeared for PNSC submitted that SCB's action was not enforceable on the basis of the principle "ex turpi causa non oritur actio". His submissions are recorded by Evans LJ and therefore there is no need for me to repeat them in my judgment. I will therefore set out the reasons why I have concluded that the principle does not apply, even though I accept that SCB wrongly attempted to obtain payment from Incombank by deceit. The basis for the principle was stated by Lord Mansfield CJ in Holman v Johnson (1775) 1 Cowp. 341 at 343 in the context where the court was considering whether to enforce a contract. He said: "The objection, that a contract is immoral or illegal as between the plaintiff and defendant, sounds at all times very ill in the mouth of the defendant. It is not for his sake, however, that the objection is ever allowed: but it is founded in general principles of policy, which the defendant has the advantage of, contrary to the real justice, as between him and the plaintiff, by accident, if I may say so. The principle of public policy is this: ex dolo malo non oritur actio. No court will lend its aid to a man who founds his cause of action upon an immoral or an illegal act. If from the plaintiff's own stating or otherwise, the cause of action appears to arise ex turpi causa, or the transgression of a positive law of this country, there the court says he has no right to be assisted. It is upon that ground the court goes: not for the sake of the defendant, but because they will not lend their aid to such a plaintiff. So if the plaintiff and defendant were to change sides, and the defendant was to bring his action against the plaintiff, the latter would then have the advantage of it: for where both are equally in fault, potior est conditio defendentis." The principle was applied to an action based in tort in Clunis v Camden and Islington Health Authority[1998] 1 WLR 902. Beldam LJ giving the judgment of the Court said at page 908F: "We do not consider that the public policy that the court will not lend its aid to a litigant who relies on his own criminal or immoral act is confined to particular causes of action. Although Mr Irwin asserted that in the present case the plaintiff's cause of action did not depend upon proof that he had been guilty of manslaughter, the claim against the defendant is founded on the assertion that the manslaughter of Mr Zito was the kind of act which Dr Sergeant ought reasonably to have foreseen and that breaches of duty by the defendant caused the plaintiff to kill Mr Zito. Further the foundation of the injury, loss and damage alleged is that, having been convicted of manslaughter, the plaintiff will in consequence be detained under the Mental Health Act 1983 for longer than he otherwise would have been. In our view the plaintiff's claim does arise out of and depend upon proof of his commission of a criminal offence. But whether a claim brought is founded in contract or in tort, public policy only requires the court to deny its assistance to a plaintiff seeking to enforce a cause of action if he was implicated in the illegality and in putting forward his case he seeks to rely upon the illegal acts." In Tinsley v Milligan [1994] 1 AC 340, the House of Lords considered the application of the principle to a claim concerning property rights. Lord Goff, Lord Keith and Lord Browne-Wilkinson rejected the public conscience test that had surfaced in decisions in the early 1990's. Lord Browne-Wilkinson considered in depth the application of the principle in relation to claims to enforce property interests. He said at page 375: "Although reference was made to Lord Eldon's principle, none of those cases was decided on the simple ground (if it were good law) that equity would not in any circumstances enforce a resulting trust in such circumstances. On the contrary in each case the rule was stated to be that the plaintiff could not recover because he had to rely on the illegality to rebut the presumption of advancement. In my judgment, the explanation for this departure from Lord Eldon's absolute rule is that the fusion of law and equity has led the courts to adopt a single rule (applicable both at law and in equity) as to the circumstances in which the court will enforce property interests acquired in pursuance of an illegal transaction viz., the Bowmakers rule [1945] KB 65. A party to an illegality can recover by virtue of a legal or equitable property interest if, but only if, he can establish his title without relying on his own illegality. In cases where the presumption of advancement applies, the plaintiff is faced with the presumption of gift and therefore and therefore cannot claim under a resulting trust unless and until he has rebutted that presumption of gift: for those purposes the plaintiff does have to rely on the underlying illegality and therefore fails." There is in my view but one principle that is applicable to actions based upon contract, tort or recovery of property. It is, that public policy requires that the courts will not lend their aid to a man who founds his action upon an immoral or illegal act. The action will not be founded upon an immoral or illegal act, if it can be pleaded and proved without reliance upon such an act. The immoral or illegal act relied upon by PNSC was the attempted deception of Incombank. No doubt it is unethical for one bank to attempt to deceive another bank, but I doubt whether an unsuccessful attempt amounts to an act which would prevent a good cause of action in deceit being enforced. Certainly in equity there is authority for the proposition that where the unlawful act has not been carried into effect, the court is able to uphold, despite the attempted illegality, an equitable interest. (See Tinsley v Milligan supra. at page 257) In any case SCB's cause of action in deceit against PNSC does not require the attempted deceit to be pleaded nor does it involve any reliance upon it. Their case as pleaded and proved was that PNSC made false statements in the bill of lading that the goods had been shipped by 25th October 1993. That statement was made knowing it to be false. SCB relied on it and therefore suffered loss because it paid out over $1 million to Oakprime. Mr Young submitted that but for the attempted deceit or the decision to deceive by SCB, there would have been no loss as there would have been no payment to Oakprime. SCB would not have paid unless they thought they would be able to obtain reimbursement from Incombank and to do that they must have known that they needed to deceive Incombank. Accepting that to be correct, it does not provide PNSC with a defence based upon the principle "ex turpi causa non oritur actio" as SCB's action is not founded upon the attempted deceit. The court, when upholding SCB's claim, is not lending its aid to enforcing an action which involves pleading or reliance upon an immoral or illegal act. The fact that damage may not have resulted but for a decision to deceive is irrelevant to the cause of action when pleaded and proved. It follows that the judge was right to hold SCB's claim against PNSC succeeded. 3. Has SCB a good cause of action against Mr Mehra? SCB pleaded their case against Mr Mehra in deceit and conspiracy. They relied on misrepresentations contained in three classes of documents, the letter of credit, the shipping advice to SCB and the invoice and packing list. By those documents it was alleged that Mr Mehra had represented to SCB that the contents of the documents and information contained in them were true and accurate, that he genuinely believed that loading had been completed on 25th October 1993 in new 24 gauge steel drums and that he estimated that the cargo would arrive in Vietnam on 15th November 1993. The judge held that the representations made were known to be false and were relied upon in such a manner as to amount to deceit. That by itself would not be sufficient to make Mr Mehra liable. An action for deceit against Mr Mehra requires proof that he made the false statements and that SCB relied upon those false statements as being made by him. The judge held: "As against Mr Mehra (and Oakprime) SCB relies on the tendering of the false bills of lading as constituting a representation that the contents of the bills were true and accurate (in addition SCB also relies on the tendering of the shipping advice stating that the ETA of the vessel was Nov. 15, 1993, the invoice and the packing list as constituting an implied representation that Mr Mehra believed that loading had been completed on Oct. 25, 1993). For similar reasons to those that apply in the case of PNSC and Seaways, all the ingredients of the tort of deceit are made out against Mr Mehra (and Oakprime)." He went on at page 706: "Mr Mehra contends by way of defence that he is not liable for the acts of Oakprime. I refer to my detailed findings as to Mr Mehra's conduct set out above. The relevant principles are referred to in Clerk & Lindsell on Torts, 17 ed., par. 4-49, C. Evans Ltd v Spritebrand Ltd [1985] 1 WLR 317, and Williams v Natural Life Health Foods Ltd [1996] 1 BCLC 131. In the present case Mr Mehra authorized, directed and procured the acts complained of with full knowledge that the acts complained of were tortious. He is accordingly personally liable." Mr Cherryman QC who appeared for Mr Mehra submitted that the judge should not have concluded that Mr Mehra was liable as he had authorised, directed and procured the acts complained of as that had never been pleaded against him. I shall return later to that submission, but will consider first Mr Cherryman's submission that Mr Mehra had not committed the tort of deceit. He submitted that he had not made any false representation. The representations had been made by Oakprime and in any case SCB had relied on them as being statements by Oakprime not as statements of Mr Mehra. Mr Mehra had acted at all times as a director of Oakprime and was not liable for the deceit of Oakprime. Oakprime was set up in 1989 and started to trade in 1990. Mr Mehra held 25% of the shares. Initially there were four directors and it had three full-time and two part-time employees. It went into liquidation due to litigation unrelated to this case. Evans LJ has referred to documents relied on as containing the misrepresentations. They are all on Oakprime headed paper or clearly stated to be from Oakprime. Mr Mehra's name appears as the person signing the documents as managing director of or on behalf of Oakprime. In my view the representations were made by Oakprime and all the evidence points to the conclusion that SCB relied upon them as being representations by Oakprime. Since Saloman v Saloman Co Ltd [1897] AC 22, companies have been recognised as separate legal entities to their shareholders, their directors and their employees. Leaving aside certain cases, not applicable in this case, where it has been held permissible to lift the corporate veil e.g. where the company is a mere facade, directors or employees acting as such will only be liable for tortious acts committed during the course of their employment in three circumstances. First, if a director or an employee himself commits the tort he will be liable. An example is the lorry driver who is involved in an accident in the course of his employment. Although Mr Mehra was the person who was responsible for making the misrepresentations, he did not commit the deceit himself. For reasons I have already stated the representations were made by Oakprime and not by him. Further, SCB relied upon them as representations by Oakprime and not as representations by Mr Mehra. The second way that a director or an employee will become liable is a branch of the first. A director or an employee may, when carrying out his duties for the company, assume a personal liability. An example where personal liability was assumed was Fairline Shipping Corporation v Adamson [1975] QB 180. A different conclusion was reached in Trevor Ivory Ltd v Adamson [1997] 2 NZLR 517. What amounts to such an assumption will depend upon the facts of the particular case. Guidance as to how to decide whether such an assumption took place can be obtained from Williams v Natural Life Ltd [1998] 1 WLR 830. In that case, the second defendant, Mr Mistlin, opened a health food shop in Salisbury and in 1986 formed Natural Life Health Foods Ltd as a vehicle to franchise the concept of retail health food shops under the name "Natural Life Health Foods". The plaintiffs were interested and were encouraged by a brochure and a prospectus to enter into a franchise agreement. Their turnover was substantially less than predicted and they sued the company and Mr Mistlin for the negligent advice that had been given. The company was dissolved and thereafter the action proceeded against Mr Mistlin alone. Lord Steyn who gave the leading speech he said at page 834: "It will be recalled that Waite LJ took the view that in the context of directors of companies the general principle must not "set at naught" the protection of limited liability. In Trevor Ivory v Anderson [1992] 2 NZLR 517, 524, Cooke P. expressed a very similar view. It is clear what they meant. What matters is not that the liability of the shareholders of a company is limited but that a company is a separate entity, distinct from its directors, servants or other agents. The trader who incorporates a company to which he transfers his business creates a legal person on whose behalf he may afterwards act as director. For present purposes, his position is the same as if he had sold his business to another individual and agreed to act on his behalf. Thus the issue in this case is not peculiar to companies. Whether the principle is a company or a natural person, someone acting on his behalf may incur personal liability in tort as well as imposing vicarious or attributed liability upon his principal. But in order to establish personal liability under the principle of Hedley Byrne which requires the existence of a special relationship between plaintiff and tortfeaser, it is not sufficient that there should have been a special relationship such as with the principal. There must have been an assumption of responsibility such as to create a special relationship with the director or employee himself." He went on at p.835: "The touchstone of liability is not the state of mind of the defendant. An objective test means that the primary focus must be on things said or done by the defendant or on his behalf in dealings with the plaintiff. Obviously, the impact of what a defendant says or does must be judged in the light of the relevant contextual scene. Subject to this qualification the primary focus must be on exchanges (in which term I include statements and conduct) which cross the line between the defendant and the plaintiff. Sometimes such an issue arises in a simple bilateral relationship. In the present case a triangular position is under consideration: the prospective franchisees, the franchiser company, and the director. In such a case where the personal liability of the director is in question the internal arrangements between a director and his company cannot be the foundation of a director's personal liability in tort. The inquiry must be whether the director or anybody on his behalf, conveyed directly or indirectly to the prospective franchisees that the director assumed personal liability towards the prospective franchisees. An example of such a case being established is Fairline Shipping Corporation v Adamson [1975] QB 180. The plaintiffs sued the defendant, a director of a warehousing company, for the negligent storage of perishable goods. The contract was between the plaintiff and the company. But Kerr J held that the director was personally liable. That conclusion was possible because the director wrote to the customer, and rendered an invoice, creating the clear impression that he was personally answerable for the services. If he had chosen to write on company notepaper, and rendered an invoice on behalf of the company, the necessary factual foundation for finding an assumption of risk would have been absent. A case on the other side of the line is Trevor Ivory Ltd v Andersen [1992] 2 NZLR 517. This case concerned negligent advice given by a one-man company to a commercial fruit-grower. Despite proper application of the spray it killed the grower's fruit crop. The company was found liable in contract and tort. The question was whether the beneficial owner and director of the company was personally liable. The plaintiff had undoubtedly relied on the expertise of the director in contracting with the company. The New Zealand Court of Appeal unanimously concluded that the defendant was not personally liable. McGechan J, who analysed the evidence in detail, said, at p. 532, that there was merely "routine involvement" by a director for and through his company. He said that there "was no singular feature which would justify belief that Mr Ivory was accepting a personal commitment, as opposed to the known company obligation." That was the basis of the decision of the Court of Appeal. In his 1997 Hamlyn Lecture on "Turning Points of the Common Law", Lord Cooke of Thorndon commented that if the plaintiff in Trevor Ivory v Anderson "had reasonably thought that it was dealing with an individual, the result might have been different": see "A Real Thing, Taking Salomon Further", p.18, note 50. Such a finding would have required evidence of statements or conduct crossing the line which conveyed to the plaintiff that the defendant was assuming personal liability." In those quoted passages, Lord Steyn had in mind that the cause of action relied on was negligence. However the principles stated are applicable to other torts, in particular to deceit. There must be an assumption of responsibility such as to create a special relationship by the plaintiff with the director or employee himself. Whether that exists is to be judged objectively with the primary focus on things said and done by the director or employee. It is necessary to enquire whether the director conveyed directly or indirectly to the plaintiff that he assumed a personal responsibility towards the plaintiff. In the present case, Mr Mehra, by his actions or statements never led SCB to believe he was assuming personal responsibility for the misrepresentations. SCB believed they were dealing with Oakprime. It follows that Mr Mehra cannot be held liable on this ground. The third ground of liability arises when the director does not carry out the tortious act himself nor does he assume liability for it, but he procures and induces another, the company, to commit the tort. A person who procures and induces another to commit a tort becomes a joint tortfeasor (see Unilever Plc v Gillette (UK) Limited [1989] RPC 583 and Molnlycke v Procter & Gamble [1992] RPC 583. There is no reason why a director of a company should be in any different position to a third party and therefore it is possible that a director can be capable of becoming a joint tortfeasor by procuring and inducing the company, for which he works, to carry out a tortious act. However there are good reasons to conclude that the carrying out of duties of a director would never be sufficient to make a director liable. That was the view of the Court of Appeal in C. Evans v Spritebrand Ltd [1985] 1 WLR 317. At page 323H Slade LJ, whose judgment was agreed by the other members of the Court, said: "The mere fact that a person is a director of a limited liability company does not by itself render him liable for torts committed by the company during the period of his directorship: see, for example, Rainham Chemical Works Ltd v. Belverdere Fish Guano Co Ltd [1921] 2 AC 465, 488 per Lord Parmoor; and Prichard v Constance (Wholesale) Ltd v. Amata Ltd [1924] 42 RPC 63. Nevertheless, judicial dicta of high authority are to be found in English decisions, which suggest that a director is liable for those tortious acts of his company which he has ordered or procured to be done. In Performing Rights Society Ltd v Ciryl Theatrical Syndicate Ltd [1924] 1 KB 1, Atkin LJ referred to a statement of principle by Lord Buckmaster in the Rainham Chemical Works case [1921] 2 AC 465, 476 and said, at p.14: "Prima facie a managing director is not liable for tortious acts done by servants of the company unless he himself is privy to the acts, that is to say unless he ordered or procured the acts to be done. That is authoritatively stated in Rainham Chemical Works Ltd v. Belvedere Fish Guano Co. Ltd [1921] 2 AC 465, where it was sought to make a company liable for an explosion upon their works in the course of manufacturing high explosives. The company was held liable on the principle of Rylands v. Fletcher (1868) LR 3 HL 330. It was also sought to charge two directors with liability. They were eventually held responsible because they were in fact liable on the ground that they were managing directors of the company, that the company was under their sole control as governing directors, and that they were responsible for the work done by their servants. Lord Buckmaster said [1921] AC 465, 476: 'I cannot accept either of these views. If the company was really trading independently on its own account, the fact that it was directed by cfMessrs. Feldman and Partridge would not render them responsible for its tortious acts unless indeed, they were acts expressly directed by them. If a company is formed for the express purpose of doing a wrongful act, or if, when formed, those in control expressly direct that a wrongful thing be done, the individuals as well as the company are responsible for the consequences, but there is no evidence in the present case to establish liability under either of these heads.' Perhaps that is put a little more narrowly than it would have been if it had been intended as a general pronouncement without reference to the particular case; because I conceive that express direction is not necessary. If the directors themselves directed or procured the commission of the act they would be liable in whatever sense they did so, whether expressly or impliedly." Slade LJ went on to review the authorities. He concluded that the case before him was not one where the Court should attempt a comprehensive definition of the circumstances in which a director of a company will become liable as he procured and induced a tort (see also Williams v Natural Life supra at page 838G). For reasons to which I now come, there is no need to decide whether Mr Mehra's actions were such as to make him a joint tortfeasor. The amended statement of claim did not allege that Mr Mehra was liable as a joint tortfeaser by procuring and inducing Oakprime to make the false representations. Thus it was submitted that the judge was wrong to find that he was liable upon that basis. Mr Gruder QC who appeared for SCB, supported by Mr Young, applied to amend to plead that Mr Mehra had procured and induced Oakprime to make the representations. He relied upon the facts and matters already pleaded. Mr Cherryman objected. He submitted that it was too late to amend and that it would be unjust to allow such an amendment as it could have affected the evidence that would have been given. In my judgment it would be unjust to allow amendment to plead procurement and inducement by Mr Mehra. I cannot think of any evidence that was not before the judge that could have affected the decision that he arrived at and in that sense amendment could be considered to be a mere technicality. However the amendment would in reality amount to an allegation that Mr Mehra had procured and induced a fraud. That allegation should, if it was to be relied on, have been pleaded at the outset and I do not believe it right to allow such an allegation to be introduced at this stage. That means that the finding of the judge that Mr Mehra was liable upon that basis cannot stand. It was also alleged that Mr Mehra had been guilty of conspiracy. As I understand the allegation, the unlawful act relied was the deceit practised by Oakprime on SCB. That was an act carried out by Oakprime but not with Mr Mehra who acted in his capacity as employee and director. The question of contribution as between SCB and PNSC remains for further argument. I would allow the appeal by Mr Mehra, but otherwise would uphold the decision and order of the judge. LORD JUSTICE WARD: I have had the opportunity and benefit of reading in draft the judgments of Evans and Aldous L.JJ. I agree with Evans L.J. that deceit is established against SCB. On the ex turpi causa question, my views coincide with the judgment of Aldous L.J. and I agree with Evans L.J. that the matter of contribution raises an interesting question on which I would wish to have further argument before coming to any final conclusion. For the reasons given by Evans and Aldous L.JJ. I would allow the appeal by Mr Mehra. In the result I agree with my Lords as to the present disposal of these appeals. Order: Appeal by Mr Mehra allowed; appeal by PNSC dismissed. The court directed that there be a further hearing on the "apportionment issue". That hearing to take place as soon as convenient during next term. Order does not form part of approved judgment.

Mr Justice Eady: On 31 March 20002 Harrods Limited issued a press release under the heading "AL FAYED REVEALS PLAN TO 'FLOAT' HARRODS". It stated that an important announcement would be made the next day by the Chairman about his future plans for "the world famous store", which included what was described as "a first-come-first-served share option offer". It continued as follows: "The information may help those journalists who have speculated during the last few months as a future direction of Harrods. The announcement will only be posted on the website until 12 noon on April 1st. To view the information, log onto alfayed.com and click on the Harrods story on the home page. The re-launched Alfayed.com is Mr Al Fayed's personal website and gives the visitor the opportunity to learn a little more about Mr Al Fayed, his life, his beliefs and his thoughts". Anyone interested was invited to contact "LOOF LIRPA" at Harrods. It will be noted that "Loof Lirpa" is simply "April Fool" backwards. The next day, 1 April, further information was released to the press which was introduced by the words "Hello and welcome to my brand new website. I hope you like it". Again, it was announced that the Chairman had decided to float Harrods and that those interested in acquiring shares could register on the website. The offer was said to "only be valid until noon today… the 1st April". As was no doubt intended, these announcements attracted a good deal of media attention. One consequence was that an article appeared in The Wall Street Journal on 5 April in the "Deals & Deal Makers" column. Under the heading "The Enron of Britain?" the following words appeared: "If Harrods, the British luxury retailer, ever goes public, investors would be wise to question its every disclosure. Harrods made "news" at the beginning of this week, when the London department store operator announced it was about to sell shares publicly. Some news organisations picked up the news item, including The Wall Street Journal in a news briefs column – but it was all an April Fools' joke. The gimmick was a promotion for the Web site of Mohamed Al Fayed, the company's Chairman. Clues that it was a joke included the fact that contact person listed to get more information was Loof Lirpa – April Fool spelled backward. Not exactly Monty Python-level stuff. But Harrods was pleased with itself, "The reason we played out this April Fools' joke was to draw people's attention" to the re-launched and redesigned Web site, says Peter Willasey, corporate communications direct for Harrods. "We have no plans" to issue shares. Can Harrods get in trouble for messing around with the facts? It is a private limited company. As such its actions aren't under the aegis of the Financial Services Authority, the U.K.'s securities regulator. A spokesman for Companies House, an agency of the Department of Trade and Industry responsible for regulating corporate governance in the U.K., said the body wasn't aware of any complaints. As of yesterday, Harrods hadn't calculated the number of hits that Mr Al Fayed's Web site obtained to gauge the success of the bogus release. Mr Willasey says: 'Mr Al Fayed is delighted it has been picked up all around the world'". It is to be noted that the above words did not appear in the European edition (i.e. Wall Street Journal Europe). It follows that the number of readers within this jurisdiction would be rather small, since it is to the European edition that most interested readers in England would turn. The evidence is that 10 copies only are sent to subscribers in the United Kingdom from the United States. The words in question were also published in the on-line edition (www.wsj.com.) and in an Interactive Publications Library (www.dinteractive.com). Again, so far, the evidence discloses a very small number of "hits" on the article as published on the web. By contrast, The Wall Street Journal has a national distribution within the United States of approximately 1.8 million copies. A letter of complaint was sent from Harrods by Jeffery Byrne, its director of legal affairs, on 10 April 2002 which was addressed to Mr Peter Kann as publisher, chairman and chief executive, and to Mr Peter Skinner as executive vice-president and general counsel of the Journal. He wrote to complain "in the strongest terms" about the 5 April article and claimed that it had caused serious damage to Harrods' reputation worldwide and required the publication of an immediate apology. It was said to be "quite scandalous" to have equated Harrods with Enron. It was made clear from the draft apology that Harrods were seeking in addition "a substantial payment of damages" which was to be donated to charity. In due course proceedings were launched in this jurisdiction on 29 May 2002. By this time, the claim was limited to publication in England and Wales. That accords with the principle described by Lord Hope in Berezovsky v. Michaels [2000] 1 WLR 1004, 1032: "The rule which applies in these cases is that the plaintiff must limit his claim to the effects of the publication in England…" No proceedings have been launched in respect of circulation within the United States, whether there or elsewhere, and this would hardly be surprising in view of the impact of the First Amendment to the United States Constitution upon the approach taken to libel litigation in the courts of that jurisdiction. It is well known that this also has a significant effect upon the approach of the American courts to the enforcement of judgments arising from English defamation claims. The particulars of claim, which were served on 11 June 2002, attribute to the words complained of the natural and ordinary meaning that every corporate disclosure of Harrods Limited should be distrusted. There is, in the alternative, an innuendo meaning to the effect that "… It is reasonably suspected that if the Claimant were to become a public company it would prove itself to be Britain's Enron by deceiving and defrauding its investors on a huge scale". That is based upon the inference that readers would have known of the "scandal" surrounding the collapse of Enron and of the fact that it had "… artificially inflated its profits, employed improper accounting practices and deceived its investors and business counterparts on a huge scale". If it becomes necessary to do so, the Defendant, Dow Jones & Company Inc., would defend the allegations as not being defamatory and as representing a humorous response to Mr Al Fayed's April Fool's Day joke. For the moment, however, there are two applications before the court, on the Defendant's behalf, which are clearly of potential importance for the future of the litigation. There is, first, a challenge to the validity of the purported service of the proceedings within this jurisdiction and, secondly, an application to stay them on grounds of forum non conveniens. There is also, by way of response, a precautionary application on the Claimant's part for permission to serve the proceedings (should it prove necessary) out of the jurisdiction. Not surprisingly, in the forum context, the Defendant places considerable reliance upon the old case of Kroch v. Rossell [1937] 1 All E R 725. In particular, I was reminded of the words of Scott L.J. (at 732): "…it would be ridiculous and fundamentally wrong to have these two cases tried in this country on a very small and technical publication, when the real grievance of the plaintiff is a grievance against the wide-spread publication of the two papers in the respective countries where they are published". It is submitted on behalf of the Defendant that it would be equally "ridiculous" to have this matter dealt with in England when the "real grievance" of Harrods Limited emerges on the face of the letter before action as having been "… serious damage to Harrods' reputation worldwide". Against that background, it is perhaps ironic that the matter has already come before Judge Victor Marrero in the United States District Court for the Southern District of New York, where Dow Jones sought intervention by that court with a view to avoiding enormous expense and uncertainty as to whether it might continue to publish the offending article. After a detailed consideration of the law, the learned judge found that "… a more appropriate alternative remedy exists for the parties in proceeding with the London Action", and concluded that it was appropriate for the court to refrain from "encroachment upon the British tribunals". He recognised that, if Dow Jones did not prevail in these proceedings, it would not necessarily be left without a remedy in the United States. That was, I believe, a reference to the unwillingness of courts there to enforce judgments based upon "legal principles inimical to prevailing American First Amendment jurisprudence and public policy". I shall have to return to these delicate matters of forum in due course, but meanwhile I must address the equally important but more technical question of whether or not service has been effected in this jurisdiction. On 29 May 2002 a copy of the claim form was left with Mr Jan Boucek, company secretary of Dow Jones International Limited ("DJI") at its premises at 10 Fleet Place, London, EC4. DJI is not a party to these proceedings, and Mr Boucek was not authorised to accept service on behalf of Dow Jones & Company Inc. An attempt was made on 12 June 2002 to deliver the particulars of claim to Mr Boucek at the same address, but he declined to accept delivery. The particulars of claim were then faxed to that address later the same day. The matter has to be determined in the light of the provisions of the Companies Act 1985 against an extensive background of judicial authority. Reliance is placed upon the provisions of s.695(2)(a) of the 1985 Act. It is important to note that the context of this statutory regime is the obligation imposed by s.691 of the Act in respect of overseas companies to register documents and returns with the registrar of companies. What s.695 provides is a default mechanism for service; that is to say, where the relevant company has failed to comply with the obligation to register, "a document may be served on the company by leaving it at, or sending it by post to, any place of business established by the company in Great Britain". One of the central questions for me to consider, therefore, was identified as being whether or not Dow Jones & Company Inc. has established a place of business in Great Britain. Attention focused on the only candidate for that description, namely 10 Fleet Place. It is important to note, however, that the concept of establishing a place of business is relevant not only for the purposes of service under the default provisions of s.695, but it is also a fundamental requirement for the obligation to register with the registrar of companies in the first place. In other words, for the service provisions of s.695 to come into play, it is necessary to show that relevant corporation had an obligation to register under s.691. If it did not, that is an end of the matter. The Defendant corporation has not so registered and has always been advised that it has had no obligation to do so – for the very reason that it has not established a place of business in Great Britain. Mr Gavin Millar Q.C., appearing on its behalf, included within his interesting and cogent submissions a "floodgates" argument. His client, like no doubt many other foreign corporations, has set in place a number of arrangements, in accordance with legal advice, to a large extent designed with the specific purpose of keeping outside the scope of the obligation to register created by what is now s.691 of the 1985 Act. He submitted, in effect, that if the English courts were to hold, notwithstanding such arrangements, that the obligation had arisen nevertheless the apple cart would be well and truly overturned. If I were to uphold the Claimant's submission in this case, he argued, it would be tantamount to saying that after all these years the arrangements in place (and, no doubt, the legal advice on which they were based) would have proved to be quite inadequate. That is, of course, an interesting background context, but, in the last analysis, I must come to my own conclusion about the relevant arrangements in this particular case. At the heart of Mr Millar's submissions was the proposition that the court should keep quite separate the concepts of "carrying on business", on the one hand, and "establishing a place of business" in Great Britain on the other. It has never been the law in this country than an obligation to register with the registrar of companies arises from activities and circumstances which can be characterised overall merely as "carrying on business". Nor yet, it follows, would such a state of affairs be sufficient to trigger the default service provisions under s.695. The effect of Mr Millar's submissions, in this regard, is that I should be on my guard against being drawn too readily into looking at the "reality" or "substance" of the matter when addressing the critical question of whether there has been established a place of business. It will not do to adopt too broad a brush. It is necessary to focus on what might appear, in other contexts, to be fairly technical distinctions. That is for the very reason that the English courts have always recognised this boundary between carrying on business and establishing a place of business. That is well illustrated in the Scottish case of Lord Advocate v. Huron & Erie Loan & Savings Co. [1911] SC 612, 616. In that case, it would appear that the relevant company had been carrying on business in Scotland in the sense of raising money from investors in the United Kingdom and issuing debentures. That was not good enough, however, since it had not established what the Lord President described as "a local habitation of its own". It seems that the courts within this jurisdiction have continued to focus on that distinction ever since: see e.g. South India Shipping Corp v. Export-Import Bank of Korea [1985] 2 All E.R. 219, Re Oriel Limited [1986] 1 W.L.R. 180, Adams v. Cape Industries [1990] 1 Ch. 433 and Rakusens Limited v. Baser AS [2002] 1 BCLC 104. Interestingly, both Mr Millar and Mr James Price Q.C., who was appearing for the Claimant, prayed in aid a number of tests identified by the Court of Appeal in Adams v. Cape Industries (at pp.530-531), which were thought to be relevant in determining whether or not, in any given case, a place of business has been established. In applying these criteria to the present case, both counsel claimed to have scored very high marks. The relevant questions identified by the Court of Appeal focussed upon the role of representatives operating within this jurisdiction: a) whether or not the fixed place of business from which the representative operates was originally acquired for the purpose of enabling him to act on behalf of the overseas corporation; b) whether the overseas corporation has directly reimbursed him for the cost of the accommodation, at the fixed place of business, and/or the cost of his staff; c) what contributions, if any, the overseas corporation makes to the financing of the business carried on by the representative; d) whether the representative is remunerated by reference to transactions, e.g. by commission, or by fixed regular payments, or in some other way; e) what degree of control the overseas corporation exercises over the running of the business conducted by the representative; f) whether the representative reserves part of his accommodation, or part of his staff, for conducting business relating to the overseas corporation; g) whether the representative displays the overseas corporation's name at his premises or on his stationery and, if so, whether he does it in such a way as to indicate that he is a representative of the overseas corporation; h) what business, if any, the representative transacts as principal exclusively on his own behalf; i) whether the representative makes contracts with customers, or other third parties, in the name of the overseas corporation, or otherwise in such manner as to bind it; j) if so, whether the representative requires specific authority in advance before binding the overseas corporation to contractual obligations. In the present case the principal activities of DJI consist of selling advertising space in the Defendant's publications and to some extent also in publications (e.g. Wall Street Journal Europe) which are published by other companies within the group; financial news gathering, principally for the Dow Jones Newswires business, which is an electronic financial news service for subscribers; and handling and supervising accounts for the Newswires business. This information derives from service agreements and an annual return which were put in evidence by Mr Boucek. It appears from the 2001 annual report that of DJI's turnover £21 million derived from news gathering, £4.2 million from commission on advertising sales and £1.3 million on conference activities. The advertising contracts are arranged on the terms laid down by the Defendant. A question to which some attention was devoted, in the course of the argument, was whether it can truly be said that DJI concludes the contracts directly with the customers in the Defendant's name, without reference back to the Defendant. When the invoice is generated, it is the Defendant's name which appears on the document and no mention is made directly of DJI (although there is in the bottom right hand corner a reference, in general terms, to "your local sales representative", should the customer have any queries). Payment is to be made to the Defendant's US dollar account at the Chase Manhattan Bank in London Wall. On the face of it, therefore, it rather looks as though a contract is generated in the Defendant's name directly between DJI and the relevant customer and that, accordingly, DJI has the necessary authority to contract. The terms of the contract itself, however, make clear that a binding agreement is only concluded when the Defendant chooses, in its editorial discretion, to publish the advertisement in question. Until that point there is only an offer to the Defendant (albeit passed through DJI), which remains open and capable of acceptance until the decision is taken to publish. That decision, however, is taken by the Defendant rather than DJI. It was said by the Court of Appeal in Adams v. Cape Industries [1990] Ch. 433, 531 that "… the fact that a representative, whether with or without approval, never makes contracts in the name of the overseas corporation or otherwise in such a manner as to bind it must be a powerful factor pointing against the presence of the overseas corporation". There is no sign or notice at the premises at Fleet Place referring to the Defendant, as opposed to DJI. On the other hand, my attention was drawn to the BT Phone Book for London (October 2001), which contains an entry in large type for "DOW JONES & Company Inc – 10 Fleet Pl, EC4 020 7842 9900". There is also an entry for Dow Jones Newswires Departments, giving addresses at 10 Fleet Place, 150 Holborn and 90 Long Acre. Various telephone numbers are given according to the relevant department. There is a separate entry, immediately underneath, for "Dow Jones International Ltd", which again gives various telephone numbers, but the only address given for DJI is 90 Long Acre, whilst the only reference to 10 Fleet Place in the telephone directory is for the "editorial" department of Dow Jones Newswires. By contrast, Dow Jones Inc is not mentioned in the "Business to Business Directory" for London (2001/2002), but DJI has two entries, under 10 Fleet Place and 90 Long Acre, respectively. The same is true of Yellow Pages for London Central (01/02). Mr Millar submitted that it would be wrong to draw an inference of an established place of business merely from a telephone directory entry. Such information would simply provide a potential customer within this jurisdiction, or indeed anyone else, with a route to contact the Defendant without having to go to an international directory. What is more important, for present purposes, is what happens when such contact has been made. If the person wishes, for example, to advertise in the Wall Street Journal, the arrangements will no doubt be made through DJI but, as I have described above, the contract will not be entered into until the editorial decision has been taken, by the Defendant, to insert the relevant advertisement when space has become available. Another matter, which Mr Price has emphasised on behalf of the Claimant, was that there are generally, at any given moment, a number of the Defendant's staff, who are directly paid by the Defendant throughout, operating in London. So far as DJI's own staff are concerned, they are not paid directly but, on the other hand, the Defendant is obliged contractually to reimburse DJI for its staff costs. So too with the premises, it is DJI which contracts in respect of 10 Fleet Place although, once again, the costs so incurred are reimbursed by the Defendant. This may look somewhat artificial, but these arrangements have been in place for some time specifically to ensure that the Defendant does not, so to speak, place a foot within this jurisdiction. The specific "place of business" is in the name of an English company. Although DJI undoubtedly conducts its own business, it is probably fair to say in light of the evidence that most, if not all, of that business is directed towards servicing that of the Defendant. To that extent, its business may be perceived as entirely dependent upon the Defendant (as being in a sense "parasitic"), but that is not necessarily to identify its own business, consisting of the provision of services, as being that of the Defendant. There have from time to time been firms of solicitors with effectively only one client, but that does not mean that the solicitor's practice is that of the client. Naturally, it is right to scrutinise the arrangements with care, but Mr Millar submits that it would not be right to characterise DJI's business as being truly that of the Defendant unless the situation can be characterised as a "sham". As Mr Millar submitted, the burden of proving service rests in this instance upon the Claimant. Accordingly, it must prove all the factual ingredients necessary for that inference. In particular, it must establish all the circumstances upon which it relies as demonstrating that the Defendant has established a place of business within this jurisdiction. It was against this background that I was invited to consider the various factors identified in Cape which I have listed above. As to the first criterion, there is no evidence before the court as to whether or not 10 Fleet Place was originally acquired for the purpose of enabling DJI to act on behalf of the Defendant. In the light of the limited nature of DJI's business (I am not, of course, thinking in terms of its scale), I suspect that it probably was. But suspicion is not enough. The fact is that I have no evidence. In any event, it is of greater significance to consider how DJI carries out its responsibilities; in particular, whether it has authority to bind the Defendant to contractual obligations without referring back. For the reasons I have already discussed, I have decided that this is not so in relation to the selling of advertising space. Moreover, it has not been demonstrated with reference to any other sphere of activity. Secondly, the evidence does not establish direct reimbursement of DJI, either in respect of accommodation or staffing costs. The chosen contractual method of reimbursement undoubtedly embraces all such costs incurred by DJI and includes a "mark up". Remuneration for its services, however, is not the same as direct reimbursement. The distinctions may seem very technical, but it appears that they are sanctioned by law, and that is why the contractual arrangements take the form they do. There is bound to be a fine drawing of lines if one remembers that a company may be carrying on business here without necessarily having established a place of business. As to what degree of control, if any, the Defendant exercises over the running of DJI's business, Mr Millar submits yet again that there is no evidence. So far as advertising space is concerned, there is no doubt that the terms of business included in the "rate card" are laid down (or, in Mr Price's word, "dictated") from the United States. That may well be right, but if it be the case that DJI does not have the power to clinch the sale of advertising space, it is difficult to see how the contents of the rate card could be described as controlling or running DJI's business. I have come to the conclusion that the Claimant is unable to prove that the Defendant has established a place of business within Great Britain and, it follows, cannot establish that service has taken place effectively by means of sending relevant documents to 10 Fleet Place. An alternative argument was developed by reference to the wording of CPR 6.2 and 6.5. It seems that the point was considered in the course of argument before Gray J in Lakah Group v. Al Jazeera Satellite Channel, unreported, 26 March 2003. It is provided in CPR 6.2(2) that a company may be served by any method permitted under Part 6 "as an alternative to the methods of service set out in …(b) section 695 of [the Companies] Act (service on overseas companies)". One of the methods so permitted under CPR 6.5 is that a document may be sent or transmitted to, or left at, one of the places shown in the attached table, including a place within the jurisdiction "where the corporation carries on its activities". There was argument before Gray J as to whether these provisions of the CPR altered the position, by giving greater latitude, for service upon overseas companies. What is significant for present purposes, however, is that the statutory regime under s.695 (for service in default of registration) is predicated upon the proposition that the company to be served is an overseas company within the meaning of s.691 (see paragraph 14 above). The short answer to the alternative argument on service is that the wording of the CPR does not enable one to by-pass the need to demonstrate that a place of business has been established within this jurisdiction. The default provisions of s.695 are predicated upon the assumption that one is dealing with an overseas company falling within the description in s.691. In the light of my conclusion on the Companies Act point, I am invited to give permission to serve out of the jurisdiction. I should make it clear that steps were taken on behalf of the Claimant to extend the validity of the claim form to 31 May 2003. This was a precaution taken against the possibility that the court might find against the Claimant on its primary argument on service. It was achieved by orders of Master Ungley dated 25 October 2002 and Master Leslie dated 24 January 2003. Clearly the issues on the Claimant's application overlapped considerably with those arising on the Defendant's application for a stay on the ground of forum non conveniens. It is necessary to remember that the court is here concerned with a claim brought by an English company for the purpose of protecting its trading reputation in respect of publications which, according to English law, have taken place within this jurisdiction. That applies both to the small number of copies of The Wall Street Journal received by subscribers here and also to the apparently limited number of hits emanating from this jurisdiction on the relevant page of the web site. (See Godfrey v. Demon Internet [2001] QB 201; Loutchansky v. Times Newspapers Ltd [2002] 2 WLR 640 at [58] and [59]; Gutnick v. Dow Jones & Co Inc [2002] HCA 56, High Court of Australia.) There are two important principles of English defamation law which, although they may not commend themselves to parties, courts or commentators in other jurisdictions, are well established. What is more, they have been recognised as of continuing validity in two recent House of Lords decisions, namely Shevill v. Presse Alliance SA [1996] AC 959 (where the Brussels Convention was relevant) and Berezovsky v. Michaels [2000] 1 WLR 1004 (where it was not). (See also Schapira v. Ahronson [1999] E.M.L.R. 735, CA.) The first of these long-standing principles is that English law does not recognise what would now be called a "single publication" doctrine. Even though a newspaper's primary circulation may be in one or more foreign jurisdictions, English law recognises that there may also be separate publications in other jurisdictions, each being sufficient to found a separate cause of action. Thus, however limited and technical it may appear, there have been publications within this jurisdiction which are arguably tortious and which give rise to a cause of action here. The other principle of long standing is that damage is presumed. There is no evidence here, so far as I am aware, that the Claimant's reputation suffered any actual damage as a result of the publications sued upon. That is not, however, a stumbling block. It may well be that, even if the Claimant succeeds on liability, the damages recovered would be nominal or very modest. But that is nothing to the point. As Mr Price put it, there is no de minimis principle when it comes to establishing publication. It can be argued that the technical nature of these publications ought to weigh heavily with the court when it comes to the exercise of discretion. I have to consider what is the point of allowing such litigation to go ahead, involving no doubt considerable inconvenience and expense to parties outside this jurisdiction, when it appears that the Claimant has so little to gain. Mr Millar argues that it would be disproportionate. There is also the point to which the Judge in New York adverted; namely, that there may be considerable difficulty in enforcing a judgment against the Defendant in the light of public policy in the United States, as applied in the United States courts. Once again, what is the point? I suppose, from the standpoint of an English judge, the point has to be seen in terms of vindication of reputation. That is recognised as perhaps the main public policy consideration underlying the law of defamation generally and, moreover, it is also reflected as a legitimate consideration under Article 10(2) of the European Convention on Human Rights. Mr Price argues that the Defendant does not have to go to any great expense or inconvenience, since "all" it has to do is to acknowledge that it was not intending to draw a genuine analogy with Enron and had no basis for doing so. Unfortunately, I suspect that to American citizens this would present itself as an unacceptable option. In particular, however little interest the 5 April article may have actually generated, as a matter of principle the Defendant would not wish to undertake not to re-publish the original allegations. That would equate to "prior" or "previous" restraint. There is the impasse. The Claimant wishes to pursue the action in order to demonstrate, as an objective matter of truth, and for the record, that the imputations reflected in its pleaded meanings are unjustified. It may be over-sensitive, but I believe as a matter of English law, and for that matter public policy, it is entitled to do so. I also take the view that these English publications relating to an English corporation, however limited and technical, are most conveniently dealt with in an English court. As a matter of fact, that seems to coincide with the view of the learned Judge in the District Court in New York. Reference was made to Kroch v. Rossell, as is generally done in such cases. What is important to remember is that Mr Kroch had no real connection with this country, and that factor appears to have been critical so far as the Court of Appeal was concerned in 1937. Here we have an English company which manifestly has a connection with this jurisdiction. This is where it primarily trades and it certainly has a well established reputation here. The case does not, therefore, dissuade me from coming to the decision which, in all other respects, seems to me to be plainly right and in accordance with authority. (See e.g. The Albaforth [1984] 2 Lloyds Rep. 91, 96, per Robert Goff L.J. and Berezovsky, cited above, at 1014, per Lord Steyn.) I will, therefore, refuse the stay on forum grounds and grant permission to serve out. I would encourage the parties, however, before further costs are incurred to arrive at a sensible compromise. My words may fall on stony ground, but that is no reason for not making an attempt.

Peter Smith J : INTRODUCTION This judgment is in respect of the trial of the Preliminary Issue ordered by Master Moncaster on 15th March 2005 namely :- i. Whether either or both of the Credit Agreement and the Security Agreement are valid and enforceable or illegal and void as a result of the application of Section 151 of the Companies Act 1985 or at common law. ii. Whether the Guarantee (in whole or in part) is valid and enforceable or unenforceable as a result of the said section in the Companies Act 1985 or at common law. The other Preliminary Issues directed by the order have been disposed of by the parties. To make the Preliminary Issue intelligible the Credit Agreement is an agreement dated 23rd February 2001 where Anglo Petroleum Ltd ("APL") borrowed £15,000,000 from TFB (Mortgages) Ltd ("TFB") repayable on 22nd August 2001. On the same day APL entered into a Security Agreement ("the Security Agreement") under which it granted a floating charge over its assets and mortgaged 46 petrol stations to TFB as security for its indefinite liability under the Credit Agreement. The Guarantee is a guarantee of the same date given by Paul Sutton under which he guaranteed APL's liabilities to TFB under the Credit Agreement and the Security Agreement subject to a maximum of £15,000,000 plus interest and costs in enforcing the Guarantee. On 22nd August 2001 the Credit Agreement was extended until 22nd February 2002 on terms that APL paid an immediate pre payment of £750,000 and agreed to the arrangement fee being increased by £1,662,499.92 payable in 6 monthly instalments of £277,083.32. On 9th November 2001 TFB demanded payment by APL of a sum of £14,250,000 outstanding under the Credit Agreement. On the same day TFB also appointed administrative receivers over APL's assets. On 7th December 2001 TFB demanded payment by Paul Sutton of £14,250,000 under the Guarantee. There have been realisations of approximately £10,000,000 but there are disputes over the realisations none of which is for consideration before me. COMPANIES ACT 1985 The Preliminary Issue addresses whether or not the Credit Agreement and Security Agreement are valid under Section 151 of the Companies Act 1985 and whether or not the Guarantee also fails on the basis that it too infringes those provisions. The relevant provisions for the purpose of this Preliminary Issue are sections 151, 152 and 153 which are as follows:- "151.--(1) Subject to the following provisions of this Chapter, where a person is acquiring or is proposing to acquire shares in a company, it is not lawful for the company or any of its subsidiaries to give financial assistance directly or indirectly for the purpose of that acquisition before or at the same time as the acquisition takes place (2) Subject to those provisions, where a person has acquired shares in a company and any liability has been incurred (by that or any other person), for the purpose of that acquisition, it is not lawful for the company or any of its subsidiaries to give financial assistance directly or indirectly for the purpose of reducing or discharging the liability so incurred. (3) If a company acts in contravention of this section, it is liable to a fine, and every officer of it who is in default is liable to imprisonment or a fine, or both. 152.--(1) In this Chapter-- (a) "financial assistance" means— (i) financial assistance given by way of gift, (ii) financial assistance given by way of guarantee, security or indemnity, other than an indemnity in respect of the indemnifier's own neglect or default, or by way of release or waiver, (iii) financial assistance given by way of a loan or any other agreement under which any of the obligations of the person giving the assistance are to be fulfilled at a time when in accordance with the agreement any obligation of another party to the agreement remains unfulfilled, or by way of the novation of, or the assignment of rights arising under, a loan or such other agreement, or (iv) any other financial assistance given by a company the net assets of which are thereby reduced to a material extent or which has no net assets; (b) "distributable profits", in relation to the giving of any financial assistance-- (i) means those profits out of which the company could lawfully make a distribution equal in value to that assistance, and (ii) includes, in a case where the financial assistance is or includes a non-cash asset, any profit which, if the company were to make a distribution of that asset, would under section 276 (distributions in kind) be available for that purpose, and (c) "distribution" has the meaning given by section 263(2). (2) In subsection (1)(a)(iv), "net assets" means the aggregate of the company's assets, less the aggregate of its liabilities ("liabilities"to include any provision for liabilities or charges within paragraph 89 of Schedule 4). (3) In this Chapter-- (a) a reference to a person incurring a liability includes his changing his financial position by making an agreement or arrangement (whether enforceable or unenforceable, and whether made on his own account or with any other person) or by any other means, and (b) a reference to a company giving financial assistance for the purpose of reducing or discharging a liability incurred by a person for the purpose of the acquisition of shares includes its giving such assistance for the purpose of wholly or partly restoring his financial position to what it was before the acquisition took place. 153.--(1) Section 151(1) does not prohibit a company from giving financial assistance for the purpose of an acquisition of shares in it or its holding company if-- (a) the company's principal purpose in giving that assistance is not to give it for the purpose of any such acquisition, or the giving of the assistance for that purpose is but an incidental part of some larger purpose of the company, and (b) the assistance is given in good faith in the interests of the company. (2) Section 151(2) does not prohibit a company from giving financial assistance if— (a) the company's principal purpose in giving the assistance is not to reduce or discharge any liability incurred by a person for the purpose of the acquisition of shares in the company or its holding company, or the reduction or discharge of any such liability is but an incidental part of some larger purpose of the company, and (b) the assistance is given in good faith in the interests of the company. (3) Section 151 does not prohibit-- (a) a distribution of a company's assets by way of dividend lawfully made or a distribution made in the course of the company's winding up, (b) the allotment of bonus shares, (c) a reduction of capital confirmed by order of the court under section 137, (d) a redemption or purchase of shares made in accordance with Chapter VII of this Part, (e) anything done in pursuance of an order of the court under section 425 (compromises and arrangements with creditors and members), (f) anything done under an arrangement made in pursuance of section 582 (acceptance of shares by liquidator in winding up as consideration for sale of property), or (g) anything done under an arrangement made between a company and its creditors which is binding on the creditors by virtue of section 601 (winding up imminent or in progress). (4) Section 151 does not prohibit-- (a) where the lending of money is part of the ordinary business of the company, the lending of money by the company in the ordinary course of its business, (b) the provision by a company in accordance with an employees' share scheme of money for the acquisition of fully paid shares in the company or its holding company, (c) the making by a company of loans to persons (other than directors) employed in good faith by the company with a view to enabling those persons to acquire fully paid shares in the company or its holding company to be held by them by way of beneficial ownership. (5) For the purposes of subsection (4)(bb) a company is in the same group as another company if it is a holding company or subsidiary of that company, or a subsidiary of a holding company of that company." The ambit of these sections in relation to the facts in the Preliminary Issue involved extensive citation of authorities which I shall refer to further in this judgment. BACKGROUND There are three actions to which this Preliminary Issue relates. They arise out of the purchase by Kaluna Ltd ("Kaluna") of the whole of the issued share capital of APL (then known as Repsol Petroleum Ltd) from Repsol (UK) Ltd ("RUK") a company owned by Repso Petroleo a Spanish company. Kaluna was a special purpose vehicle formed for the purpose of this acquisition. It is a company registered in the British Virgin Islands and its beneficial owner is a British Virgin Island discretionary trust where the main beneficiaries (according to Mr Riches a witness called by APL) are the 2 daughters of Paul Sutton. He is the Protector of the Settlement and as such has the usual power in BVI trusts of appointing and removing trustees. DOCUMENTS CONCERNING AQUISITION Two documents are relevant to the acquisition of the shares in APL by Kaluna. The first is a Compromise Deed ("The Compromise Deed") dated 15th November 2000. The parties to this are RUK and APL under its former name. At the time of the Compromise Deed APL was indebted to its parent company RUK in the sum of £30,000,000. That indebtedness was apparently repayable on demand and carried interest at a commercial rate. APL at the time of the Compromise Deed would have been unable to repay that sum if demanded. At that time it had cash in its bank account amounting to some £4,000,000. The debt was unsecured. TERMS OF COMPROMISE DEED The material terms are as follows:- i. APL agreed to pay £6,000,000 of the outstanding indebtedness on the date of execution of the Deed (clause 2.1). ii. It agreed to repay a second payment on 15th May 2001 of £9,000,000 (clause 2.2). iii. It agreed to pay interest no later than 15th May 2001 being an agreed amount of £300,000 but subject to pro rata abatement in the event of voluntary repayment (clauses 2.3 and 5.1(c)). iv. It agreed to execute and deliver to RUK a fixed first legal charge over the properties identified in the schedule to the Compromise Deed. In exchange for those matters RUK irrevocably and unconditionally released and discharged APL and the subsidiaries from repayment of the balance of the outstanding inter company debt namely £15,000,000 (clause 3). Otherwise the terms were unexceptional. On the same day RUK and Kaluna entered into a Share Purchase Agreement ("the SPA") whereby RUK sold all of the issued share capital in APL to Kaluna. The total number of shares was 690,570 one pound shares. According to the SPA the consideration for the shares was £1. That was also the consideration that was stated in the share transfer executed on the same day and upon which stamp duty of £5 was paid. The SPA refers to the inter company debt as being £30,000,000 plus interest down to the Completion Date owed by APL to RUK immediately prior to the execution of the Compromise Deed. The net current asset value was stated to be the net current assets shown on the Completion Statement. That document has not been produced before me. However there was attached to a fax dated 22nd February 2001 sent by APL to TFB (which has other significance in this case) a balance sheet as at 31st October 2000. That letter also stated that there had been no material alteration in APL's financial position from that date to the date of the fax. The net assets employed show fixed assets in respect of land and buildings valued at £20,477,000. It apparently shows a total deficiency of £120,000 taking into account the £30,000,000 loan due to RUK. The accounts of RUK to 31st December 1999 which appear to have been approved around the 14th April 2000 showed RUK made an operating loss of £1,731,000 in the year (the year before the loss was £762,000). It shows freehold assets valued at £23,000,843 and shows a surplus of net current assets of £6,388,000 but after the application of the loan of £30,000,000 shows net liabilities of £567,000. Further documentation which was obtained from RUK's solicitors who acted on the acquisition (Betesh Fox of Manchester) included a balance sheet of APL as at 30th June 2000 which showed net liabilities (after the £30,000,000 loan) of £1,411,000. Finally in the context of the financial position of APL there is an email dated 2nd November 2000 from Nicholas Fairhurst (partner at Betesh Fox) to a Mr Clifford at Baker Tilley (who was presumably acting for Kaluna). This email was copied in to Mr Riches, APL's subsequent Managing Director, who gave evidence before me. The email was in the context of preference claims under section 239 Insolvency Act 1986 but there was an observation that at "£15,000,000 RPL [i.e APL] is balance sheet solvent so that there can be no question of a preference. At £9,000,000 or £5,000,000 RPL would be insolvent although the outcome for creditors could still be better that existing". That shows that at the time of the SPA those advising Kaluna (including Mr Riches) believed that APL would be balance sheet insolvent if the inter company debt was written down to £13,000,000 and that in reality a write down to £9,000,000 or £5,000,000 was required to be sure. It is clear in my opinion that APL was balance sheet insolvent as at the time of the SPA and was only capable of trading because RUK financed it to the tune of £30,000,000 on its unsecured loan. The evidence shows that Repso Petroleo the ultimate holding company was under pressure to dispose of RUK's shares in APL by the year end. Given the figures that is hardly surprising. The only other material provision in the SPA is clause 21 whereby Kaluna agreed to give a guarantee to RUK in the terms of schedule 10. By that guarantee Kaluna guaranteed as principal debtor the due and punctual performance by APL of all of its obligations under the Compromise Deed and undertook to indemnify RUK against all losses, damages, costs and unexpected expense incurred by it arising from any failure on the part of APL to perform and or observe any of its obligations under the same. As security for that Guarantee (it being noted that Kaluna's unsecured guarantee was worthless as RUK must have inevitably known) Kaluna also on the same day charged the 690,570 shares in APL to RUK as security for its obligations under the Guarantee. FINANCIAL TRANSACTIONS At the time of the SPA and Completion Deed a number of events occurred:- APL repaid £6,000,000 of the £30,000,000. It funded that as to £4,000,000 of its own cash. The balance was raised by a resolution of APL to increase its share capital to 2,690,570 by the creation of 2,000,000 extra ordinary shares of £1 which were issued to Kaluna Ltd. There was subsequently disclosed in the course of the hearing documentation which suggested that Kaluna initially contemplated lending the £2,000,000 to APL but that did not proceed (doubtless a decision was made to improve the balance sheet position of APL by having the £2,000,000 as shares rather than debt liability). How that issue operated in relation to RUK's charge over the other shares in APL was not explored before me. It might have had an impact if the security ever came to be enforced but in the circumstances as set out in this judgment that never arose. There were 2 other transactions which took place at the same time which were not explained before me. First on 15th November 2000 Kaluna borrowed £2,000,000 from Vanessid Investment Ltd (a Gibraltar company) repayable the next day. The price for that was interest of £300,000. It is impossible to compute in annual terms what that rate of interest is save to say that it is huge. Mr Sutton and Mr Riches guaranteed its payment. I do not know how and when or if at all Kaluna repaid that money. A Gibraltar firm of solicitors Hassans acted for Vanessid. Mr Levy QC who gave evidence before me is a partner in Hassans. Second some 8 days later there was apparently an agreement whereby APL borrowed £2,000,000 from Vanessid with interest at the rate of £100,000 per week. Various loan agreements and documents were apparently prepared but Mr Riches was unable to say whether or not the transaction took place (an odd lapse of memory). It may be that it is connected to the second unusual transaction which is set out in a letter dated 15th November 2000 from Betesh Fox to the directors of APL (i.e. the new directors and in particular Mr Riches who countersigned it). It referred to a sale by Classic Motion Ltd (a company associated with Mr Sutton) of shares in a company Seletar for £2,300,000. This of course represents the amount which Kaluna borrowed from Vanessid to fund (presumably) the share subscription in respect of the 2,000,000 shares issued to it in APL. The second Vanessid loan may have been a method by which APL raised monies to satisfy its apparent indebtedness to Classic Motion for the acquisition of the shares. It is all very odd. One interpretation is that Kaluna raised £2,000,000 cash so that cash could be transferred to RUK in part discharge of its indebtedness (under the terms of the Compromise Deed) via APL. It then possibly discharged its indebtedness to Vanessid via Classic Motions' sale of the shares in Seletar to APL which in turn borrowed the money under the second Vanessid loan. I simply do not know. I do observe however the cautious observations in the Betesh Fox letter. Accordingly as a result of the Compromise Deed and the SPA APL's debt to RUK was reduced to £15,000,000 of which £6,000,000 was handed over by it immediately (raised as set out above) and the balance of £9,000,000 was due on 15th May 2001. In the meantime it was secured for the first time on its petrol stations. Kaluna provided £2,000,000 to APL by the shares subscription to enable it to fund the £6,000,000 first payment due under the Compromise Deed. That might have come back to Kaluna indirectly by virtue of the Classic Motion transfer of the Seletar shares but I make no concluded decision in that regard. Kaluna apparently provided the £1 (Mr Riches said it was cellotaped to the back of the SPA). RUK therefore gave up £15,000,000 worth of indebtedness in exchange for an immediate cash payment of £6,000,000 and a promise of a further £9,000,000 in 6 months. In addition it took the security. Mr Martin QC who appears on behalf of APL and Mr Sutton challenges the giving of the security but not the other provisions of the Compromise Deed under Section 151 of the Companies Act 1985. He also attacks on the same basis the Kaluna Guarantee (or more accurately any payment made by APL or security given by APL which has the effect of discharging or releasing the Kaluna Guarantee). Simultaneously in addition to the direct security from APL RUK also took the security over the APL shares. None of this in my view is surprising. RUK wrote off £15,000,000. In exchange for that write off it took an immediate cash payment and a future payment which for the first time became a secured payment. To ensure that APL remained in a worthwhile position to make the repayment 6 months later it took a charge over the shares that it had sold to Kaluna. The avenue for that charge was the Guarantee. I have no doubt that the Guarantee was worthless and was merely the vehicle to enable RUK to obtain a charge over the shares. Having parted with control of RUK to a purchaser which was not worth anything but leaving a large amount of debt outstanding none of these transactions seems to me to be surprising. Mr Riches in paragraph 4 of his witness statement before me dated 22nd November 2005 said that "the commercial agreement between Kaluna and RUK was that Kaluna would acquire the shares of APL for £15,000,000 payable as follows:- (1) £6,000,000 would be payable on completion (2) £9,000,000 would be payable 6 months thereafter" This is contrasted with his earlier witness statement dated 4th November 2003 where he said in paragraph 5 as follow:- "5 the commercial agreement between Kaluna and RUK was that Kaluna would acquire the shares of APL for £11,000,000, payable as follows:- 5.1 £2,000,000 on completion 5.2 £9,000,000 6 months later" In paragraph 6 he said that the agreements were structured "in order to save stamp duty" whereby the inter company debt was reduced by £4,000,000 out of APL's bank account and as part of the sale and purchase RUK would reduce the inter company debt to £15,000,000, the purchase price would be £1 and Kaluna on completion would procure the repayment of £6,000,000 of the inter company loan and procure repayment of the £9,000,000 6 months later. On cross examination Mr Riches said that the reference to £11,000,000 in his earlier witness statement was a mistake. I find his explanation (like many other aspects of his evidence) unsatisfactory. The reality in my judgment is that at the time the first witness statement was deposed to APL was unwilling to make the bold statement that Kaluna was acquiring for £15,000,000 and part of the £15,000,000 was simply the utilisation of £4,000,000 in cash in the bank account of APL. I can see why they might not wish to say that because it would be a blatant breach of section 151 and it is inconceivable that any lawyers (let alone the array of lawyers who advised both sides on these transactions) would allow it to proceed on that basis. The reality is that at best Kaluna paid £2,000,000 to acquire the share holding in APL. Further as I have set out above it might not even have paid as much as that depending on the true interpretation of the Seletar transaction or if the proposed arrangement as between it and APL had proceeded by way of a loan for £2,000,000. Despite Mr Riches oft repeated assertion that the commercial agreement was that Kaluna would pay £15,000,000 for the shares the evidence as it transpired did not support such a proposition. Further despite this oft repeated assertion it is not submitted on behalf of APL that the Compromise Deed and the SPA do not reflect the genuine transactions that took place on that day. In the course of Mr Riches cross examination I asked whether there were any documents which supported his statement that the commercial agreement was that the sale and purchase of the shares was for £15,000,000. Mr Martin QC told me that there was one (later enlarged to two). The former was not yet in evidence and he sought to produce it in re-examination of Mr Riches. The document he produced was a copy letter from Betesh Fox. It bore the date 25th January 2006 but that was because the software programme on the computer from which it was extracted put the date on the letter when it was printed off. Subsequent disclosure showed that the letter was actually dated 18th August 2000. The letter is a copy of Betesh Fox's terms and conditions for its retainer as legal advisors to the BVI companies controlled either by Mr Sutton or his father in respect of "Operation Tapas" (being the acquisition of APL). Paragraph 1.1 said that the work was required for the acquisition of the entire issued share capital for a consideration of £15,000,000 payable in full on completion. This document had apparently been found on 26th January 2006 by Mrs Nicola Sexton a director of APL. In her subsequent witness statement of that date she explained how she had come to find it. First in paragraph 3 she said that APL had received instruction to conduct thorough searches in relation to the pleaded issues but they had "not concentrated on the original Repsol transaction which had not so far as we had been aware been in dispute in these proceedings" I find that an extraordinary observation to make. I do not see how it can be seriously contemplated that the Compromise Deed and the SPA and their creation were not part of the relevant material for the purposes of the actions between these parties generally and especially in the context of the Preliminary Issue. It seems to me that APL did not conduct a proper search. This is reflected by the relative paucity of the documents produced that must have been in existence before the Compromise Deed and the SPA were entered into. During an exchange between Counsel and myself, it transpired that requests had been made to recover documents from the Receivers, but none had been forthcoming although they had been inspected. In addition enquiries had been made of Betesh Fox but those enquires do not appear to have been pursued with any great vigour and finally no attempt was made to obtain documents from Kaluna and Mr Sutton's associated companies. In the light of all that I made an order addressed to Betesh Fox under CPR 31.17 requiring them to produce documents for the purpose of this trial. There remained a residual question as to whether or not anybody would be entitled to inspection of those documents (assuming any privilege would be claimed). In the events that happened nobody asserted privilege and three significant bundles of documents were extracted from the ten bankers' boxes of documents which Betesh Fox handed over with no great difficulty. These documents are important because they show how the acquisition of the shares in APL gestated. In my judgment they completely undermine Mr Riches' statement that there was an initial agreement to buy for £15,000,000 and that the transaction was then subsequently restructured to save stamp duty. No evidence of any stamp duty saving issues had ever been raised. Nor could there be because it seems to me to be plain and obvious that if the lawyers had advised a restructuring of the transaction to hide the fact that it was actually a sale and purchase of £15,000,000 that would have involved the parties and the lawyers being involved in a criminal conspiracy to evade stamp duty. All the evidence from these late disclosed documents show that the lawyers discharged their duties (on both sides of the transaction) with considerable care and I cannot believe for one minute that they would have done anything as blatantly illegal as that. Nor do I believe that they would have advised a course of action if they had a belief that that would have been a breach of Section 151 CA 1985. Of course I accept that merely because they believed it does not infringe Section 151 does not mean that the transactions cannot actually be found subsequently to have breached that section. An analysis of these documents in addition to showing that there is no question of the commercial basis for the agreement as so described by Mr Riches as being changed to save stamp duty clearly indicates also that there was never any overriding commercial agreement between Kaluna and RUK for a sale and purchase of £15,000,000. In reality what has happened is RUK wished to extract as much as possible by an urgent sale as it could out of its operations of petrol stations in the UK. At the time of the negotiation it is important to appreciate that RUK had two assets. It had a £30,000,000 unsecured debt due from APL. APL was balance sheet insolvent as I have set out above. However that balance sheet insolvency takes into account the £30,000,000 loan. It follows that even if APL went into liquidation the likelihood is that RUK would have received a substantial repayment on the realisation of APL's assets by the liquidator. The second asset RUK had was the shares it held in APL. It is self evident in my opinion that the price anybody is willing to pay for the shares will be based on the worth of APL. In turn the worth of APL will be dependent on the amount of the inter company indebtedness that remains unpaid at the time that the shares are sold. Given the financial position of APL it is impossible to believe that anybody would pay £15,000,000 for the shares unless there was a significant adjustment in respect of the inter company indebtedness. If a purchaser did not secure a substantial reduction of the inter company indebtedness it follows inevitably that it would not pay more than a nominal purchase price to take the company off RUK's hands because it is insolvent if that £30,000,000 debt remains outstanding. It is in the light of those self evident factors that the correspondence disclosed in the action should be considered. CLIP A The first bundle of documents ("Clip A") comprised copies of correspondence showing how the negotiations opened. The first is a fax dated 26th June 2000 from Lazard Brothers to Arthur Andersen enclosing a copy of an offer that they had received from Sutton Oil in Bermuda for whom they were acting. Sutton Oil is another of Mr Sutton's companies. It was written in the light of having seen the information memorandum dated 19th April 2000 on APL and having reviewed a significant amount of the contents of the Data Room. The offer is made subject to the contract to acquire the entire issued share capital for £2,000,001 including their assessment of the net assets/liabilities "on a debt free basis". Further conditions are appended and under condition (d) it was made clear that all of the inter company indebtedness was to be cancelled and they required confirmation that no Third Party debt existed within RPL. That offer plainly required RUK to write off £30,000,000. The next document is headed Heads of Terms dated 25th July 2000. It was signed by RUK and Sutton Oil Bermuda Ltd (Mr Sutton signing on its behalf). Clause 1 stated that Sutton Oil would pay a total consideration of £17,000,000 to RUK "for the shares of the Company and the Inter Company Loan apportioned as to £1 for the shares and £16,999,999 for repayment of the Inter Company Loan." APL was to be sold cash and debt free and the total consideration was based on an assumption under clause 7 that the net current assets of APL (stock plus debtors less creditors) should be £2,300,000. It is not clear what was to happen to the £4,000,000 cash held at that time. Nevertheless this Heads of Agreement plainly differentiates between the Shares and the Inter Company Loan. It also recognised that the £17,000,000 was being paid in respect of RUK's two assets namely the shares and the Debt due under the Inter Company Loan. That offer was revised on 10th August 2000 as set out in revised terms in a letter from Arthur Andersens of that date to Sutton Oil. The consideration was now reduced to £15,000,000 but once again with the apportionment as between the shares and the repayment of the Company Loan. Clause 2 required the balance of the Company Loan to be written off and also by clause 3 it was required that APL had a cash balance between £4,000,000 and £5,000,000 and the minimum working capital was now raised to £6,250,000 (no doubt taking into account the retention of the cash). Mr Riches signed this document but he professed to have no recollection of it before it was put to him for the first time on his recall for further cross examination. The next document is a letter dated 6th November 2000 from Mr Fairhurst of Betesh Fox to James Collis of Ashurst Morris and Crisp (they were acting for RUK). This apparently followed a meeting which had taken place the previous Friday when it is said that a Mr Oaten of Arthur Andersons had put a revised structure on behalf of RUK at that meeting. The concern at that time was as to whether or not the giving of the security for the reduced debt would be a preference. It will be seen from the letter that Kaluna's advisors considered that APL was balance sheet insolvent and the giving of the security would only amount to a preference if at that time APL was insolvent. The letter points out that reducing the debt to £15,000,000 would make RUK £5,300,000 worse off than if APL went into liquidation and RUK was paid its entire pro rata indebtedness of £30,000,000 (a dividend of 67.7 pence). It is clear from the letter that the revised offer was not that £15,000,000 write off because the writer goes on to criticise the offer. They also raise the question of Section 151 CA 1985. In that context they refer to the written opinion of Miss Lucy Wilson Barnes of Counsel dated 13th October 2000 which had previously been disclosed (to which I shall make reference further in this judgment). There is a further copy of the same letter which adds comments on the original proposal and the revised proposal. CLIP B The first document is an email from Mr Fairhurst to various of the parties on both sides enclosing a copy of Miss Wilson-Barnes' advice. She was retained by Betesh Fox to advise specifically on Section 151 CA 1985. Mr Riches is forwarded that email on 12th October 2000 and discounts the possibility of a white wash. On 8th November 2000 Mr Fairhurst sent a further letter to Mr Collis suggesting that they were now to proceed on the basis of the original structure including execution by APL and RUK of a Compromise Agreement providing for the immediate release of £15,000,000 of inter company payable debt. The only other document of significance is a file note dated 2nd January 2001 recording a telephone call between somebody at Betesh Fox and Mr Sutton where Mr Sutton is reported seeking to re-finance the entire portfolio within Repsol (i.e. RUK), and saying that Mr Riches was preparing a business plan and projections (which I have never seen) and that they were looking for £12,000,000 on £17,000,000 worth of properties and it being suggested that Mr Riches would like the proposal to be circulated to any bank contacts that Betesh Fox might have. There was a second telephone call recorded between Betesh Fox and Mr Riches where it is said that Mr Riches had already put the proposal to a number of banks and asked Betesh Fox to approach Dunbar Bank. There is reference to completion of the acquisition of Copes and 40 Conoco sites coming into the group although there might be at least 120 Conoco sites to come in. Once again the business plans referred to have not been disclosed in this action. CLIP C On 16th August 2000 Mr Riches sent the original Heads of Terms to Mr Fairhurst. It is clear that Mr Fairhurst drafted a retainer letter (being the one produced by Mr Martin QC as above) and it is sent out on 18th August 2000. There had clearly been earlier instructions because that letter was taken from a draft dated February 2000 which appears to be in respect of the same transaction. In my judgment there is nothing significant to be drawn from the generalised reference in paragraph 1.1 to there being an acquisition of the share capital for a consideration of £15,000,000. On 30th August 2000 (apparently following discussions with Mr Riches on 23rd August 2000 and a meeting with RUK) Mr Fairhurst wrote to Mr Sutton reporting on matters that had been discussed. There is reference to what became the Heads of Terms set out in Anderson's letter of 10th August 2000 but with also observations on how to treat the balance of the RUK indebtedness (i.e. a funding rather than a trading debt). The reason for this is apparently that if it was treated as a trading debt APL would be subject to a tax charge on the write off of £15,000,000. The next documents are client care letters provided by Betesh Fox. They are in draft form. It will be seen from that report that Kaluna is paying £1 for the shares and the inter company debt is dealt with by a release of £15,000,000. However the proposal at that stage envisages RPL making an immediate repayment of the balance of the £15,000,000. On 25th September 2000 Mr Fairhurst gave Mr Riches advice about financial assistance and potential breaches of Section 151 on the assumption that APL would raise money on the security of its existing assets in order to repay the balance of the inter company indebtedness. Significantly it was on the assumption that the borrower was APL (paragraph 7) and even more significantly that APL would not guarantee the obligations or provide security or indemnity in respect of the obligations of any persons firm or company (paragraph 6). I have already made observations on the email of 2nd November 2000 which deals with the level of inter company indebtedness required to be released to achieve solvency (£13,000,000). There is a written opinion of Miss Lucy Wilson-Barnes dated 13th October 2000 confirming a telephone conference she had on 12th October. In that advice she set out the transaction then under consideration which was another variant (paragraph 3) with £5,000,000 being paid on completion and £10,000,000 being outstanding. Also the remaining balance was to be discharged within 9 months. Her opinion cannot be affected by those matters and it is to the effect that the proposed transaction would not infringe the section. On a file note dated 3rd November 2000 for the first time an initial repayment of £6,000,000 is proposed. Of that £4,000,000 is to come from APL and the remaining £2,000,000 is to come from "Sutton Oil/Paul Sutton's own resources" and was to be provided by way of a loan from them to APL but to be subordinated to all other debts of the company. It was proposed at that stage that the outstanding loan balance would be £24,000,000 with an unusual procedure of repayment of £9,000,000 within 6 months with £15,000,000 paid at the time of repayment of the £6,000,000. Miss Wilson Barnes gave an advice in note form in respect of the preference issues on 3rd November 2000 and was asked to advise in conference further on 7th November 2000 in the light of the then proposed agreement with £24,000,000 being outstanding. In addition Kaluna was proposed as a Guarantor for APL's obligations and it was also proposed to give a charge over its shares in support of that guarantee. On 7th November 2000 Miss Wilson Barnes advised that this new transaction would infringe Section 151 it being suggested by her that the reconstructing of the debt did not make APL attractive enough for Kaluna to pay a £1 for it. She suggested restructuring the debt in a separate stand alone transaction completed for the benefit of APL "prior to share purchase even though in contemplation of share purchase". The present arrangement before her was in her opinion so linked that there was financial assistance. She also expressed the opinion that the Compromise Agreement was justified on any basis as a commercial transaction whether or not the share sale goes ahead. I can see that but I have difficulty with the concept of the transactions infringing Section 151 if they operate together but not if they are dealt with in separate transactions. The reality is that the Compromise Deed as Mr Martin QC submits simply would not have taken place without the SPA (I accept that). There would be no point in RUK giving up £15,000,000 worth of unsecured debt for £15,000,000 worth of secured debt only if it is still to remain in control of APL. The difficulty is the £24,000,000 which would be payable on default. That gives RUK £30,000,000 plus the security. Mr Fairhurst reported this advice to Mr Riches on 7th November 2000. Once again this was something Mr Riches had forgotten. However it is clear that he was happy with the advice because it apparently emphasised that a proposal by RUK at that stage involving retaining £24,000,000 indebtedness (see above) would infringe Section 151. It was clear in the context of the present issue that Mr Riches was quite happy for the existing directors of APL to be warned that the transaction might expose them to personal liability (doubtless for negotiating purposes). The proposed letter I suspect is the one that was in draft form dated 7th November 2000 (Clip A). On 8th November 2000 Mr Fairhurst sent a three page document to Dr Nigg for consideration. He is based in Liechtenstein and he is Kaluna's sole officer. In this letter the proposals are set out in the form that they appeared ultimately in the Compromise Deed and the SPA. Although the letter was addressed to Dr Nigg, Mr Fairhurst sent it via Mr Riches inviting him to discuss it. This too was something Mr Riches could not recall. ORIGINAL DOCUMENTS DISCLOSED I have already referred to the requests made by Kaluna via Betesh Fox on 14th November 2000 to borrow £2,000,000 for one day from Vanessid. The loan documentation had Mr Riches and Mr Richard Sutton as guarantors. On 14th November 2000 Dr Nigg held a board meeting by telephone. Resolution 3 authorised Mr Riches to purchase the Seletar shares and to sell them to RUK for £2,300,000 and to borrow £2,000,000 from Vanessid. I have already commented on the curiosities of this transaction. On the same day a board meeting of APL was apparently held and Mr Riches reported the acquisition by APL of the Seletar shares from Kaluna (paragraph 1) (although this does not appear to be strictly correct as regards Kaluna). The £2,300,000 to be borrowed by APL (see the letter 23rd November 2000) was resolved to be paid to Kaluna in satisfaction of the purchase price (with £300,000 going to Messers Hassans the solicitors for Vanessid). I was provided with a note of the original board of APL meeting on 15th November 2000 which explained the proposed sale as completed. It also considered legal advice obtained from Ashursts in respect of Section 151 and Section 239 and the advice received from Counsel (not I suspect Miss Wilson-Barnes) that the transaction was not an infringement of those sections. On 10th November 2000 Dr Nigg held a board meeting of Kaluna. This reported the proposed acquisition of the shares in APL in the form of the documents as they were executed. Paragraph 5 set out the documents provided by Betesh Fox. It included a report on the SPA, advice letters in respect of Section 239 IA 1986 and Section 151 CA 1985, disclosure bundles and financial due diligence and tax due diligence reports prepared by Baker Tilley and PWC respectfully. None of these documents has been produced (save perhaps some of the advice). Paragraph 8 records that there was commercial benefit in Kaluna entering into the arrangement it being noted that RUK was aware of the fact that Kaluna had no assets other that the shares in APL. The Compromise Deed and the SPA were completed on that day. RE-FINANCING It is important to appreciate that APL's and Mr Sutton's case is that they challenge the security TFB obtained as a result of this re-financing as being the primary infringement of Section 151 CA 1985. Thus Mr Martin QC was at pains to point out that no challenge was made to the terms of the Compromise Deed save the security. Thus APL and Mr Sutton wish to take advantage of the RUK debt reduction of £15,000,000 but do not wish to submit to the legality of the security supporting that arrangement. It is an unattractive plea but if that is what the law says then so be it. As shall be shown in this part of the judgment the arguments of APL and Mr Sutton have further potentially far reaching effects. I shall also note that Mr Martin QC was at pains to emphasise that no part of his arguments involved alleging that the Compromise Deed and the SPA and the Credit Agreement and the Security Agreement were anything other than genuine documents and the provisions therein contained were not anything other genuine either. This did not in my view rest easily with Mr Riches' repeated statement that the "commercial understanding" of the arrangements was a £15,000,000 purchase. It required quite careful balancing by Mr Martin QC with his submissions. In effect Mr Martin QC disavowed Mr Riches evidence (see footnote 2 to the written closing submissions on paragraph 3). I do not accept that Mr Riches honestly held the belief that the arrangements were a "commercial deal" whereby Kaluna paid £15,000,000. The documentation which I have set out above shows that plainly was never the intention and could only (for example) have been achieved by blatantly using £4,000,000 of APL's money to arrive at that figure. I place no value on the Betesh Fox engagement letter of 18th August 2000 (paragraph 1.1). Equally I place no value on the other document which Mr Martin QC relied upon as showing a reference to a £15,000,000 purchase. This appears from a letter dated 12th February 2001 sent by Mr Riches on Anglo notepaper addressed to an underwriter GE Capital Commercial Finance which in the first paragraph refers to "the deferred payment due to Repsol for the original purchase of the Repsol UK". This is casual in the extreme in my view. It reflects the casual way in which Mr Riches approached his evidence. He never made any attempt to familiarise himself with any of the documents and was quite prepared to provide witness statements which bore no relation to the contemporary documents. This letter was never shown to anybody other than GE Capital and has no significance at all. Prior to the re-financing APL had borrowed £2,000,000 from Philip J Davies Holdings Plc on 24th November 2000. This might well have taken place in substitution for the second Vanessid loan. The interest rates under this document are modest (only approximately 260%) compared with the Vanessid loan interest rates. Once again it is a short term loan of less than a month with an option to repay early. It is signed by Mr Riches and Mr Richard Sutton. They are warrantors and agree to procure the repayments by APL. It is clear that Mr Sutton and Mr Riches were desirous of extending the borrowings of APL both as regards re-financing the £9,000,000 due in May 2001 under the terms of the Compromise Deed and obtaining further finance for further development and expansion. That is shown by the Betesh Fox attendance note dated 2nd January 2001 which I have already referred to. It is also supported by Mr Riches' evidence. This re-financing took place early because according to his evidence it afforded an opportunity to borrow further funds at what he considered to be favourable rates. As will be seen a further £6,000,000 was indeed borrowed by APL on the security of its existing property portfolio. What happened to that £6,000,000 is not revealed. There is a hint in the Betesh Fox memo that it is quite clear Mr Riches and APL caused the £6,000,000 to be raised and to be used for purposes completely unconnected with the original Kaluna share purchase. Notwithstanding that APL and Mr Sutton contend that this unconnected obtaining of money on the security is also tainted by Section 151. This argument is hardly less attractive than the arguments made in respect of the original Compromise Deed and the SPA but if they are correct and that is what the law says so be it. Mr Martin QC submits that the terms of the Credit Agreement are excessive (involving for example a one up front fee of £1,750,000). That is the way in which Mr Martin QC opened the case but in his closing submissions (note 11) he changed his tack. He emphasised that the point was whether or not there was a material reduction in APL's assets as opposed to whether these fees and other matters were excessive. He was right to change his tack because it was quite clear on Mr Riches evidence that he did not regard the Credit Agreement terms as being oppressive. He thought they represented good value for money. Having seen the other sources from which Kaluna and/or APL borrowed at the instigation of Mr Riches and/or Messrs Sutton I can well understand why he thought the TFB terms were generous. The reality I suspect is that APL had no choice. It is clear that the proposed re-financing had been hawked round various commercial entities. Mr Riches was once again vague as to the success of such operations. It goes without saying in my view that borrowing from clearing banks would have been cheaper than borrowing from TFB. APL would not borrow from TFB if it could borrow from one of the major clearing banks. Organisations are driven to borrowing from the likes of TFB because they cannot obtain money from the clearing banks. It is clear in my view that the inference to be drawn is that because of its financial position APL would not be able to borrow otherwise than from TFB and TFB set terms which are higher than the clearing banks require. That is a consequence of one's credit status and no more. NEGOTIATION OF THE LOAN FROM TFB Apparently this started with a barrister in Mr Levy's London Chambers who knew Mr Sutton effecting an introduction in turn to Mr Levy who in turn introduced Mr Sutton and APL to TFB. Mr Levy was in my view plainly the agent to TFB for the purposes of receiving communications and gaining knowledge of the affairs of APL/Kaluna. Mr Martin QC demonstrated that quite convincingly in his cross examination. The key faxed letter of 22nd February 2001 upon which significant reliance is place by APL/Sutton is the tip of the iceberg. Mr Levy was paid a fee of £300,000 by TFB for introducing the business although he subsequently apparently repaid that when the present litigation arose. He was never paid any fees by Kaluna/APL. I will not refer to the other documents which show that Mr Levy was plainly TFB's agent; they appear from the cross examination of Mr Levy by Mr Martin QC. Initially TFB sought to retain Allen & Overy on the transaction but they felt unable to complete the retainer because they did not know enough about TFB and those behind it. To encourage TFB to lend the £15,000,000 Mr Riches obtained a valuation of APL dated 12th February 2001 from an organisation called Brand-Finance whose proprietor appears to be one Thayne Forbes. His report suggested that APL had an "indicative equity value" of £42,000,000. This was based upon 4 items. First was Anglo's business plan including projections (another document not shown to me). Second there were property valuations prepared by Hillier Parker and APL's management accounts for 31st December 2000 and its audited accounts for 3 years to 31st December 1999. Hillier Parker's valuation was stated to be as at 14th February 2001 and given the date of the Brand Finance value valuation 2 days earlier presumably there was something on similar lines of an earlier date. It valued the properties at £17,075,000. That did not necessarily include all of the properties. It is clear that it would be impossible in my view to come up with a valuation of the equity of APL in February 2001 of £42,000,000 based on its previous balance sheets (showing insolvency or a low level of non solvency) and the properties with a valuation of £17,000,000. The £42,000,000 therefore can only have come from a "creative" business plan which presumably was created by Mr Riches and/or Mr Sutton. I do not see how anybody could have placed any weight on the Brand Finance value assessment. On 22nd February 2001 Mr Levy sent various documents to a Mr Turner. He is a chartered surveyor and director of Motcomb Estates Ltd and in such capacity he managed the Reuben Brothers property portfolio. The Reuben Brothers are behind TFB and he was involved in assessing the value to be attributed to the security offered by APL. He was critical of the Hillier Parker valuation because it was a desktop valuation. This was resolved by APL giving security over motor vehicle, plant equipment and investments and the obtaining of Mr Sutton's personal guarantee. This is not disputed. Mr Sutton chose not to give evidence before me despite having provided witness statements supposedly to deal with other issues. I do not believe that that is a basis for him not providing evidence. All the key matters concerning the negotiation of the Compromise Deed and the SPA and the terms of the Credit Agreement and the Security involved him heavily. One would have hoped that his recollection would have been somewhat better than Mr Riches which would have been of assistance. As he has not given evidence where there are matters of controversy as between what he might have said and what TFB's witnesses have said I accept the TFB versions. Thus I accept paragraph 19 of Mr Turner's witness statement as to how the additional security and Mr Sutton's guarantee came into play. It will be seen that the essence of APL's/Mr Sutton's argument is to deny the giving of his guarantee which was required by TFB to strengthen the securities which were being used to raise £15,000,000 as opposed the existing indebtedness of £9,000,000. Mr Turner had a basic understanding of Section 151. He plainly received Mr Riches letter of 22nd February 2001 because it is referred to in Mr Levy's fax of 22nd February 2001. That fax sent to Mr Turner enclosed analysis of APL's assets (confirmed by Mr Riches). It will be seen that the extra items amount to nearly £9,000,000 which would have afforded TFB considerable comfort as between the borrowings and the Hillier Parker valuation. The Anglo letter of 22nd February 2001 is addressed to TFB c/o Hassans. Mr Levy received it and Mr Turner saw it. Both of those were acting on behalf of TFB and it accordingly in my view is therefore constructively aware of all the matters set out in that letter. The first paragraph is non controversial. It enclosed a balance sheet as at 15th November 2000 confirming the book value of £20,477,000 and total assets of £29,263,000. It is a little difficult to read but that basis includes the £30,000,000 inter company debt although if that figure is of course taken out APL is balance sheet insolvent. The second paragraph of the letter is heavily relied upon by APL/Sutton and it says this:- "For your information, a condition of the acquisition was that the £30 million of loans from the parent (Loan Account Repsol in the attached balance sheet) was to be paid off as to part and written off as to part, in its entirety, (the final balance to be paid off from the proceeds of the loan to be provided by your company). " What does this paragraph say? First it wrongly tells TFB that it was a condition of the acquisition that £30,000,000 of loans was to be paid off as to part and written off as to part in its entirety. Second it shows that the final balance was to be paid off from the proceeds of the loan to be provided by TFB. By attaching the balance sheet it shows in my view only one thing namely that the TFB finance is to be used by APL to repay its existing balance sheet indebtedness. Mr Martin QC elicited more information from Mr Levy in cross examination (day 3 page 26 etc). Mr Levy had sworn a witness statement at the time of the summary judgment proceedings in front of Mr Justice Jack where he said that he was never told that the purpose of the advance was to use the funds for the purchase of shares in APL or the discharging of any deferred purchase price. He plainly had some indication by the fax of 22nd February 2001 but I do not see that that of itself is sufficient to suggest that the re-financing was in respect of the share purchase. Plainly the wording shows the contrary. On day 3 (page 48) Mr Martin extracted the following out of Mr Levy:- "Q. How is it that the question arises of putting the two of them together? Can you tell us that? A. Mr Sutton said he needed money in order to refinance his purchase of Repsol and I approached Mr Reuben. Q. At that stage was a figure mentioned? A. I seem to recall that 15 million was mentioned, whether a smaller or larger figure was, I do not recall. Q. Of course you would have understood, when Mr Sutton said that to you, what he was talking about, because, as we have seen, you already knew of the Kaluna transaction, yes? A. Yes. Q. So you would have understood Mr Sutton to be saying that he needed to refinance the purchase by Kaluna of the shares, is that correct? A. I understood that he needed to refinance the purchase of the petrol stations, yes. Q. But by Kaluna? It was a reference to the transaction. A. I do not recall any reference to Kaluna." It is true that Mr Levy vaguely refers in the first part to re-financing the purchase. Equally he vaguely refers to needing to re-finance the purchase of the petrol stations but he knew nothing about Kaluna. Mr Sutton's absence is crucial. The evidence shows direct negotiations between him and the Reubens. Mr Riches did not appear to have a direct role. I do not see that the fax of 22nd February 2001 and these vague conversations can possibly be said to be sufficient to suggest that TFB were financing the share purchase. I do not see how APL and Mr Sutton can rely upon vague conversations which contradict the clear import of the 22nd February fax and the documents enclosed. What was being financed was plainly existing indebtedness of APL. Nor did the cross examination of Mr Turner advance the matter any further. He was concerned with the valuation of the properties. He was rightly dismissive of the Brand Finance valuation and it is clear on his unchallenged evidence that the transaction only went through when TFB obtained sufficient margins as a result of the extra properties and assets and Mr Sutton's personal guarantee. Mr Martin QC submits (see note 9 to his closing submissions) that whether the Third Party lender is affected by the illegality depends on his knowledge. He submits that if TFB knew that the loan was to be used in circumstances which infringed Section 151 (whether or not in fact they knew of the infringement) they cannot say that their loan is not part of the unlawful assistance. He submits that it is only if they did not know sufficient of the use to which the loan would be put that they are entitled to say that the borrowers were able to apply the loan for the loan purposes. I accept that analysis but I am wholly un-persuaded that there was anything on the slender material put forward by APL/Sutton to suggest that TFB knew (actually or constructively) that there was a potential or even an actual Section 151 point. I do of course accept that when one looks at the facts and if on the facts as known to them there is an infringement of Section 151 then it is no defence to say that they did not understand that that would be an infringement. However the above represents the totality of the material deployed to fix TFB with knowledge. In my judgment it is woefully inadequate. There is in my view nothing to suggest to TFB that it was doing anything other than lending money to APL to repay an existing indebtedness and provide extra capital for its purposes. Neither side sought advice under Section 151 at this stage. This is hardly surprising. APL/Sutton on their part had been extensively advised on the point earlier (see above) and there was nothing to suggest that TFB were doing anything other than providing £6,000,000 to APL and £9,000,000 to repay its existing indebtedness. In reality that is the end of APL/Sutton's case on the Preliminary Issue on the facts as I found them. TERMS OF CREDIT AGREEMENT The loan is for a short term until 22nd August 2001 subject to extension thereafter. The purpose in clause 3 (a) is to apply "the re-financing indebtedness of [APL]…. and for the provision of working capital". Further under clause 3 (b) TFB is not bound to monitor or verify the application of any loan. Default interest under clause 8.1 is 2% a month or part thereof but is to be compounded daily. This gives a rate of approximately 30%. In addition fees are payable of £1,750,000 in monthly instalments of £291,666.66 (clause 16) this represents a fee of in excess of 10% of the borrowing. There is a linkage with a Security Agreement as it is referred to as being in the form substantially as the draft set out in schedule 2. Under clause 11 it was provided that if it was or became unlawful for TFB to give effect to any of the obligations as contemplated by the Agreement or to fund or maintain the Loan then upon informing APL of the unlawfulness APL is obliged to repay the Loan. Mr Todd QC in his closing submissions submitted that if the Agreement was held to be void under Section 151 CA 1985 clause 11 was triggered. That he submitted was a Customer Liability as defined in the guarantee untainted by the unlawful financial assistance so that Mr Sutton remains liable on his guarantee. That in my view is not a correct construction of clause 11. It is designed to cover any illegal acts of TFB not illegal acts of APL. To do so otherwise would in effect circumvent the fundamental principle that infringement of Section 151 makes the transaction in question void. It is well established that upon that principle of illegality the loss lies where it is and monies advanced under a legal agreement cannot be recovered. This clause would entirely circumvent Section 151 and it cannot have been intended so to operate and if it did it too would infringe Section 151. If operated it would simply still allow the loan to take place. Mr Todd QC did not argue that clause 6 of the Sutton guarantee made Mr Sutton independently liable if the Customer Liabilities were avoided under Section 151. He was right not to so argue. I accept Mr Martin QC's submissions that as Mr Sutton is guaranteeing "Customer Liabilities" on the construction the guarantee if in law there are no such liabilities he cannot be liable even as a principal debtor. The drafting will not support such a conclusion. However the wording of the Security may well have an impact in severing part of the £15,000,000 facility (a point which I shall deal with further in this judgment). TERMS OF THE SECURITY AGREEMENT "Secured Liabilities" are defined as meaning :- "all present and future obligations and liabilities (whether actual or contingent and whether owed jointly or severally or in any other capacity whatsoever) of the Chargor to the Lender under each finance document except for any obligation which if it were so included would result in this Deed contravening Section 151 CA 1985….." The charge (clauses 2 & 3) secures the Secured Liabilities. TERMS OF SUTTON GUARANTEE This was a guarantee for the Customer Liabilities being all monies and liabilities which the customer i.e. APL owed to TFB. It refers to the Credit Agreement. The guarantee makes Mr Sutton a separate principal debtor (clause 6). However as he is the principal debtor for the Customer Liabilities Mr Martin QC submitted that that clause could not be used to recover from Mr Sutton in the event that the Customer Liabilities are held to be void under Section 151 CA 1985 because such a determination means there are no such liabilities. APL/SUTTON SUBMISSIONS As appeared from APL's skeleton argument the primary argument of APL/Sutton was that Kaluna acquired the shares in APL under the SPA. Under schedule 10 of the SPA Kaluna agreed as principal obligor the due performance of APL's obligations and that was a liability incurred for the purpose of Kaluna's acquisition of the shares in APL. It is accordingly submitted that APL gave financial assistance directly or indirectly for the purpose of reducing or discharging Kaluna's liability under schedule 10 of the SPA and it would therefore have acted in breach of the prohibition in Section 151 (2) (a) (ii) by giving a security which in itself is financial assistance directly or indirectly for the purpose of the acquisition of the shares. Thus it is submitted there are two questions (1) did APL give financial assistance and (2) was it financial assistance given directly or indirectly for the purpose of reducing or discharging Kaluna's liability. This was then supplemented by a submission that APL assisted Kaluna because £9,000,000 of the funds which APL borrowed from TFB under the Credit Agreement and the Security Agreement was used to effect the early repayment of the outstanding balance due to RUK under the Compromise Deed for which Kaluna was liable under schedule 10 of the SPA. Thus it was submitted that it was equally plain that the assistance given by APL to Kaluna was of a financial nature since it resulted in Kaluna being discharged from the liability in the sum of £9,000,000. There is the difficulty of course that the Credit Agreement and the Security Agreement whilst replacing the liability to RUK under the Compromise Deed and the supporting security took place several months after the SPA was completed. There is also the plain difficulty that the share price was only £1 and Mr Martin QC does not suggest that that is a "sham" figure. Indeed he submits to the contrary. It is said that the replacement of the RUK indebtedness of £9,000,000 with the TFB borrowings, is part of the same illegality and the TFB advance is unlawful financial assistance because of the fees which materially reduce APL's assets (and thus being contrary) to Section 152 (1) (a) (iv). It is submitted that because the Security Agreement is financial assistance within Section 152 (1) (a) (ii) and the security replaced the RUK charge the giving of the security at the time of Kaluna's acquisition is unlawful. In that context reliance is placed upon Wyatt "Company Acquisition of owned shares" fifth edition paragraph 11.14. The key for this despite Mr Martin QC's submissions is in my view that it requires me to consider that the documents do not show the commercial reality. It is suggested (paragraph 36 of APL/Sutton's opening skeleton) that the commercial reality is a sale and purchase at £11,000,000 (query £15,000,000). I simply do not accept that that is the correct analysis. There was in my view no such agreement contemplated at any time. The only potential indications of such an agreement are the two flimsy letters to which I have made reference. All the contemporary evidence which was produced in the course of the trial as set out by me shows something entirely different. Kaluna was never in the market of making an offer of £15,000,000 or anything approaching that to buy the APL shares. Its opening gambit was £2,000,000 on the basis that RUK wrote of its £30,000,000 in debt entirely. Even as the transaction progressed there was never any prospect of APL paying anything like £15,000,000. There was a fleeting suggestion of paying £9,000,000 on completion but that never materialised. This commercial reality is not real at all. I do not believe anybody looking at the facts would seriously accept a statement by Mr Riches "we paid £11,000,00 (or £15,000,000) to acquire APL's shares". The reality is that Kaluna was anxious to acquire APL's shares but on the strength of APL having a certain net worth. Equally RUK had two assets to dispose of. It wanted to dispose of its shares but at a price which reflected how its other asset namely the debt due from APL was to be repaid. There is no question of there being an agreement to sell and buy at £15,000,000/£11,000,000 and then the documents being constructed in a different way. The parties entered into a series of discussions and negotiations which led to RUK's two assets being disposed of upon the terms set out in the Compromise Deed and the SPA. To suggest that APL is providing financial assistance is in my view untenable. There were quite clear financial advantages for APL in entering into the Compromise Deed and giving the security to RUK. APL became solvent as a result of the transactions and achieved a write off of its debts of £15,000,000. In those circumstances the decision of APL to give security for the balance is perfectly reasonable. To suggest that by giving security APL is providing financial assistance to Kaluna to lighten its liability under the schedule 10 guarantee is to reverse the status of the principal debtor and surety. Kaluna is supporting APL not the other way round. All APL is doing is agreeing to repay half of its existing indebtedness in exchange for it giving a charge over its assets to secure that repayment. Of course if the true transaction between the parties was as Mr Riches suggested and the documents were then artificially re written so as to conceal that fact that might well be a different case. However that is not the way it has been argued on behalf of APL/Sutton as I have set out. Once again the facts do not support Mr Martin QC's finely balanced arguments. This is reinforced again by the fact that it would make commercial sense for RUK to pass control of APL to Kaluna only if it had protection as regards its outstanding indebtedness. The reasons are obvious and have been set out earlier in this judgment. I do not therefore accept on a factual analysis that there is any financial assistance given to Kaluna. There is a bona fide restructuring of APL's indebtedness with a significant reduction in exchange for a security. Kaluna as the purchaser of the shares and thus controller of APL guarantees APL's liability "to encourage" Kaluna to ensure APL remains in a position to satisfy its primary indebtedness to RUK. The giving of Kaluna's guarantee is a vehicle for RUK to have another transaction which makes commercial sense namely a charge over APL's shares. That supports Kaluna's guarantee which in turn supports APL's obligations to RUK and not the other way round. The same applies factually in my view to the Credit Agreement and the Security document. They are to replace APL's existing indebtedness and securities. They are not designed (on their face they say not) to replace financial assistance used to acquire APL's shareholding. The terms of the Credit Agreement as I have set out above in terms (terms not being challenged as being inaccurate by APL/Sutton) expressly state that the loan is for the purposes of repaying APL's indebtedness and providing the working capital. The working capital part (£6,000,000) is then used by APL for an unidentified purpose. Nevertheless that purpose is not said to be connected to the original share acquisition. Given that analysis of the facts how is it that APL/Sutton contends Section 151 is infringed. I bear in mind the relevant observations of Hoffman J as he then was in Charterhouse Investments Ltd v Tempest Deisels [1986] BCLC 1. The facts there bear a similarity to the present issue in that the acquisition also involved the holding company releasing debt due from it and the target company surrendering tax losses which it had. It was alleged by the purchaser that the agreement to surrender the tax losses infringed Section 54 of CA 1948 (the predecessor but differently worded to Section 151). At page 10 Hoffman J said this:- "There is no definition of giving financial assistance in the Section although some examples are given. The words have no technical meaning and their frame of reference is in my judgment the language of ordinary commerce. One must examine the commercial realities of the transaction and decide whether it can properly be described as the giving of financial assistance by the company bearing in mind that the section is a penal one and should not be strained to cover transactions which are not fairly within it " In effect what he is saying is that if a transaction has a lawful and bona fide purpose the court should not strain the section to render the transactions illegal. The consequences of the plea of Section 151 are severe. They were summarised by Mr Sheldon QC in Hill v Tyler [2005] 1 BCLC 41 at paragraph 66. It is accepted by Mr Todd QC that if APL/Sutton's contentions are correct TFB cannot recover (subject to a blue pencil argument to which I shall refer to in this judgment below) any of the monies it advanced. In addition on the wording of the guarantee Mr Sutton is consequentially released and APL is not under an obligation to repay any of the £15,000,000 it borrowed although it was used (1) to repay the RUK indebtedness and (2) to provide working capital for its own benefit. In addition of course APL takes the benefit of the Deed of Compromise in that it had secured a reduction in its indebtedness of £15,000,000. This was not illusory; it turned APL from an insolvent company into a solvent one. The main platform for APL's submissions is the Court of Appeal decision in Chaston v SWP Group Plc [2003] 1 BCLC 655. The starting point is the judgment of Arden LJ starting at paragraph 31. She stated that the "general mischief" of Section 151 was to stop the resources of the target company and its subsidiaries being used directly or indirectly to assist the purchase financially to make the acquisition. The reason for this is that it might prejudice the interests of the creditors of the target group and the interest of any shareholders who accept the offer to acquire their shares or to whom the offer is made. Once again as in Section 54 CA 1948 there is no definition of financial assistance in Section 152. Paragraph 32 is important:- "Thus although section 152 proscribes a number of forms of financial assistance, it does not define the words "financial assistance". It is clear from the authorities that what matters is the commercial substance of the transaction: "The words 'financial assistance' have no technical meaning and their frame of reference is the language of ordinary commerce" (see per Hoffmann J in Charterhouse v Tempest Diesels [1986] BCLC 1, approved by the Court of Appeal in Barclays Bank plc v British & Commonwealth Holdings plc [1996] 1 BCLC 1 at 40). This approach was confirmed by Lord Hoffmann (with whom the other members of the House of Lords agreed) in a recent revenue case: MacNiven (Inspector of Taxes) v Westmoreland Investments Ltd [2001] STC 237 at 254. In the relevant passage, Lord Hoffmann usefully draws a distinction between the expression "financial assistance", which conveys a commercial concept, and other words used in this group of sections which by contrast have a recognised legal meaning:- " "The distinction between commercial and legal concepts has also been drawn in other areas of legislation. So, for example, the term 'financial assistance' in s.151 of the Companies Act 1985 has been construed as a commercial concept, involving an inquiry into the commercial realities of the transaction (see Burton v Palmer [1980] 2 NSWLR 878 at 889-890 and Charterhouse Investment Trust Ltd v Tempest Diesels Ltd [1986] BCLC 1). But the same is not necessarily true of other terms used in the same section, such as 'indemnity'. As Aldous LJ said in British and Commonwealth Holdings plc v Barclays Bank plc [1996] 1 WLR 1 at 14: 'It was submitted that as the words 'financial assistance' had no technical meaning and their frame of reference was the language of ordinary commerce, the word 'indemnity' should be similarly construed. The fallacy in that submission is clear. The words 'financial assistance' are not words which have any recognised legal significance whereas the word 'indemnity' does. It is used in the section as one of a number of words having a recognised legal meaning.' I would only add by way of caution that although a word may have a 'recognised legal meaning', the legislative context may show that it is in fact being used to refer to a broader commercial concept." I have to bear in mind the mischief and ask in what way APL's assets and resources have been used to assist Kaluna's acquisition. The only item identified by Mr Martin QC was the giving of the charge to RUK as security for APL's reduced indebtedness. This (to echo paragraph 32 of Arden LJ's judgment) ignores the commercial substance of the transaction. Mr Riches might say repeatedly that the commercial substance of the transaction is a £15,000,000 purchase but it was nothing of the sort. The commercial substance of the Deed of Compromise was a reduction of APL's indebtedness by £15,000,000 in exchange for security. It is true I accept that it was linked to the SPA but the SPA did not involve the use of APL's resources. It merely gave RUK the Kaluna guarantee. I do not see how the giving of the security by APL for its reduced debt can be viewed in isolation which is what APL/Sutton wish to achieve. It gave security as a price for a reduction of its debt. Mr Martin QC submits that the giving of that security falls within Section 152 (1) (ii) CA 1985. I do not agree. The giving of the security is not financial assistance as defined in Section 151; it was the price APL had to pay for obtaining a £15,000,000 reduction in its debt. As I have said this achieved a substantial benefit to APL. Ultimately the reduction of the RUK indebtedness enabled APL when under the control of Kaluna to raise another £6,000,000 from TFB on the re-financing. None of this would have been possible but for the restoration of its balance sheet to solvency by writing off half of its RUK debt. It does not seem to me that it can be said that the giving of the security for the reduced debt is financial assistance for the purposes of Section 151 CA 1985. Mr Martin QC also relies on paragraphs 38-39 which provide as follows:- "The first issue on this appeal is whether the incurring of liability to pay the fees to D&T or the payment of those fees constituted "financial assistance" for the purpose of section 151. Although it does not clearly so appear, it would seem that the judge concluded that there was financial assistance in the circumstances of this case. It is clear from the Charterhouse case as approved by this court in the British & Commonwealth case that the test is one of commercial substance and reality. Looking simply at the facts, the judge found that the payments were "to facilitate the progress of the negotiations and to enable SWP to conclude its due diligence exercise: and having done so, then to make up its mind whether or not to acquire the shares in DRCH." (judgment, paragraph 187). As a matter of commercial reality, the fees in question smoothed the path to the acquisition of shares. There was no provision in the agreement for any benefit to be given to the DRC Group. What the DRC Group was looking for was the spin-off benefits of the acquisition. The DRC Group had financial difficulties and it would be joining a larger group which saw a future for it. However, the negotiations appear to have been solely concerned with the actual terms of the acquisition, for example, as to the giving of warranties by the selling shareholders. Mr Cunningham argues persuasively that we should take into account that section 151 imposes criminal liability. That is so, but the effect is as Hoffmann J said in the Charterhouse case only that the language must not be strained as to include transactions not fairly within it. Moreover, the term "financial assistance" is clearly established to be a commercial concept. Accordingly the question whether financial assistance exists in any given case may be fact-sensitive and not one which can be answered simply by applying a legal definition. The question is whether from a commercial point of view the transaction impugned amounts to financial assistance. If the company's participation in the transaction meets that test, no straining of the statutory language occurs." He submits that the giving of the security by APL "smoothed the path to the acquisition of the shares". I do not see Arden LJ as introducing some new construction of Section 151 – 152. In my view she is saying that on the facts the fees in question was as a matter of commercial reality financial assistance. Looking at the present case to isolate the security is to ignore commercial reality. APL have benefited substantially from the transaction. I accept of course that detriment is not required vis a vis APL for the purpose of Section 152 (1) (a) (i) but that does not mean that one should ignore in deciding whether an arrangement was of commercial advantage as opposed to financial assistance the substantial benefits accruing to APL by reason of the Compromise Deed. It arises out of the failure of APL/Sutton to address the commercial reality of this case. The commercial reality is as I have said that RUK were trying to realise two assets namely its debt and its shares. There is no smoothing of the path to enable Kaluna to pay £1. That consideration represents the net worth of APL after the genuine restructuring of its liabilities to RUK. Without that restructuring of course APL would have been insolvent and Kaluna would not have even paid a £1. I do not regard the "increase" to a £1 as being significant. Finally Mr Martin prayed in aid an observation in Wyatt "Company Acquisition of Owned Shares" (fifth edition) paragraph 11.14 which states:- "An example of a giving of security which falls within sub-para (ii) is where a subsidiary is indebted to its parent company on an unsecured basis, and a third party offers to buy the subsidiary on terms that the subsidiary's indebtedness will be paid off over a period of time after completion of the sale. If the parent now wishes to secure its future position by taking a charge over assets of the subsidiary, the giving by the subsidiary of that charge will constitute a giving of financial assistance for the purpose of the proposed acquisition of its shares." No authority is provided for that proposition. It is in my view contrary to a number of authorities cited by Mr Todd QC. It is well understood that academic opinion is to be distinguished from "argued tough law" (Cordell v Second Clanfield Properties Ltd [1969] 2 Ch 9) (even when the Judge is also an author). Further I note that Buckley on the Companies Acts (leading editor Arden LJ) has been substantially re-written in the light of the Chaston decision (see paragraphs 151.9 A and 151.9 B). What is significant however is that 151.10 is not altered in the light of the Chaston case and still states (note 3) that the repayment of a debt which is properly due from the company does not constitute the giving of financial assistance. Reference is made to Armour Hick Ltd v Whitehouse [1980] 1 WLR 1520 at 1524 G - 1525 C. That itself refers to the decision of Schriener J in Gradwell (PTY) v Rostra Printers Ltd [1959] (4) SA 419. In the Gradwell case an offer was made of £42,000 for the shares and the loan account that was then outstanding to the parent company less amounts owed to lenders on first mortgages. An analysis showed that £40,258 was owed on the loan account and taking into account the higher securities the amount actually paid was less than that amount. It is true as the Judge observed that the repayment of the loan account would help the purchaser to effect the apparent purchase but the repayment of the debt was held not to infringe the provisions of Section 86 (2) CA 1926. The wording is virtually the same as Section 152 (1) (a) (i). It seems to me as a matter of common sense that if it is lawful for a company to repay its own indebtedness and there is a genuine commercial justification it must also equally be lawful to the company to assist that repayment by providing security. APL achieved considerable assistance in repaying its debt by the reduction by £15,000,000. It also of course received assistance from Kaluna by Kaluna's injection of £2,000,000. I cannot as I have said see how the decision of APL to give a charge to RUK as security for the balance of the £15,000,000 can go anywhere towards the suggestion of financial assistance for Kaluna's purchase. I am reinforced in that view in my opinion by the decision of Wellington Publishing Company Ltd [1973] 1 NZLR 133. In that case the target company raised money (including by raising a loan on security of the company's assets). Those were then used to declare lawful dividends declared to the takeover shareholder. That was held not to infringe Section 62 CA 1955 (the New Zealand Statutory equivalent). The giving of lawful dividends was just an incident of the company activities as the raising of lawful loans and the repayment of lawful debts. In the present case it is not said that any of the transactions were not genuine. For the reasons that I have already set out extensively in this judgment they all made commercial sense to APL. In his closing submissions Mr Martin QC attacked the Credit Agreement and the Security Agreement by two routes. ROUTE ONE This is the allegation that the APL charge to RUK was financial assistance within Section 152 (1) (a) although there was no material reduction in its assets. It is said that TFB's funds were used in part to discharge the balance of APL's indebtedness. In my view this argument fails for two reasons as set out in this judgment. First I do not accept that the giving of the security was financial assistance. Second I do not accept that TFB had knowledge that its monies were being used for replacement of securities which were financial assistance. Mr Martin QC acknowledged that TFB would have to have knowledge for the purpose of fastening liability on it for route one. ROUTE TWO Route two involves a finding that the guarantee given by Kaluna in the SPA was liability incurred for the purpose of its acquisition of the shares in APL and that APL's repayment of its outstanding indebtedness discharged the guarantee and that amounted to financial assistance to Kaluna. It is then submitted that the arrangements by APL to secure funding to repay the RUK loan and thereby provide financial assistance to Kaluna constituted financial assistance. In this case it is submitted that the TFB loan involved a material reduction and that Section 152 (1)(a)(iv) and is therefore infringed because TFB knew the reason for the loan and so was party to the illegality. In my view this is unsustainable for a number of reasons. First, the repayment of the APL debt is not a financial assistance to Kaluna; it is repayment of APL's reduced indebtedness. The security it gave similarly was not financial assistance. APL's borrowing did involve an expense and I accept that would be a substantial reduction in its assets if it was part of a scheme involving financial assistance. It was not however financial assistance. It was a commercial transaction engineered by Mr Sutton/Mr Riches for their own benefit and the benefit of APL realising funds for other purposes and repaying the genuine reduced balance of the RUK indebtedness and its supporting security. The transaction was plainly of advantage to APL as Mr Riches evidence showed. Its commercial purpose was to benefit APL not to provide financial assistance. Finally of course I have already determined that TFB was not aware of the alleged underlying illegality for the reasons set out earlier in this judgment. I accept that Mr Sutton's guarantee would fall subject to the point referred to in the next part of the judgment if the Credit Agreement and the Security was held to be invalid. BLUE PENCIL Had this arisen I would have had no hesitation in view of the definition of secured liabilities in the Security Agreement determining that TFB would have been entitled to recover in any event the £6,000,000 which was advanced totally unconnected with the supposed unlawfulness (and a pro rata fee). Equally I would have held that Mr Sutton would have been similarly so liable on his guarantee. However for the reasons set out in this judgment this does not arise. Accordingly I determine that neither the Credit Agreement nor the Loan Agreement infringes Section 151 CA 1985. I will hear what Counsel has to say about the consequential application for an interim payment and the outstanding costs issues (if any).

Master Gordon-Saker : This is an appeal by Wolferstans, a firm of solicitors in Plymouth, against a decision made by Mr Emery, an authorised court officer, on the assessment of their bill. The solicitors acted for 224 claimants in the Sabril group litigation against Aventis Pharma Limited. The claimants had the benefit of public funding. 164 claims were successful. The remaining 60 claims were discontinued and the costs of the discontinued claims fell to be paid by the Legal Services Commission. Bills in respect of 43 of the discontinued claims were assessed by the court in 2006. Bills in respect of the remaining 17 discontinued claims, of which this case is one, were lodged with the court for provisional assessment in April 2009. As I understand it, the provisional assessment of the bills in relation to the other 16 discontinued claims is awaiting the outcome of this appeal. The issue that arises on this appeal is whether the solicitors should be allowed profit costs in respect of work done to sort and summarise the Claimant's medical records by Medical Clerical Bureau (MCB). MCB charged the solicitors £841.75 plus value added tax for doing this work which, according to their invoice, is calculated by multiplying 22.75 hours by an hourly rate of £37. In their bill the solicitors claimed 22.8 hours as part of their profit costs at the prescribed hourly rate of £75 together with enhancement of 50 per cent. The total sum claimed in the bill for this work is therefore £2,565 (excluding value added tax). If that sum is allowed as claimed the solicitors would therefore make a profit of £1,723.25. Mr Emery took the view that this work should not be allowed as part of the solicitors' profit costs, but should be claimed as a disbursement. Accordingly he disallowed the 22.8 hours claimed in the documents schedule (£2,565) and added in the amount of MCB's invoice (£841.75) as a disbursement. In the 43 bills which were assessed in 2006 the solicitors claimed for the work done by MCB as disbursements. However, following the decision of the Court of Appeal in Crane v Canons Leisure Limited [2007] EWCA Civ 1352, they considered that they could properly claim for this work as part of their profit costs even though the work was carried out by a third party. There is a similar claim in each of the other 16 bills awaiting assessment. The issue before the court in Crane was whether the claimant's solicitors could recover as base costs the costs of work done by independent costs consultants in relation to the detailed assessment of the claimant's bill. If those costs were recoverable as base costs, the solicitors would be entitled to a percentage success fee under their conditional fee agreement with the claimant, to which they would not be entitled if the costs were recoverable only as a disbursement. Master Wright, on appeal from an authorised court officer, held that these costs were a disbursement and disallowed the success fee claimed. The work done by the independent costs consultants in Crane involved the preparation of an initial schedule of costs, the preparation of a detailed bill and the conduct of the detailed assessment proceedings. May LJ noted that this work could have been done within the claimant's solicitors' firm by their own staff and apprehended "that, if they do the costs work themselves in house, the cost of doing so would be legitimately charged as profit costs" (paragraph 6). At paragraph 14 he continued: If [the solicitors] properly choose to delegate their own work, they remain entitled to charge on their own account and the proper amount of the charge is not necessarily the same as the amount which they agree to pay their subcontractor. It could be more or it could be less. In my view the appellants are right to concentrate on whether the work is solicitors' work; and Master Hurst was right to say [in Claims Direct Test Cases Tranche 2] that a characteristic of such work is whether the solicitor remains responsible to the client for its proper conduct. Intrinsically, it might be said that profit costs should be limited to work which the solicitors do themselves, because if they delegate it, the subcontractor is making a profit as well. But, since the solicitor remains entitled to the proper amount which he, not the subcontractor, would charge, there is in theory only one amount of profit … 15. In my view, Costings Limited in the present case were doing work which Rowley Ashworth had themselves undertaken to their client to do. It was solicitors' work for which Rowley Ashworth were entitled to make their own direct charge. In theory, they remained liable for it, although in reality it was done entirely for their own benefit, since poor Mr Crane had no interest in this costs squabble and was never going to be affected by it one way or the other. I do not think that the classification of the cost of this work can sensibly depend on whether Rowley Ashworth did the work themselves, whether they delegated it to another solicitor or whether they delegated it to costs draftsmen who were not solicitors. At paragraph 35 Hallett LJ said: … to construe these particular provisions and determine whether or not these costs are properly described as base costs or disbursements, one must focus on the nature of the work done (whether it is solicitors' work) and where responsibility for the work lies. 36. In my view, the work done by Costings was undoubtedly solicitors' work. It was the type of work Rowley Ashworth were retained to do: Rowley Ashworth may have chosen to delegate their work, but they never relinquished control of it and responsibility for it. At every stage of the process Costings' work was under Rowley Ashworth's supervision. Crane was not the first case in which the court considered whether solicitors could charge for work done by others as if they had done the work themselves. In Smith Graham v Lord Chancellor [1999] 2 Costs LR 555 a solicitor instructed in public funded criminal proceedings claimed for work done by an enquiry agent as if the work had been done by a member of the solicitor's firm. The solicitor was acting for a local councillor charged with falsely claiming expenses. The work done by the enquiry agent involved attending at the council's offices with the defendant to examine the expense claim forms. The enquiry agent billed the solicitor in the usual way but the solicitor claimed the enquiry agent's time at the hourly rate prescribed for a Grade B fee earner by the Legal Aid in Criminal and Care Proceedings Costs Regulations 1989. Hallett J (as she then was) held that the nature of the work which the enquiry agent had been instructed to do "was work which it was appropriate for a fee earner to do" and that therefore the solicitor could recover the cost of that work at the prescribed hourly rates as work "done by fee earners". In Stringer v Copley [unreported; 17 May 2002] the Claimant, on the detailed assessment of her costs, claimed £519.75 in respect of solicitor's time for preparing a witness statement. In fact the statement had been prepared by a litigation support agency which had billed the solicitor £250 for the work. The District Judge disallowed the item but, on appeal, the Circuit Judge allowed it following Smith Graham. The Claimant in the present case was born in 1934. She was first prescribed Vigabratin (Sabril) in 1990 when she was diagnosed as suffering from epilepsy. She continued to take the drug until 1998. She instructed the solicitors in 2004 after hearing of possible links with visual injury. The Claimant's medical records were obtained and sent to MCB for sorting, paginating and analysis. There were 1,270 pages of records and the analysis produced by MCB ran to 7 pages. The work was done by Margaret Luscombe SRN. It is my experience that many solicitors undertaking personal injury or clinical negligence cases will sort and analyse the medical records themselves. Some firms who specialise in these areas employ nurses or former nurses specifically for this type of task and their work will be billed in the normal way as fee earner work usually at an hourly rate appropriate for paralegals or other non-qualified fee earners. Other firms outsource this work to agencies such as MCB. I am satisfied that the work done by MCB to sort and analyse the medical records was solicitors' work. It was the sort of work which Wolferstans were retained to do. Had a fee earner at Wolferstans carried out this work, I have no doubt that – subject to the reasonableness of the time spent – the cost would have been recoverable. Had a mistake been made in the work I have no doubt that Wolferstans would have been responsible for it. There is nothing in regulations 107 or 107A of the Civil Legal Aid (General) Regulations 1989 which imposes a different test in public funding assessments. Nor is there anything in the Legal Aid in Civil Proceedings (Remuneration) Regulations 1994 which prevents the recovery by a solicitor of work done by agents. I was told by Mrs Nash that while case plans were submitted to the Commission in respect of the generic costs, no case plans were submitted in respect of the individual cases. There was thus nothing agreed with the Commission in respect of the treatment of these costs; although I understand that in some cases the solicitors submitted Claim 4s seeking these costs as disbursements. Accordingly, in my judgment, in principle at least, the solicitors are entitled to recover the cost of this work as profit costs as if it had been done by a fee earner in their firm. Having regard to the public purse, that is not a decision that I reach lightly or with enthusiasm. It is a decision which, to my mind, unavoidably follows the authorities to which I have referred. I say "in principle at least" because it is apparent that despite MCB's invoice for "22.75 hours of work at £37 per hour" that does not reflect the work that was actually done. MCB's letter dated 27th August 2004 explains that the bill includes £154.80 for photocopying the records twice. Apparently MCB charge half their hourly rate for pagination and paginate, on average, 600 pages per hour. To paginate 1,270 pages would take 2.12 hours. That would be equivalent to £39.23. The amount of the invoice, less the photocopying and pagination, would come to £647.72, which would be equal to 17.5 hours at £37 per hour. Mrs Nash accepted that pagination is not fee earner work and that the claim should be limited to 17.5 hours preparation and photocopying (£154.80) as a disbursement. I understand that Mr Emery allowed enhancement of 50 per cent, as claimed, on non-routine items. Enhancement may only be allowed where the work was done with exceptional competence, skill or expertise or with exceptional dispatch, or where the case involved exceptional circumstances or complexity. In my judgment sorting the medical records is not work of the type which would normally justify enhancement. However analysing the medical records is work of the type which would normally justify enhancement, for it is not routine and requires specialist skill and knowledge. I anticipate that the analysis may well have been carried out during the sorting but, in any event, there is no breakdown to show the amount of time spent on each task. Doing the best I can, therefore, I think that an allowance of enhancement of 25 per cent on all of the sorting and analysing work allowed would be appropriate. Accordingly a further 17.5 hours of preparation should be allowed with enhancement at 25 per cent. As to the photocopying, £154.80 is claimed for copying 1,270 pages twice. That would be equivalent to about £0.06 per page produced. Photocopying charges will generally only be allowed where they are exceptional, otherwise they are considered to fall within the solicitor's overhead. To my mind what is exceptional will have to be measured by the facts of the particular case. In a case where the profit costs are less than £7,000 it would be unusual to see the generation of 2,540 photocopies. Accordingly I would view this as exceptional and allow the sum of £154.80 claimed as a disbursement. The appeal is allowed to that extent. *****

Mr Justice Leggatt : Introduction These four appeals from arbitration awards raise questions of interpretation of the cancellation provisions in four materially identical shipbuilding contracts. The vessels which are the subject of the contracts are known by their respective Yard Hull numbers: J0051, J0052, J0119 and J0120. In each case the contract was made between Zhoushan Jinhaiwan Shipyard Co Ltd of the People's Republic of China ("the Yard" or "the Builder") and a buying company specially created for that purpose ("the Buyer") which formed part of the Golden Ocean Group. In each case the Buyer has purported to exercise a contractual right to cancel the contract on account of delay in delivering the vessel. In each case the Yard has sought to argue that the cancellation was wrongful on the ground that a relevant part of the delay was caused by the Buyer's own breach of the contract. The central question raised by these appeals is whether the factual allegations made by the Yard as to the extent and cause of delay, if proved, provide an answer to the Buyers' claims, or whether on the proper interpretation of the contracts the cancellations were lawful even on the facts alleged. The contracts Article I of each contract contained a description of the vessel to be built. Article II specified the contract price of the vessel and provided for the price to be paid by the Buyer in five instalments, with the final instalment due upon delivery of the vessel. Article III provided for the contract price to be adjusted in various circumstances. Relevantly for present purposes, Article III.1(b) required the contract price to be reduced by deducting US$7,000 from the final instalment for each day that the delivery of the vessel was delayed by more than 30 days but less than 210 days after the Delivery Date specified in Article VII. Article III.1(c) gave the Buyer a right to cancel the contract if the delay in the delivery of the vessel continued for a period of at least 210 days. This right was expressed in the following terms: "If the delay in the delivery of the VESSEL continues for a period of two hundred and ten (210) days (being the total "non-permissible" delays and 30 days allowance) after the DELIVERY DATE as defined in Article VII, then in such event, the BUYER may, at its option, rescind or cancel this Contract in accordance with the provisions of Article X of this Contract." The phrase "Delivery Date" was defined in Article VII to mean the date stated in that clause or "such later date to which delivery is extended pursuant to the terms of this Contract". A further right to cancel the contract for delay in delivery of the vessel was provided in Article VIII.3. Article VIII is at the heart of the dispute and I will quote it in full: "1. CAUSE OF DELAY If, at any time before actual delivery, either the construction of the VESSEL, or any performance required hereunder as a prerequisite of delivery of the VESSEL, is delayed due to war, blockade, revolution, insurrection, civil commotions, riots, sabotage, lockouts, local temperature higher than 35 degree centigrade, Acts of God or the public enemy, terrorism, plague or other epidemics, quarantines, prolonged failure or restriction of electric current from an outside source, freight embargoes, earthquakes, tidal waves, typhoons, hurricanes, storms or other causes beyond the control of the BUILDER or of its sub-contractors, as the case may be, the BUILDER shall not be liable for such delay and the time for delivery of the VESSEL under this Contract shall be extended without any reduction in the CONTRACT PRICE for a period of time which shall not exceed the total accumulated time of all such delays, subject nevertheless to the BUYER's right of cancellation under Paragraph 3 of this Article and subject however to all relevant provisions of this Contract which authorize and permit extension of the time of delivery of the VESSEL. 2. NOTICE OF DELAY Within seven (7) days from the date of commencement of any delay on account of which the BUILDER claims that it is entitled under this Contract to an extension of the time for delivery of the VESSEL, the BUILDER shall advise the BUYER by telefax or email confirmed in writing, of the date such delay commenced, and the reasons therefor. Likewise within seven (7) days after such delay ends, the BUILDER shall advise the BUYER in writing or by telefax or email confirmed in writing, of the date such delay ended, and also shall specify the maximum period of the time by which the date for delivery of the VESSEL is extended by reason of such delay. Failure of the BUYER to acknowledge the BUILDER's notification of any claim for extension of the DELIVERY DATE within thirty (30) days after receipt by the BUYER of such notification, shall be deemed to be a waiver by the BUYER of its right to object to such extension. In the event that the BUILDER shall not comply with the notices required to be sent under this clause, they shall not be entitled to any relief claimed. 3. RIGHT TO CANCEL FOR EXCESSIVE DELAY If the total accumulated time of all delays on account of the causes specified in Paragraph 1 of the Article aggregate to two hundred and twenty five (225) days or more, or if the total accumulated time of all delays on account of the causes specified in Paragraph 1 of the Article and "non-permissible" delays as described in Paragraph 1 of Article III aggregate to two hundred and seventy (270) days or more, in any circumstances, excluding delays due to arbitration as provided for in Article XIII hereof or due to default in performance by the BUYER, or due to delays in delivery of the BUYER's supplied items, and excluding delays due to causes which, under Article V, VI, XI and XII hereof, permit extension or postponement of the time for delivery of the VESSEL, then in such event, the BUYER may in accordance with the provisions set out herein cancel this Contract by serving upon the BUILDER telefaxed, emailed or telexed notice of cancellation which shall be confirmed in writing and the provisions of Article X of this Contract shall apply. The BUILDER may, at any time, after the accumulated time of the aforementioned delays justifying cancellation by the BUYER as above provided for, demand in writing that the BUYER shall make an election, in which case the BUYER shall, within thirty (30) days after such demand is received by the BUYER either notify the BUILDER of its intention to cancel, or consent to an extension of the time for delivery to a mutually agreed future date, it being under stood and agreed by the parties hereto that, if any further delay occurs on account of causes justifying cancellation as specified in this Contract, the BUYER shall have the same right of cancellation upon the same terms as hereinabove provided. 4. DEFINITION OF "PERMISSIBLE" DELAY Delays on account of such causes as provided for in Paragraph 1 of this Article excluding any other extensions of a nature which under the terms of this Contract permit postponement of the DELIVERY DATE, shall be understood to be (and are herein referred to as) "permissible" delays, and are to be distinguished from "non-permissible" delays on account of which the CONTRACT PRICE of the VESSEL is subject to adjustment as provided for in Article III hereof." Article X deals with the consequences of a valid cancellation by the Buyer. In particular, Article X.2 requires the Yard when notice of cancellation is given to refund "immediately to the Buyer the full amount of all sums paid by the Buyer to the Builder on account of the Vessel, unless the Builder disputes the Buyer's cancellation and/or rescission of this contract by instituting arbitration in accordance with Article XIII." If there is such a dispute, the Yard's obligation to repay the price depends on the outcome of the arbitration. If the Yard is required to refund the price, it must also pay interest at the rate of 5% per annum if the contract has been cancelled in accordance with Article III.1(c). There is no obligation to pay interest if the cancellation takes place under Article VIII. Article XIII provides for disputes to be resolved by arbitration in London in accordance with English law, and by Article XIX the parties agreed that the contract was to be governed and interpreted in accordance with English law. The disputes In each case the cancellation of the contract by the Buyer followed a similar pattern: i) The delivery of the vessel was delayed beyond the "Delivery Date" (as defined in Article VII of the contract). ii) The Buyer gave notice of cancellation of the contract on a date which was more than 270 days after the Delivery Date. iii) Before such notice of cancellation was given, the Yard had not given notice to the Buyer of any delay which the Yard claimed had been caused by a breach of contract by the Buyer (or any other cause for which the Yard was not responsible). iv) After notice of cancellation had been given, however, the Yard did make such a claim and alleged that breaches of contract by the Buyer had resulted in delays in the construction of the vessel totalling, variously, not less than 90 days or 100 days depending on the case. In each case the breaches of the Buyer's contractual obligations alleged by the Yard were breaches of Article IV of the contract. That Article makes provision for inspection of the vessel by a supervisor appointed by the Buyer throughout the period of construction. Article IV.3 includes the following: "The SUPERVISOR shall have, at all times until delivery of the VESSEL, the right to attend tests according to the mutually agreed test list and inspect the VESSEL, her engines, accessories and materials at the BUILDER's Shipyard, its subcontractors or any other place where work is done or materials stored in connection with the VESSEL. In the event that the SUPERVISOR discovers any construction or material or workmanship which does not or will not conform to the requirements of this Contract and the SPECIFICATIONS, the SUPERVISOR shall promptly give the BUILDER a notice in writing as to such nonconformity, upon receipt of which the BUILDER shall correct such nonconformity if the BUILDER agrees with the BUYER. In any circumstances, the BUILDER shall be entitled to proceed with the construction of the VESSEL even if there exists discrepancy in the opinion between the BUYER and the BUILDER, without prejudice to the BUYER's right to submit the issue for determination by the CLASSIFICATION SOCIETY or arbitration in accordance with the provisions hereof. The BUYER undertakes and assures the BUILDER that the SUPERVISOR shall carry out his inspections in accordance with the agreed inspection procedure and schedule and usual shipbuilding practice and in a way as to minimize any increase in building costs and delays in the construction of the VESSEL. Once a test has been witnessed and approved by the SUPERVISOR, the same test should not have to be repeated, provided it has been carried out in compliance with the requirements of the CLASSIFICATION SOCIETY and SPECIFICATIONS." [underlining added] In relation to each contract, the Yard has alleged that the Buyer was in breach of the undertaking which I have underlined. More particularly, the Yard has alleged that: i) The Buyer's supervisor worked very short hours, with the result that the whole inspection process (and with it the construction process) was delayed; ii) The Buyer's supervisor imposed unreasonable requirements, beyond those specified in the contract / specification for the Vessel / Class Rules / regulations / agreed standards / general practices, which led to substantial delay in the construction of the vessel; iii) The Buyer's supervisor delayed unreasonably in returning procedures or drawings of the vessel, without which the Yard was unable to carry out further construction of the relevant items. The Yard argues that, on a proper interpretation of the contracts, delays caused by these alleged breaches of contract by the Buyer cannot be relied on in calculating any of the periods of delay specified in Article III.1(c) and Article VIII.3 which entitle the Buyer to cancel the contract. When such delays are excluded, it follows – if the Yard's factual allegations are correct – that in each case the cancellation was wrongful and itself amounted to a repudiatory breach of the contract. If the cancellations were lawful, the Buyer was in each case entitled under Article X to a refund of all instalments of the contract price which had been paid before the cancellation together (potentially) with interest on those instalments from the date of payment to the date of repayment. If on the other hand the cancellations were unlawful, the Yard was entitled to keep the instalments and re-sell the vessels, crediting the Buyer only with the balance of the proceeds of any such sale after the Yard has recouped its expenses. Many millions of dollars are, in consequence, at stake in these disputes. The arbitration awards Pursuant to the arbitration clauses in Article XIII of the contracts, the disputes were referred to arbitration in London. There were four arbitrations but only two hearings. The arbitrations relating to Hulls J0051 and J0052 were heard together and so also (but separately) were the two arbitrations relating to Hulls J0119 and J0120. In the arbitrations relating to Hulls J0051 and J0052, the arbitrators were Messrs Baker-Harber and Martin-Clark and Captain Lee. They issued awards in each arbitration (in materially identical terms) on 7 April 2014 in the form of majority awards published by Messrs Baker-Harber and Martin-Clark accompanied in each case by a dissenting opinion from Captain Lee. Following applications by both parties under section 57 of the Arbitration Act 1996, further awards were issued on 14 June 2014. By these awards, the tribunal decided the following preliminary issues: "(1) Did the Builder remain obliged to deliver Hull J0051/J0052 to its Buyer by the Delivery Date of 30 September 2012 and/or is the Builder prevented from claiming any relief, even if the Builder's allegations that delays to the construction of the Vessel were caused by alleged defaults of the Buyer, as set out in Appendix 2 to the Defence and Counterclaim submissions, were to be established, due to: i. The Builder's failure to give notice to the Buyer of such delays pursuant to Article VIII.2 of the Shipbuilding Contract and/or ii. The Builder's failure to deliver Hull J0051/J0052 to its Buyer by 28 June 2013 as required by the Shipbuilding Contract. (2) If the answer to the above question is "yes", was the cancellation of the Contract by the Buyer valid with the consequence that the Builder is required to repay to the Buyer or the Assignee Bank the instalments together with accrued interest thereon? (3) If the answer to the above question is "yes", is the Builder entitled to withhold repayment on the basis of the defence of equitable set-off as pleaded? (4) Whether in the light of our decisions on the first, second and third Preliminary Issues, the tribunal should issue an award giving effect to those decisions and, if so, whether it should impose any condition for doing so, and if so, what condition?" The tribunal (by a majority) gave the answer "yes" to all the questions raised by the first two preliminary issues, save that they held in relation to preliminary issue (2) that the Builder was not required to pay accrued interest on the instalments. The tribunal (by a majority) gave the answer "no" to preliminary issue (3). In the light of their decisions on the first three issues, the tribunal issued awards to the effect that: i) The Buyer's cancellation of the contract in accordance with Article VIII.3 of the contract was valid and justified; ii) The Buyer's cancellation of the contract in accordance with Article III.1(c) of the contract was not valid and not justified; iii) The Yard was obliged to repay to the Buyer or its assignee the full amount of the instalments advanced by the Buyer; iv) The Buyer's claim for interest failed. In the arbitrations relating to Hulls J0119 and J0120 the arbitrators were Messrs Baker-Harber, Gaunt and Yang. The tribunal issued awards on preliminary issues in those arbitrations on 18 June 2014. The preliminary issues were similar to those in the arbitrations relating to Hulls J0051 and J0052. The tribunal (again by a majority) gave similar answers to the questions raised, with one exception. The exception was that, on the question of interest, the tribunal in these arbitrations held that, by virtue of the fact that the Buyer correctly invoked Article III.1(c) (as well as Article VIII.3) as a basis for its cancellation of the contracts, interest was payable on the instalments to be refunded, which the Yard was ordered to pay. The appeals By an arbitration claim form dated 27 June 2014, the Yard applied for permission to appeal under section 69 of the Arbitration Act 1996 on the following questions of law arising out of the awards made in the arbitrations relating to Hulls J0051 and J0052: i) On the facts pleaded by the Yard in its Defence and Counterclaim submissions in the arbitration and on a true construction of the contract between the parties dated 16 November 2006 as varied, were the Buyers entitled to cancel the contract and to repayment of the instalments of the price paid by them? ii) In particular, on the true construction of the contract, was delay caused by the Buyer's default or breach of contract "permissible delay" for the purposes of Article VIII.1 of the contract? iii) Did Article VIII.2 of the contract require the Yard to give notice to the Buyers of all delays caused by the Buyer's defaults or breaches of contract, failing which such delays would count towards the period of 270 days' delay entitling the Buyers to terminate the contract under Article VIII.3? iv) Did Article X.2 exclude the Yard's right to set off its claims for damages against its liability to repay the instalments of the price paid for the vessel? v) Is it manifestly unjust that the Buyer's claim should be enforced without regard to the Yard's counterclaim? By arbitration claim forms of the same date, the Buyers applied for leave to appeal against the tribunal's decisions in these arbitrations that the Buyers were not entitled on the assumed facts to cancel the contract under Article III and so were not entitled to interest on the sums to be refunded. In August 2014, the parties agreed that each should have leave to appeal in these arbitrations. The Yard also applied for leave to appeal against the awards made in the proceedings relating the Hulls J0119 and J0120 on the following questions of law arising out of the awards: i) On the facts pleaded by the Yard in its Defence and Counterclaim submissions in the arbitration and on a true construction of the contract between the parties dated 17 September 2010 as varied, were the Buyers entitled to cancel the contract and to repayment of the instalments of the price paid by them? ii) In particular, on the true construction of the contract, was delay caused by the Buyer's default or breach of contract "permissible delay" for the purposes of Article VIII.1 of the contract or "non-permissible" delay for the purposes of Article III.1 of the contract? iii) What was the consequence of the Yard not giving notice under Article VIII.2 of delays caused by the Buyers' breaches of contract or defaults (or those of companies under the same control)? iv) In particular, was the consequence of not giving such notice that those delays would count towards: a) The period of 270 days' delay entitling the Buyers to terminate the contract under Article VIII.3; and b) The period of 210 days' delay after the Delivery Date entitling the Buyers to terminate the contract under Article III.1(c) so that the Yard became obliged to pay interest on the sums refunded. On 13 October 2014 Cooke J gave the Yard permission to appeal against these awards because of the overlap of the issues with those to be determined in relation to Hulls J0051 and J0052 where the parties had agreed that appeals should take place. On the hearing of these appeals the Yard has been represented by Mr Michael Nolan and the Buyers by Mr Timothy Young QC. The facility with which their submissions were advanced has been honed by arguing the issues raised on these appeals not only in the underlying arbitrations but apparently in a string of other arbitrations relating to further shipbuilding contracts in which similar issues have arisen. Approach to interpretation The principles applicable to the interpretation of contracts were recently summarised in BMA Special Opportunity Hub Fund Ltd v African Minerals Finance Ltd [2013] EWCH Civ 416 at [24] by Aikens LJ as follows: "The court's job is to discern the intention of the parties, objectively speaking, from the words used in the commercial document, in the relevant context and against the factual background in which the document was created. The starting point is the wording of the document itself and the principle that the commercial parties who agreed the wording intended the words used to mean what they say in setting out the parties' respective rights and obligations. If there are two possible constructions of the document a court is entitled to prefer the construction which is more consistent with 'business common sense', if that can be ascertained. However, I would agree with the statements of Briggs J in Jackson v Dear[1], first, that 'commercial common sense' is not to be elevated to an overriding criterion of construction and, secondly, that the parties should not be subjected to '…the individual judge's own notions of what might have been the sensible solution to the parties' conundrum'. I would add, still less should the issue of construction be determined by what seems like 'commercial common sense' from the point of view of one of the parties to the contract." Mr Nolan submitted that, in each arbitration, the majority of the tribunal misapplied these principles by allowing what they perceived to be a commercially sensible construction to prevail over the meaning of the words used by the parties to record their bargain. In order to ascertain the meaning of the words used by the parties to record their bargain, a judge or arbitrator must bring to bear both their understanding of how words are commonly used and their understanding of the purposes which someone using the words in the relevant context could be expected to have. Where the document to be interpreted is a contract, the assumption made is that the parties to the contract chose its language to express an intention which they shared. The assumption is also made that the parties were reasonable people with the purposes and values which reasonable parties in their situation who had a shared intention may fairly be supposed to have had. Necessarily, as Aikens LJ observed, this does not allow a judge or arbitrator to interpret the words used in the light of what would seem like 'commercial common sense' merely from the point of view of one of the parties to the contract or from the judge's own point of view. Identifying the meaning of the words used, however, and the shared purposes and values which the parties may be taken to have had are not two separate inquiries. The meaning of all language depends on its context. To paraphrase a philosopher of language, a sentence in never not in a context. Contracting parties are never not in a situation. A contract is never not read in the light of some purpose. Interpretive assumptions are always in force. A sentence that seems to need no interpretation is already the product of one. At the same time the main source from which the shared purposes and values of the parties can be ascertained is the contract they have made. It is for these reasons that it is a fundamental principle of the interpretation of contracts that the contractual document must be read as a whole. The main particular criticism made by Mr Nolan of the approach of the majority arbitrators is that they imposed their own notion of what might have been a sensible contract to make and/or made the mistake of judging what made commercial common sense from the Buyer's point of view. I do not accept that contention. As I will explain, it is in fact the Yard which relies on assumptions about what arrangements would be commercially sensible which cannot in my view confidently be attributed to the contracting parties. Furthermore, the interpretation for which the Yard contends is inconsistent with the language of the contract and the purposes to be collected from the document read as a whole. The contractual scheme I think it best to start, as Mr Nolan did in his submissions on behalf of the Yard, by examining the different types of delay provided for in the contract and the consequences of each type of delay. Mr Nolan submitted that the contract provides for four types of delay. As I will indicate, the fundamental point on which I do not accept his analysis is that in my view there are only three types of delay contemplated by the contract, and there is no further and separate category of "Buyer's breach delays". Two types of delay are referred to in the contract as "permissible" delays and "non-permissible" delays. "Permissible" delays are defined in Article VIII.4 as: "Delays on account of such causes as provided for in [Article VIII.1] excluding any other extensions of a nature which under the terms of this Contract permit postponement of the Delivery Date ..." Such "permissible" delays are then distinguished from "non-permissible delays on account of which the Contract Price of the Vessel is subject to adjustment as provided for in Article III hereof." Article VIII.1, to which the definition of "permissible" delays refers, specifies causes of delay beyond the control of the Yard and provides that, where construction of the vessel is delayed due to such a cause, the Yard "shall not be liable for such delay and the time for delivery of the vessel under this Contract shall be extended without any reduction in the Contract Price for a period of time which shall not exceed the total accumulated time of all such delays, subject nevertheless to the Buyer's right of cancellation under [Article VIII.3]". It is apparent from the definition in Article VIII.4 that, contrary to what might be expected, the two categories of "permissible" and "non-permissible" delays are not exhaustive because they exclude delays which permit postponement of the Delivery Date under terms of the contract other than Article VIII.1. Mr Nolan identified a number of such terms under which the Delivery Date may be postponed, as follows: i) Articles V.1 and V.2 provide for extensions of the Delivery Date in the case of, respectively, changes in the specifications and plans for the construction of the vessel and changes to the applicable Class requirements. ii) Article V.4 provides for an automatic extension for the time of delivery of the vessel to the extent that delivery is delayed by the failure of the Buyer to deliver on time items which it is the Buyer's responsibility to supply. iii) Article VI.1 provides for the Delivery Date to be extended where delay is caused by the failure of the Buyer's representatives or supervisor to attend sea trials. iv) Article XI.4(a) provides for the Delivery Date to be postponed for any period during which the Buyer is in default of its obligation (a) to pay an instalment of the contract price, (b) to provide a guarantee of payment or (c) to take delivery of the vessel under the contract. v) Article XII.2(b) includes provision for the parties by mutual agreement to proceed with the contract even in the event that the vessel becomes a total loss if they first agree between them a reasonable extension of the Delivery Date and adjustment of other contract terms. vi) Article XIII.7 provides for the Delivery Date to be extended if the construction of the vessel is affected by any arbitration. Mr Nolan referred to delays capable of giving rise to an extension of the Delivery Date under these various provisions as "hotchpotch" delays. There is a common feature of these delays, which is that they are excluded from consideration when determining whether the Buyer is entitled to reduce the contract price or cancel the contract because of delay in delivering the vessel. For this reason I prefer to describe them as "excluded" delays. As Mr Young QC pointed out, the distinction between permissible delays and excluded delays is also drawn in Article III.1(d). This provides: "For the purpose of this Article, the delivery of the VESSEL shall not be deemed delayed and the CONTRACT PRICE shall not be reduced when and if the DELIVERY DATE of the VESSEL is extended by reason of causes and provisions of Articles V, VI, XI, XII and XIII hereof. The CONTRACT PRICE shall not be adjusted or reduced if the delivery of the VESSEL is delayed by reason of "permissible" delays as defined in Article VIII hereof." The Articles listed in this clause include all the Articles under which extensions of the Delivery Date on account of excluded delays can occur. Like permissible delays, therefore, excluded delays result in an extension of the time for delivery of the vessel without any reduction in the contract price. However, excluded delays are more favourable than permissible delays from the Yard's point of view. If the total of all permissible delays accumulates beyond a certain level (either 225 days on their own or 270 days when aggregated with non-permissible delays), they give the Buyer a right to cancel the contract under Article VIII.3. As I will consider in more detail later, under the terms of Article VIII.3 excluded delays do not count towards these thresholds. Nor are they taken into account for the purpose of Article III. There is no provision of the contract which gives the Buyer the right to cancel on account of any excluded delays. Consistently with this, Article III.1(d), quoted above, deems excluded delays not to be delays to the delivery of the vessel at all. There is accordingly a tripartite classification of delays to the delivery of the vessel. The scheme is one in which permissible and excluded delays can result in an extension of the time for delivery of the vessel without any reduction in the contract price, whereas non-permissible delays do not give rise to any extension of the time for delivery and, if they cause delivery to be delayed by more than 30 days beyond the Delivery Date, result first in a reduction in the price and then, after 210 days, in a right on the part of the Buyer to cancel the contract and recover the instalments of the price paid with interest. Permissible delays result in an extension of the Delivery Date but nevertheless, if they accumulate beyond a certain point (either on their own or when added to non-permissible delays), trigger a right to cancel the contract, though no interest is payable on the instalments of the contract price which become repayable on such a cancellation. Excluded delays are not counted as delays for the purpose of any right of cancellation. I think it plain that these three categories of delay are intended to cover the whole field. It is natural to expect, and the wording of the definition in Article VIII.4 makes clear, that – once excluded delays are taken out of the picture and deemed not to be delays at all – any delay which is not a "permissible" delay is a "non-permissible" delay, and vice-versa. Buyer's breach delays How then do delays caused by breaches of contract by the Buyer (which I will call "Buyer's breach delays") fit into this scheme? Some Buyer's breach delays are excluded delays. Thus, Article V.4 provides that, if the Buyer fails to deliver to the Yard within the time specified any items which it is the Buyer's obligation under that clause to supply, "the delivery of the Vessel shall automatically be extended for a period of such delay, provided such delay in delivery of the Buyer's supplied items shall affect the delivery of the Vessel." Further, if the Buyer is in default of any of the three obligations set out in Article XI, "the Delivery Date shall, at the Builder's option, be postponed for a period of continuance of such default by the Buyer": see Article XI.4(a). The Yard's case that the Buyers were in breach of contract, however, is based on Article IV. Article IV does not contain any provision which causes or permits the time for delivery of the vessel to be extended if the Buyer breaches the undertaking given in that clause as to how inspections will be carried out by its supervisor. Delay caused by a breach of Article IV is therefore not excluded delay in the sense in which I am using that term (to refer to delays which permit extension of the Delivery Date under a provision of the contract other than Article VIII.1). Nor is Article IV one of the Articles specified in Article III.1(d), quoted in paragraph 32 above. The Yard therefore cannot rely on Article III.1(d) to say that delay in the delivery of the vessel caused by a breach of Article IV does not count as delay for the purpose of the provisions in Article III which cause the contract price to be reduced after a delay in delivery exceeding 30 days and which give the Buyer the right to cancel the contract if the delay in delivery continues for 210 days. This last point seems to me to be fatal to the Yard's case in these proceedings. Unless the Yard could say that the delays in delivery of the vessels allegedly caused by the Buyers' breaches of Article IV were permissible delays, which the Yard does not contend, it follows that the Buyers were entitled to cancel the contracts in circumstances where the delay had in each case continued for more than 210 days. Moreover, even if the delays could be characterised as permissible delays, this would not enable the Yard to avoid the conclusion that the Buyers were entitled to cancel the contracts, since the delay in each case exceeded the length of time which gave rise to a right of cancellation under Article VIII.3. The right to cancel under Article VIII.3 As I have indicated, Article VIII.3 provides for a right of cancellation in two circumstances. The first is where the total of all accumulated permissible delays amounts to 225 days or more. The second is where the total of all permissible delays and non-permissible delays combined amounts to 270 days or more. As in each of the instant cases the Buyer cancelled the contract after more than 270 days of delay in delivering the vessel had occurred, the Buyer had on the face of things a right of cancellation under Article VIII.3 whether the delay was permissible or non-permissible delay or a combination of the two. The Yard disputes that conclusion on the basis of language in Article VIII.3 which excludes certain periods of delay from the computation of time under that clause. This exclusion is expressed as follows: "excluding delays due to arbitration as provided for in Article XIII hereof or due to default in performance by the BUYER, or due to delays in delivery of the BUYER'S supplied items, and excluding delays due to causes which, under Article V, VI, XI and XII hereof, permit extension or postponement of the time for delivery of the VESSEL." On behalf of the Yard, Mr Nolan argued that delays caused by a breach of the Buyer's obligations under Article IV are delays "due to default in performance by the Buyer" which fall within this exclusion, with the result that such delays do not count towards either of the two periods of delay which trigger the right of cancellation provided for in Article VIII.3. On behalf of the Buyers, Mr Young's primary contention was that the words "due to default in performance by the Buyer" in the exclusion are intended to refer to Buyer's defaults provided for in Article XI and therefore do not encompass the Buyer's breaches of Article IV alleged in this case. Article XI is headed "Buyer's Default" and provides that the Buyer "shall be deemed in default of its obligation under the Contract" if any of three specified events occurs. As mentioned earlier, those events are: (a) failing to pay an instalment of the contract price on time; (b) failing to provide a guarantee on time; and (c) failing to take delivery of the vessel when duly tendered. Mr Young submitted that, just as the reference in the exclusion to "delays in delivery of the Buyer's supplied items" is an obvious allusion to Article V.4, so the reference to delays "due to default in performance by the Buyer" matches the language of Article XI. Although I would not attach too much weight to the linguistic parallel on its own, I think that this interpretation does make the best sense of the exclusion in Article VIII.3. The clear intent of the exclusion, as I see it, is to remove from Article VIII.3 the delays which I am calling "excluded" delays – that is, delays which extend the time for delivery of the vessel under a term of the contract other than Article VIII.1. As discussed earlier, the scheme of the contract is that such excluded delays do not count as part of any period which gives rise to a right of cancellation, either under Article III.1(c) or under Article VIII.3. Although there is on any view an element of duplication in the wording of the exclusion in Article VIII.3, interpreting delays "due to default in performance by the Buyer" as meaning delays which extend the Delivery Date pursuant to Article XI is consistent with this scheme and treats the exclusion in Article VIII.3 as equivalent to the exclusion in Article III.1(d), which seems to me to be the logical interpretation. I would therefore conclude that, even if the delays alleged by the Yard are classified as permissible delays (or as a mixture of permissible and non-permissible delays), and a fortiori if they were non-permissible delays, the Buyers were entitled to cancel the contracts. The presumption against the Buyer benefiting from its own breach Mr Nolan argued that, if this interpretation of the contract were to be accepted, it would mean that the Buyers are being allowed to profit from their own wrong. There is a well established presumption that a contract is not to be construed in a way which allows a party to rely on its own breach of the contract in order to obtain a benefit: see e.g. Alghussein Establishment v Eton College [1988] 1 WLR 587. Mr Nolan submitted that any interpretation of the contract which leads to the conclusion that the Buyer was entitled to cancel by reason of delay which (on the assumption made for the purpose of the preliminary issues in the arbitrations) was caused by its own breaches of the contracts would violate this presumption and must therefore be avoided in the absence of clear express words which compel such a result. I of course recognise the force of the general presumption on which the Yard relies. When considering what reasonable parties would be likely to have intended, however, it is necessary to descend from generality and look closely at the specific consequences which would ensue if a particular interpretation is adopted. When the implications of a breach by the Buyer of Article IV are examined, I do not think it safe to assume that reasonable commercial parties would have intended that such a breach could permit the Yard to postpone the delivery of the vessel. Notably, while Article IV.3 of the contracts (quoted at paragraph 7 above) requires the Buyer's supervisor to give prompt notice to the Yard of any construction or workmanship which does not or will not conform to the requirements of the contract, the Yard is only obliged to correct such nonconformity if it agrees with the Buyer. To make the position even clearer, the clause continues: "In any circumstances, the BUILDER shall be entitled to proceed with the construction of the VESSEL even if there exists discrepancy in the opinion between the BUYER and the BUILDER, without prejudice to the BUYER's right to submit the issue for determination by the CLASSIFICATION SOCIETY or arbitration in accordance with the provisions hereof." It is therefore plain that the Buyer's supervisor has no power to delay the construction of the vessel. If the supervisor points out what he thinks is a failure by the Yard to build the vessel in accordance with the contract, it is up to the Yard to decide whether it agrees with the supervisor, in which case it must of course correct the defect, or whether it is disagrees with the supervisor, in which case it is free to ignore him. If the supervisor is found to have been right by the Classification Society or in an arbitration, the Yard will then have to correct the defect; but that is no less than it would be obliged to do anyway. Looking at the allegations of breach made by the Yard (which I have set out at paragraph 8 above), even if it is true that the Buyer's supervisor worked very short hours, I can see no reason why this should have delayed the construction process. Whilst the supervisor had the right to attend tests and carry out inspections, there was nothing in the contract which required the Yard to wait for him. Equally, if the supervisor sought to impose unreasonable requirements beyond those specified in the contract, the Yard had no obligation to comply with them. As for returning procedures or drawings of the vessel (the third form of alleged breach), the specifications for the vessel were all agreed at the time when the contracts were made and were annexed to the contracts, and I can see nothing in the contract terms which required the supervisor's approval to be sought or obtained for any procedures or drawings. In these circumstances, given what seems to me to be the lack of any contractual power on the part of the Buyer's supervisor to delay the construction of the vessel, I can see no obvious reason why the parties should have agreed that a breach of the Buyer's undertaking in Article IV.3 would in any circumstances permit the Yard to postpone delivery of the vessel. At any rate I am not persuaded that commercial common sense – as opposed to what might seem like commercial common sense from the point of view of the Yard – demands an interpretation which has that result. Such an interpretation would, furthermore, if it is to be credited as a possible interpretation, need somehow to be shown to fit into the contractual scheme. The Yard's case as to how it does so is that, in addition to the three categories of permissible, non-permissible and excluded delays, there is a fourth type of delay provided for in the contract – namely, Buyer's breach delays. That contention, however, seems to me to face at least four major objections. The first is that all the Buyer's breach delays identified by Mr Nolan apart from delays caused by breaches of Article IV are excluded delays. If there is a fourth category of delay, therefore, it would not be a general category but would be limited to one particular species of Buyer's breach delay. I can see no logic, rhyme or reason in treating delay caused by breaches of Article IV as a special category of delay all on its own. The second objection is that, whereas the contract provides for the Delivery Date to be extended on account of delay caused by other breaches by the Buyer, the contract does not provide for the Delivery Date to be extended, or to be capable of being extended, on account of a breach of Article IV. That in itself raises a strong inference that the parties did not intend a breach of Article IV to permit such an extension. A third objection is that the definition of permissible delay contained in Article VIII.4, as discussed earlier, seems to me to leave no room for any category of delay other than the three types which I have identified. A fourth objection is that, if a breach of Article IV permits late delivery on a sui generis basis, it does so not only without any provision of the contract which says so but without any requirement on the Yard to give notice of the delay and its consequences. As Mr Young showed, the contract wording is replete with provisions requiring any extension of the Delivery Date to be communicated and agreed between the parties (or ascertained by arbitration). Furthermore, the operation of the cancellation clauses depends on the parties knowing where they stand. Those provisions depend for their efficacy on the parties being able to calculate with precision and know at any given time how many days of (i) permissible delay and (ii) non-permissible delay have occurred. The parties could no doubt have made a contract which left them each to perform their own calculation and then argue about the causes of delay after a cancellation has occurred. However, they have tried to avoid such an anarchic situation. Instead, they have adopted a scheme which provides for notices to be given and agreement reached, or any dispute resolved by arbitration if necessary, whenever an event occurs which the Yard wishes to say justifies an extension of the time for delivery. It would be wholly illogical to attribute to the parties the intention that one category of delay – being one particular kind of Buyer's breach delay – uniquely falls outside this scheme. Mr Nolan submitted that it was not necessary to have a notice requirement for delays of the kind alleged by the Yard in these cases because the Buyer would know if fault of its supervisor had caused delay and could in any case, if unsure of the Yard's position regarding any such delay, ask the Yard before seeking to exercise a right of cancellation. In my view, both these arguments are bad. It is common ground that delay is only relevant insofar as it has an impact on the delivery of the vessel. Even if the Buyer was aware that the Yard was complaining about its supervisor's conduct (which cannot be assumed), the Buyer would not know what effect, if any, such defaults were said to have on the critical path for construction, unless told. Nor has any reason been suggested which could conceivably explain why the parties might, uniquely among all kinds of delay, have chosen to leave delay of this kind for the Buyer to have to inquire into. Putting such an onus on the Buyer would furthermore create a wholly unsatisfactory situation where, if the Yard did not respond to an inquiry or gave a non-committal response, the Buyer would be left in limbo. I agree with the observation of Hamblen J in relation to a similar suggested anomaly in a similar shipbuilding contract in Adyard Abu Dhabi v SD Marine Services [2011] EWHC 848 (Comm) at para 255 that it is inherently unlikely that the parties would have intended there to be such a limbo. All these reasons combine to render untenable, in my view, the Yard's contention that delay resulting from a breach by the Buyer of Article IV is in a special category of its own which enables it somehow to be treated in the same way as excluded delays even though Article IV is not mentioned in Article III.1(d) or in the exclusion in Article VIII.3 and there is nothing in Article IV which permits such delay to be relied on to justify any postponement of the time for delivery of the vessel. Were the alleged delays "permissible" delays? In my view, the only contention reasonably available to the Yard to support a case that delays caused by breaches of Article IV were capable of extending the time for delivery of the vessel is that such delays were "permissible" delays. For the reasons given, this contention, even if correct, would not on the facts make the cancellations unlawful. The consequence would be that the Buyers were entitled to cancel the contracts under Article VIII.3, though not under Article III(1)(c). The practical significance of this is the Buyers would not in that event be entitled to interest under Article X on the instalments of the contract price which had to be repaid. Different conclusions were reached on the question whether the relevant delays were permissible delays by the two arbitral tribunals. In the arbitrations relating to Hulls J0051 and J0051 the tribunal held that, on the assumed facts, the delays were permissible delays giving rise to a right to cancel under Article VIII.3 but not under Article III.1(c). The Buyers are appealing on this point. There is no similar appeal by the Buyers from the awards made in the arbitrations relating to Hulls J0119 and J0120, as the tribunal in those arbitrations decided that the relevant delays were to be treated as non-permissible delays so that the Buyers were entitled to cancel the contracts under Article III.1(c). Whether the delays in question were "permissible" delays depends on the proper interpretation of Article VIII.1. As discussed, "permissible" delays are defined in Article VIII.4 as delays on account of causes provided for in Article VIII.1 (leaving aside excluded delays). Article VIII.1 sets out a list of particular causes ending with the words "or other causes beyond the control of the Builder". Taken at face value, that phrase would include a breach of contract by the Buyer. Somewhat ironically, however, it was the Yard's argument that, despite the apparent width of those words, the clause should not be construed as including Buyer's breach delays, while the Buyers argued that such delays are included. On behalf of the Yard, Mr Nolan pointed out that the long list of causes set out in Article VIII.1 conspicuously does not include breach of contract by the Buyer. Rather, all of the listed causes have the character of force majeure events in the sense of "supervening events which arise without the fault of either party and for which neither of them has undertaken responsibility": see The "Kriti Rex" [1996] 2 Lloyd's Rep 171, 196. Mr Nolan relied on the principle of interpretation known as "ejusdem generis" – that, where a list of particular items is followed by general words, the general words should be construed as limited to things of the same kind as the specified items. The main justification for this principle, as identified in Lewison, The Interpretation of Contracts (5th Ed, 2011) at para 7.13, is the presumption that words have not been used unnecessarily; for if the general words are given an unrestricted meaning, the specifically enumerated items are surplusage. Mr Nolan submitted that, in circumstances where all the particular causes listed in Article VIII.1 are causes beyond the control of both parties and for which neither one of them has undertaken responsibility, the words "other causes beyond the control of the Builder" should be read as referring only to other causes of a like kind. The contrary argument, advanced by Mr Young on behalf of the Buyers, is that the phrase "force majeure" does not appear in clause, nor are there any words which expressly limit its application to causes beyond the control of both the parties. To the contrary, the clause refers to "causes beyond the control of the Builder" and not "causes beyond the control of the parties". Mr Young submitted that the words used should be interpreted literally as including causes beyond the control of the Builder which are not also beyond the Buyer's control because they are matters for which the Buyer has undertaken contractual responsibility. In my view, the better interpretation of Article VIII.1 is that contended for by Mr Nolan. I have reached that view principally because, as discussed above, Buyer's breach delays are dealt with elsewhere in the contract. In so far as they are intended to permit postponement of the Delivery Date, specific provision is made to that effect. There is thus no need to read or attempt to read Article VIII.1 as encompassing Buyer's breach delays. If it did, it would moreover produce duplication in relation to delays caused by breaches of Article V.4 or Article XI, as there would then be two different regimes in the contract which provide for an extension of the time for delivery of the vessel in those cases. A further reason for construing Article VIII.1 as not including Buyer's breach delays is that permissible delays, when they reach a certain point, give rise to a right of cancellation of the contract. As Mr Nolan rightly emphasised, there is a presumption against a construction which would as a general matter permit the Buyer to rely on delay caused by its own breach to justify cancellation of the contract. Admittedly, delays due to breaches of the contract by the Buyer other than breaches of Article IV are specifically excluded from the computations of delay in Article VIII.3. But a construction which does not treat such delays as permissible delays at all seems to me to be preferable. I conclude that Buyer's breach delays do not fall within the scope of Article VIII.1. The effect of failure to give notice of delay Even if that is wrong, however, and Buyer's breach delays are potentially within the scope of Article VIII.1, I consider that the Buyers are correct in their submission that the Yard is not entitled to treat the delays alleged in these cases as permissible delays in circumstances where no notice of them was given as required by Article VIII.2. Article VIII.2 imposes a requirement that, where the Yard claims that any delay entitles it to an extension of the time for delivery of the vessel, the Yard must give written notice of the delay and the reasons for it within seven days from the date of the commencement of the delay. No such notice was given by the Yard. The consequence of this is stipulated in the last sentence of Article VIII.2: "In the event that the BUILDER shall not comply with the notices required to be sent under this clause, they shall not be entitled to any relief claimed." On behalf of the Yard, Mr Nolan argued that the words "any relief claimed" relate solely to extending the time for delivery of the vessel, which is what the earlier part of the clause refers to. Thus the failure to comply with the notice requirement in Article VIII.2 means that delay due to a cause provided for in Article VIII.1 does not give rise to an extension of the Delivery Date pursuant to Article VIII.1; however, such delay is still classified by Article VIII.4 as permissible delay (unless it is excluded delay). In my view, there are at least three problems with this argument. The first is that, if the Yard's interpretation were correct, delay in delivery could occur which the Buyer reasonably supposed to be the Yard's fault because no notice of any cause allegedly beyond the Yard's control had been given. To take a hypothetical example, suppose that a few days delay in the construction of the vessel occurred due to power cuts ("restriction of electric current from an outside source") which were outside the Yard's control; however, no notice of these delays was given under Article VIII.2 and the Buyer was not aware that the delivery date had been affected. Suppose that the Yard subsequently failed to deliver the vessel on time. If the Buyer then served a notice of cancellation after 210 days of what it reasonably understood to be "non-permissible" delay had elapsed, it could find itself wrong-footed by an allegation of the kind which has been made in the present cases that part of the delay was "permissible" – so that the cancellation was in fact a wrongful repudiation of the contract. An interpretation which allows this would seem to defeat the purpose of the notice requirement. A second problem is that, if delay of which the required notice has not been given still counts as permissible delay even though it does not entitle the Yard to an extension of the Delivery Date, there would appear to be no purpose either in the mechanism in Article VIII.1 for extending the Delivery Date or in the notice requirement. So far as I can see, the Yard's interpretation would render both of those provisions pointless since the effect of permissible delay on the Buyer's rights of cancellation (and right to an adjustment of the contract price) would be exactly the same as if those provisions did not exist. A third problem with the Yard's interpretation is that it does not accord with what Article VIII.2 says. Article VIII.2 does not say that, unless the notice requirement is complied with, the Yard shall not be entitled to an extension of the time for delivery of the vessel. Rather, the words used are much broader: the Yard shall not entitled to "any relief claimed". To ascertain the scope of these words, it is necessary to look back at the wording of Article VIII.1. Article VIII.1 provides that, where delay due to a cause beyond the control of the Builder occurs, "the Builder shall not be liable for such delay and the time for delivery of the vessel under this Contract shall be extended without any reduction in the Contract Price …" (emphasis added). The point of the words I have emphasised is that delays in construction are prima facie the responsibility of the Builder, unless they are excused by a provision of the contract. The basic default position under the contract, in other words, is that delay is "non-permissible" unless a term of the contract classifies it as permissible (or, in the case of excluded delays, deems it not to be delay at all). The natural reading of the last words of Article VIII.2 which remove the Yard's entitlement to "any relief claimed" is that they are intended to deprive the Yard of the exemption from liability for delay provided for in Article VIII.1 as well as preventing the time for delivery of the vessel from being extended. Accordingly, in the event that the Yard does not give notice under Article VIII.2 that delay has commenced which the Yard claims is due to an event falling within Article VIII.1, the result is not only that there is no extension of the Delivery Date under that provision but also that the Yard remains liable for the delay. In other words, the delay constitutes non-permissible delay. I add that, although not stated expressly, I think it clear from the conjunction and inter-relationship of the two clauses that the notice requirement in Article VIII.2 applies only to delay which the Yard claims has resulted from a cause provided for in Article VIII.1. Thus, unless a cause of delay comes within Article VIII.1, there is no requirement on the Yard to give notice of the commencement of such delay under Article VIII.2. Conclusion on cancellation I conclude that even if (contrary to my view) Buyer's breach delays fall within the scope of Article VIII.1, the Yard cannot claim that the delays which occurred in these cases were permissible delays in circumstances where no notice was given in accordance with Article VIII.2. The delays were therefore non-permissible delays which, by the time that cancellation occurred, had given rise to the right to cancel the contract both under Article III.1(c) and under Article VIII.3. As the cancellations were in accordance with Article III.1(c), it follows that under Article X the Buyers are entitled to interest at the stipulated rate on all instalments of the contract price which they have paid until the date of repayment. Equitable set-off The last issue is whether the tribunals were entitled to reject the Yard's claim to be entitled to set off its counterclaim for damages in respect of the Buyer's alleged breaches of contract against the instalments of the contract price repayable to the Buyers. This issue is the subject of an appeal only in relation to Hulls J0051 and J0052. There is no appeal from the equivalent decision that no set-off was available in the proceedings relating to Hulls J0119 and J0120. In its Defence and Counterclaim submissions in the arbitrations, the Yard's counterclaim has been stated in the following terms: "The Buyer's aforesaid breaches of the Contract have resulted in damage to the Builder in putting the Buyer into the position in which it was (on this hypothesis) entitled to and did exercise a contractual right of termination, such damages being the amount of profit which the Builder would have made if the vessel had been built, delivered and paid for, alternatively in the amount of the expenditure incurred in performance of the Builder's obligations under the Contract." Mr Nolan explained that he did not draft this statement of case and would prefer to put the counterclaim in terms that the Buyer's breaches of the contract caused the Buyer to become entitled to cancel the contract which in turn caused the Yard to become liable to repay the contract price. The Yard has suffered loss in this amount less any sum which it may recoup by selling the vessel in mitigation of its loss. It seems to me that a difficulty for the Yard, however the counterclaim is formulated, is that an essential step in the chain of causation between the Buyer's alleged breaches of contract and the Yard's loss is the Buyer's valid exercise of a contractual right to cancel the contract. Since the counterclaim only arises on the hypothesis that the cancellation was lawful, it involves the contention that the Buyer is liable to compensate the Yard in damages for loss which the Yard has suffered as a result of the Buyer's lawful exercise of a contractual right. Although the issue is not one which has been directly raised on these appeals, I am unable to see how such loss can properly be recovered by the Yard. It is not sufficient in order to render such loss recoverable for the Yard to show that, but for the Buyer's previous failure to perform certain of its own obligations, the Buyer would not have been in a position where it had a right to cancel the contract. It seems to me difficult avoid the conclusion that the chain of causation was broken and that the effective cause of the Yard's losses was the Buyer's exercise of its right of cancellation. More fundamentally, in circumstances where the delay which entitled the Buyer to cancel was, as I have held, non-permissible delay, I cannot see that it is open to the Yard to claim, for this purpose or any other, that the cause of the cancellation was delay due to the Buyer's breaches of contract rather than being the fault of the Yard. The Yard's counterclaim therefore appears to me to be misconceived. If that is right, no question of set-off arises. Assuming, however, that it is wrong, I see no basis for interfering with the tribunal's findings that the test for an equitable set-off was not met. That test is whether the cross-claim is "so closely connected with [the claim] that it would be manifestly unjust to allow [the claimant] to enforce payment without taking into account the cross-claim": Federal Commerce & Navigation Co Ltd v Molena Alpha Inc (The 'Nanfri') [1978] 2 KB 972, 975; Geldof Metaalconstructie NV v Simon Carves Ltd [2011] 1 Lloyd's Rep 517 at para 43(vi). In each case the tribunal applied the correct test and Mr Nolan rightly accepted that its finding that the requirement of "manifest injustice" was not satisfied was a value judgment akin to the exercise of a discretion. The court could only interfere with such a finding if it were shown either (i) that it was premised on an error of law or (ii) that it was one which no reasonable arbitrator could reach: see Pioneer Shipping Ltd v BTP Tioxide Ltd ('The Nema') [1982] AC 724, 742. Neither is the case here. Mr Nolan argued that the majority arbitrators erred in failing to recognise the injustice that will result from the fact that the Buyers are special purpose companies with no assets apart from their rights under the contracts who will not be worth pursuing if no set-off is allowed. However, this argument was expressly considered by the arbitrators who found that any risk arising from the creditworthiness of the Buyers was one which the Yard had knowingly assumed when it entered into the contracts and did not in these circumstances give rise to any manifest injustice. It cannot be said that this view involved any error of law. On the contrary, it seems to me that the existence or otherwise of a right of set-off must in principle depend solely on the nature of the claim and cross-claim and their relationship to each other and cannot depend on the counterparty's solvency or financial worth. In commercial dealings a contracting party who is concerned about the ability of the counterparty to discharge a potential liability should seek security or otherwise accept the financial risk. In an appropriate case it might be possible to obtain a freezing order to prevent the counterparty from disposing of assets (including assets derived from payments made under the contract) pending determination of a cross-claim. But it would in my view be wrong in principle to permit a party to withhold on account of a cross-claim a payment that it would have been obliged to make if it had not taken a counterparty credit risk. Mr Nolan was unable to point to any authority which would support a different conclusion. The Yard's appeal on this issue must therefore fail. I add, however, for completeness that I do not agree with the tribunal's alternative finding that any right of set-off was excluded by the wording of Article X.2 which obliged the Yard to refund "immediately to the Buyer the full amount of all sums paid by the Buyer". The requirement to repay the "full amount of all sums paid" merely specifies the sum of money which the Yard is obliged to pay and the word "immediately" merely specifies when the payment falls due. Neither phrase can properly be interpreted, in my view, as saying anything about rights of set-off, let alone as doing so with the clarity that would be required to exclude such a right. Conclusions For the above reasons, my answers to the questions raised on the appeals are as follows: i) On the facts pleaded by the Yard in its Defence and Counterclaim submissions in the arbitrations and on a true construction of the contracts between the parties, the Buyers were in each case entitled to cancel the contract and to repayment of the instalments of the price paid by them. ii) On the true construction of the contracts, delay caused by the Buyer's breach of Article IV of the contract as alleged in these arbitrations was not "permissible delay" for the purposes of Article VIII.1 of the contract but was "non-permissible delay". iii) Article VIII.2 of the contract did not require the Yard to give notice to the Buyers of delays caused by the Buyer's breaches of Article IV of the contract alleged in these cases because such delays did not fall within the scope of Article VIII.1. Alternatively, the consequence of failing to give such notice is in any event that the delays cannot be treated as permissible delays. The delays were non-permissible delays which as such counted towards (a) the period of 270 days' delay entitling the Buyers to terminate the contract under Article VIII.3 and also (b) the period of 210 days' delay after the Delivery Date entitling the Buyers to terminate the contract under Article III.1(c) so that the Yard became obliged to pay interest on the sums refunded. iv) Article X.2 did not exclude the Yard's right to set-off its claims for damages against its liability to repay the instalments of the price paid for the vessel. v) It is not manifestly unjust that the Buyer's claim should be enforced without regard to the Yard's counterclaim. In the light of these conclusions, I dismiss the Yard's appeal and allow the Buyers' appeal against the awards in relation to Hulls J0051 and J0052. In each of these cases the Final Award of the tribunal dated 14 June 2014 will be varied by deleting the word "not" in paragraph 20(B) of the Award and replacing paragraph 20(E) by the words "the Buyer's claim for interest succeeds". The awards will be remitted to the tribunal for reconsideration and calculation of the interest to be awarded. In relation to Hulls J0119 and J0120, I dismiss the Yard's appeal and confirm the tribunal's awards dated 18 June 2014. Note 1    [2012] EWHC 2060 (Ch) at [40].    [Back]

CIVIL APPELLATE JURISDICTION Civil Appeal No. 1348 of 1990. From the Judgment and Order dated 23.7. 1985 of the Bombay High Court in W.P. No. 3144 of 1981. H .C. Tunara, J.A. Karia and M.N. Shroff for the Appellant. Ashok H. Desai, Solicitor General, U.J. Makhija, B.S. Bisaria. Mrs. A.K. Verma and Vivek Dholakia for the Respondents. N. Ganpule, V.N. Patil and A.S. Bhasime for the State of Maharashtra. The Judgment of the Court was delivered by RAMASWAMY, J. 1. The respondent is a statutory body companyporate initially companystituted under the Bombay Port Trust Act, 1879 Bombay Act 6 of 1879 , for short State Act. Under Sec. 26 thereof, the Board has power to acquire and hold movable and immovable property and also has power to lease, to sell or otherwise companyvey movable and immovable property which may have become vested in or acquired by them. The respondent has appointed A.J. Mescarnas, Assistant Estate Manager as their power of attorney holder to lease out its properties from time to time or terminate the leases and to lay action for ejectment, etc. The respondent owns the Building bearing Old R.R. No. 941 known as Frere Land Estate in which room No. 2 admeasuring 28.27 sq. meters was leased out to Vasantkumar Radhakisan Vora, for short Vasantkumar. The appellants are his legal representatives. He was served with a numberice under Sec. 106 read with s. 111 h of the Transfer of Property Act terminating the tenancy in terms of the companyenants of lease and was asked to deliver possession of the demised property giving one months time from 22nd January, 1975. It was served on Vasantkumar on January 28, 1975. The numberice of termination thereby became effective from 28th February, 1975. In the meanwhile Major Port Trust Act, 1963 Act No. 38 of 1963 , for short the Central Act, was made applicable to the Bombay Port Trust by operation of s. 133 2A with effect from February 1, 1975. After the expiry of one month, ejectment application was filed under s. 41 of the Bombay Presidency Small Cause Courts Act Act 15 of 1882 as amended under 1963 Maharashtra Amendment Act, against Vasantkumar and another for delivery of possession. After 1976 Amendment Act 19 of 1976 came into force suits were laid against three other tenants. It was pleaded by the respondent that it is a successor in interest of the Board under the State Act and were entitled to eject the tenants and to the possession of the demised portions. The plea of Vasantkumar in his written statement elaborated by the learned companynsel, is that the suit is number maintainable. Since the State Act ceased to be operative with effect from February 1, 1975, the quit numberice issued under Section 106 read with Section 111 h of Transfer of Property Act became ineffective and without determining the tenancy afresh, the suit was number validly laid. It was also pleaded that the respondent had promised that in deposit of certain amount which the tenant did, Vasantkumar would be given on lease of a portion in the reconstructed building. Thereby the respondent is estopped by promissory estoppel to have the tenant ejected. It may be mentioned at this juncture that one suit was dismissed on the ground that the tenancy was number duly determined as per law. Other suits were decreed. No appellate forum has been prescribed under Amendment Act of 1963 but a substantive suit on original side provided was available. By Maharashtra Amendment Act 19 of 1976 to the principal Act such a right to appeal was incorporated. Vasantkumar filed writ petition in the High Court under Articles 226 and 227 and others filed regular appeals to a Bench of two Judges of the Small Cause Court and are stated to be pending. In the writ petition the petitioner challenged the vires of 1963 Amendment Provisions and also 1976 Amendment Provisions to the Presidency Small Cause Courts Act. When it came up for heating before Masodkar, J., he referred it to a Division Bench. The Division Bench by its judgment dated January 17/18, 1982 up-held the companystitutional validity of those sections and remitted to the learned Single Judge to dispose of the writ petition on merits. The learned single Judge companysidered and negatived two points namely, validity of the numberice terminating the tenancy promissory estoppel and dismissed the writ petition. Vasantkumar had leave of this Court under Art. 136. The primary companytention of Mr. Turana, learned companynsel for the appellant, is that quit numberice issued under Sec. 106 read with Sec. III h of the T.P. Act is invalid. By issue of quit numberice numberright had accrued to the respondent. Termination of tenancy became operative only on expiry of one month given thereunder, i.e. February 28, 1975, by which date the State Act became inoperative as from February 1, 1975 the Central Act came into force. The respondent under the Central Act acquired, by statutory operation, the immovable property including the demised one in Frere Land Estate and thereby became a new landlord. Termination of tenancy is an act inter vivos by operation of Sec. 106 read with Sec. III h of T.P. Act. Under Sec. 109 thereof, the respondent, number being a living person, is number entitled to the benefit of the quit numberice as its operation is number saved by Sec. 2 d and Sec. 5 thereof. The suit, thereby, is number maintainable admittedly numberquit numberice determining the tenancy was issued after February 1, 1975. The edifice of the argument was built up on shifting sand and when it was subjected to close scrutiny it crumbled down traceless. Let us first deal with the arguments on the foot of the provisions of T.P. Act. Section 2 d of the Transfer of Property Act, 1882 provides saving of the previous operation of law. It states that numberhing herein companytained shall be deemed to affect save as provided by Sec. 57 and Chapter IV of this Act, any transfer by operation of law or by, or in execution of, a decree or order of a companyrt of companypetent jurisdiction. Section 106 empowers the landlord to terminate the companytract of lease of immovable property, if it is for agricultural or manufacturing purpose by giving six months numberice and terminable on the part of either lessor or lessee, by giving fifteen days numberice expiring with the end of the month of the tenancy. Section ill h provides that, on the expiration of a numberice to determine the lease, or to quit, or of intention to quit, the property leased, duly given by one party to the other. Section 109 is Rights of lessors transferee If the lessor transfers the property leased, or any part thereof, or any part of his interest therein, the transferee, in the absence of a companytract to the companytrary, shall possess all the rights, and, if the lessee so elects, subject to all the liabilities of the lessor as to the property or part transferred so long as he is the owner of it but the lessor shall number, by reason only of such transfer cease to be subject to any of the liabilities imposed upon him by the lease unless the lessee elects to treat the transferee as the person liable to Provisos are number necessary, hence omitted. Reading of these fascicule of provisions clearly demonstrates that a lessee of immovable property from month to month is terminable by giving fifteen days numberice or as per the terms of the companytract of the lessee. In this case the companytract provides to give one months numberice . On expiry of one month from the date of receipt of the numberice the lease shall stand terminated. The lessors right on transfer of the immovable property including the lease hold rights created on the property sold, the transferee, in the absence of companytract to the companytrary, shall possess all the rights and if the lessee so elects, be subject to all the liabilities of the lessor as to the property or part thereof so long as he is owner of it. But by mere transfer the lessor shall number cease to be subject to any liabilities imposed upon him by companytract of lease unless the lessee elects to treat the transferee as the person liable to him. Undoubtedly, by issuance of numberice to quit automatically the right created thereunder, namely, cessation of the lease, does number become effective till the period prescribed in the numberice or in the statute i.e. Sec. 106 expires. On expiry thereof the lease becomes inoperative and the lessor acquires right to have the tenant ejected. When he fails to deliver vacant possession, the lessor would be entitled to have the tenant ejected and taken possession in due process of law. The successor in interest whether acquires these rights and the rights acquired by lessor would enure for his benefit is the crucial question. In Halsburys Laws of England, 4th Edition, Vol. 27, paragraph 193 discussed the right accrued to the transferee of the benefit of the numberice to quit issued by the predecessor in title thus The numberice when once given enures for the benefit of the successors in title of the landlord or tenant giving it. Hill and Redman in Law of Landlord and Tenant, 17th Edition, Vol. I, at page 488, paragraph 405 have stated to the similar fact thus The numberice when once given enures for the benefit of the successor in title of the landlord or tenant giving it. In Mullas companymentary on the Transfer of Property Act, 6th Edition, at page 676 it is also stated thus Notice enures for the benefit of the successor in title of the lessor or lessee giving it. In Chitaleys Transfer Property Act, 4th Edn., 1969, Vol. III, Note 35, it is stated thus Where the lessor gives numberice to quit and then assigns his interest to another the assignee can take advantage of the numberice. In N.P.K. Raman Menon v. Collector of Malabar, AIR ,1924 Madras 908 a Division Bench of the Madras High Court held that, English cases recognise that the person who is the landlord and entitled to possession, on the date of the numberice to quit, is the proper person to give the numberice and that an assignee within the currency of that numberice can take advantage of the numberice sent by his assignor and rely upon it, when he brings a suit for recovering possession.,, No doubt Mr, Tunara placed strong reliance on the decision of Trimbak Damodhar Raipurkar v. Assaram Hiraman Patil Ors., 1962 Suppl. 1 SCR 700. The facts therein are that in 1943 a lease on agricultural land for five years was created- Before the expiry thereof Bombay Tenancy Act, 1939 was made applicable to the area where the land was situated and under Sec. 23 1 b of that Act the period of lease was statutorily extended to ten years-During the subsistence of the companytractual tenancy it was statutorily extended and the Bombay Act 67 of 1948 came into force. In March 1952 numberice was given to the tenant that the tenancy expired on March 31, 1953 and called upon the tenant to deliver possession. In the meanwhile the Bombay Act 33 of 1952 came into force. Its effect was that the lease automatically stood extended for ten years from time to time, unless terminated by giving one years numberice averting that the land was required bona fide by the landlord for personal cultivation and that income would be the main source of income of the landlord. It was companytended that since 1952 Amending Act was number retrospective, the technical requirement of numberice to quit do number apply. The question was whether the landlord was entitled to eject the tenant without companyplying with the statutory requirement. In that companytext it was held by the Constitution Bench that by operation of the statutory provisions the period of lease of 10 years from time to time was automatically extended unless the tenancy was validly terminated by giving a numberice of one year or surrender was made by the tenant as specified in the statute. The ratio therein has little application to the facts of this case. In Hitkarini Sabha v. The Corporation of City of Jabalpur Anr., 1973 1 SCR 493 the lease was granted by the Administrator without authority under the Statute. Therefore, the lease was held to be void. The numberice as required under T.P. Act was held to be mandatory, but was number done. Therefore the lease was subsisting and thereby as his land was acquired the tenant was entitled to companypensation pro rata under Section 11 of the Land Acquisition Act. We are at a loss to understand, how the ratio thereunder will be of any assistance to the appellant. In Lower v. Sorreli, 1963 1 Queens Bench Division 959 the question therein was whether the numberice to quit was a valid numberice. Admittedly, second numberice was given before the expiry of the first numberice. It was held that when such numberice were issued withdrawing the first numberice by issuance of the second numberice, a new tenancy has been created for the tenant to remain in possession until the expiry of the later numberice on September 29, 1961, to which the tenancy sections 2 1 and 23 1 of the Agricultural Holdings Act, 1948 would apply. Accordingly it was held by the Court of Appeal that there was numbervalid numberice to quit. The ratio therein also is of numberavail to the appellant. No doubt in Gurumurthappa v. Chickmunisamappa, AIR 1953 Mysore 62 a Division Bench of Mysore High Court held that the successor in interest is number entitled to avail the numberice to quit given by the original landlord. In the light of the above discussion this view is number good law. It is numberdoubt true that per se sec. 109 of T.P. Act does number apply to the facts of this case. It companytemplates transfer of lessors right inter vivos. But when right, title and interest in immovable property stand transferred by operation of law, the spirit behind Sec. 109 per force would apply and successor in interest would be entitled to the rights of the predecessor. This is what the learned single Judge of the High Court in the impugned judgment has held and we approve of the view as companyrect. We, accordingly, hold that the numberice terminating the tenancy of Vasantkumar would enure to the benefit of the respondent and it companyld be availed of by the respondent to lay the suit for ejectment. The matter companyld also be gleaned through the statutory operation as well. By operation of Sec. 26 of the State Act, the Board of Trustees acquired and held the demised property which includes lease hold interest therein. Section 29 1 of the Central Act interposed and from February 1, 1975 the appointed date, in relation to Bombay Port all the movable and immovable property, assets and funds of the predecessor Board shall vest in the Board, i.e. the respondent. By operation of Clause b thereof all debts, obligations and liabilities incurred, all companytracts entered into and all matters and things engaged to be done, by with or for the Central Govt., or as the case may be, the other authority i.e. predecessor Board under State Act immediately before such day, for or in companynection with the purposes of the port, shah be deemed to have been incurred, entered into and engaged to be done by, with or for the Board. It further postulates that all rates, fees, rents and other sums of money due to the Central Govt., or as the case may be, the other authority i.e. the predecessor Board in relation to the port immediately before such day shall be deemed to be due to the Board, i.e. the respondent. Other clauses are number necessary. Hence omitted. Thereby by operation of Sec. 29 1 b the immovable properties, i.e. demised rooms and all companytracts in relation thereto including the lease and the right to ejectment pursuant to quit numberice stood transferred to the respondent. Sub-section 2 A of Sec. 133 Repeal of the Major Port Trusts Act, 1963 states that on the application of the Central Act to the Port of Bombay, except the provisions thereof relating to municipal assessment of the properties of the port of Bombay and matters companynected therewith, shall cease to have force in relation to that port. But subclause c of sub-section 2D of Sec. 133 provides that numberwithstanding anything companytained in sub-section 2A 2B and 2C anything done or any action taken or purported to have been done or taken including numberice issued shall, in so far as it is number inconsistent with the provisions of this Act, be deemed to have been done or taken on the companyresponding provisions of this Act. By operation of Sec. 29 1 a b read with Sec. 133 2A the quit numberice companycerning the vested immovable property i.e. the demised rooms vested in the respondent shall be deemed to have been done or taken under Sec. 29 1 and Sec. 133 2A C of the Central Act. There is numberinconsistency between the Central and the State Acts in this regard. Section 6 of the General Clauses Act, 1897 postulates the effect of repeal thus Where this Act or any Central Act or regulation made after the companymencement of this Act, repeals any enactment hitherto made or hereafter to be made, then, unless a different intention appears, the repeal shall number-- b affect the previous operation of any enactment so repealed or anything duly done or suffered thereunder or c affect any right, privilege, obligation or liability acquired, accrued or incurred under any enactment so repealed or any such investigation, legal proceedings or remedy may be instituted, companytinued or enforced as if the repealing Act or Regulation had number been passed. Section 17 1 provides under In any Central Act or Regulation made after the companymencement of this Act, it shall be sufficient for the purpose of indicating the application of a law to every person or number of persons for the time being executing the functions of an office, to mention the official title of the officer at present executing the functions of an office, or that of the officer by whom the functions are companymonly executed. Section 17 of the General Clauses Act substitutes the functionaries under the Central Act to those of the functionaries under the State Act. Section 6 gives effect to the previous operation of anything done or subsists the right acquired or privilege accrued under the Repealed Act and the legal proceedings of remedy may be instituted, companytinued or enforced as if the repealing Act had number been passed. Therefore, the operation, efficacy and effectiveness of the quit numberice issued by the power of attorney Agent of the respondent i.e. the Asstt. Estate Manager has been acquired by the respondent Board. The rights and remedy accrued to the respondent under the State Act namely termination of tenancy by issue of quit numberice under Sec. 106 and 111 h of T.P. Act and on expiry of thirty days i.e. on February 28, 1975 the respondent Board became entitled to institute the proceedings in the suits to have the tenants ejected under Sec. 41 of the Provincial Small Cause Courts Act. The companytention of Mr. Tunara that the Central Act and the General Clauses Act would apply only to the acts done under the Central Act or State Act, by exercise of the statutory power which alone have been validated and they have numberapplication to bilateral acts under Central Act and the numberice under Sec. 106 of T.P. Act is number the one either under the Central or the State Act and that the numberice issued is number saved, is devoid of force. The Board of Trustees under the State Act have merely changed their hats and stand transposed to be functionaries under the Central Act. The functionaries under both the Acts are the same. The numberice was issued by the Asstt. Estate Manager by virtue of his official function as power of attorney agent on behalf of the respondent. The Board of Trustees have the right to terminate the lease under Sec. 26 of the State Act and those rights stood transferred and vested under Sec. 29 1 of the Central Act. Therefore, the termination of tenancy and laying the action for ejectment are integrally companynected with their official capacity. There is a reasonable companynection between the impugned acts and official duty. Thereby, they are the acts done under the Central Act. In Commissioner for the Court of Calcutta v. Abdul Rahim Osman Co., Sec. 142 of the Calcutta Port Act came up for interpretation. Thereunder it was companytended that short delivery of the goods was an omission and number an act done under the Act and though the suit was laid beyond three months, it was number barred by limitation. Section 142 enjoins that numbersuit shall be brought in for anything done or purported to have been done beyond three months. It was held that after the expiry of three months from the day on which the cause of action had arisen for short delivery, which was done or purported to have been done under the Act, the suit was barred by limitation. It was further held that in order to apply any bar under Sec. 142 it was first to determine whether the act which is companyplained of in the suit can be said to have been within the scope of the official duty of the person or persons who are sought to be made liable. This question can be answered in the affirmative where there is a reasonable companynection between the act and the discharge of the official duty. Once the scope of official duty is determined, Sec. 142 will protect the defendant number only from a claim based on breach of the duty but also from a claim based upon an omission to perform such duty. The protection cannot be held to be companyfined to acts done in the exercise of a statutory power but also extends to acts done within the scope of an official duty. This view was upheld in Trustees of Port of Bombay v. The Premier Automobiles Ltd. Anr., 1974 3 SCR 397 where there was short delivery of one bundle out of 153 bundles companysigned from Japan and omitted to be delivered and it was held to companystitute an act done within the ambit of Sec. 87 of the Bombay Port Trust Act, 1879 and the bar of limitation prescribed thereunder would apply. Thus we have numberhesitation to hold that the numberice under Sec. 106 and Sec. 111 h of the Transfer of Property Act is an act done or purported to have been done in the official capacity as Power of Attorney holder Asstt. Estate Manager on behalf of the respondent, Board of Trustees the right to lay the suit on expiry of one months period prescribed in the numberice, namely, on or after February 28, 1975 had accrued to the respondent. It is an act done or purported to have been done under the Central Act in exercise of the official function. The right to lay the suit on determination of the tenancy by numberice dated January 20, 1975 under the State Act is a transfer of interest by operation of Sec. 29 1 of the Central Act, to the respondent under Sec. 109 of the Transfer of Property Act. Thereby the quit numberice is valid. The suit laid, pursuant thereto, is valid and legal. Accordingly order of ejectment passed by the Small Cause Court is perfectly legal and unassailable. The next companytention of Mr. Tunara is that the respondents are estopped from ejecting the appellant and other tenants who are similarly situated on the principle of promissory estoppel. His companytention is rounded upon the fact that the Estate Manager of the respondent in his letter dated April 3, 1972 directed the tenant to deposit Rs. 11,000 and odd for grant of tenancy after reconstruction of the flats therein. The tenants placing reliance thereon have deposited the amount demanded from them and acted upon the promise to their detriment. The respondent number shall be declared to be estopped from ejecting them from the demised respective portions leased out to them. The learned Solicitor General companytended that the Estate Manager has numberauthority to give a promise. Even assuming that he has such a power, it is companyditional one, namely, approval by the Board. The Board in its meeting resolved to reject the claim and on reconstruction decided to allot to its own employees out of administrative necessity. Therefore, the promissory estoppel cannot be applied. The principle of promissory estoppel is that where one party has by his word or companyduct made to the other a clear and unequivocal promise or representation which is intended to create legal relations or affect a legal relationship to arise in the future, knowing or. intending that it would be acted upon by the other party to whom the promise or representation is made and it is in fact so acted upon the other party, the promise or representation would be binding on the party making it and he would number be entitled to go back upon it, if it would be inequitable to allow him to do so, having regard to the dealings which have taken place between the parties. The doctrine of promissory estoppel is number well established one in the field of administrative law. This principle has been evolved by equity to avoid injustice. It is neither in the realm of companytract number in the realm of estoppel. Its object is to interpose equity shorn of its form to mitigate the rigour of strict law. In Union of India v. Indo Afgan Agencies, Shah J., as he then was, speaking for the Division Bench of this Court while upholding the application of promissory estoppel to executive acts of the ,State negated the plea of executive necessity thus We are unable to accede to the companytention that the executive necessity releases the Government from honouring its solemn promises relying on which citizens have acted to theft detriment. Under our companystitutional set up numberperson may be deprived of his right or liberty except in due companyrse of and by if a member of the Executive seeks to deprive a citizen of his right or liberty otherwise than in exercise of power derived from the law companymon or statute--the Courts will be companypetent to and indeed would be bound to protect the rights of the aggrieved citizens. It was further held in its summing up thus Under our jurisprudence the Government is number exempt from liability to carry out the representation made by it as to its future companyduct and it cannot on some undefined and undisclosed ground of necessity or expediency fail to carry out the promise solemnly made by it, number claim to be the Judge of its own obligation to the citizen on an ex parte appraisement of the circumstances in which the obligation has arisen. In Century Spinning and Manufacturing Co. Ltd. v. Ulhasnagar Municipal Council, 1970 3 SCR 854 Shah, J. again extended this doctrine of promissory estoppel against public authorities thus This companyrt refused to make distinction between a private individual and a public body so far as the doctrine of promissory estoppel is companycerned. In Motilal Padampat Sugar Mills v. State of Uttar Pradesh, 1979 2 SCR 641 Bhagwati, J., as he then was, applied the doctrine of promissory estoppel to the executive action of the State Government and also denied to the State of the doctrine of executive necessity as a valid defence. It was held that in are public governed by rule of law, numberone high or low is above the law. Everyone is subject to the law as fully and companypletely as any other and the Government is numberexception. The Govt. cannot claim immunity from the doctrine of promissory estopped. Equity will, in a given case where justice and fairness demands, present a person from exercising on strict legal rights even where they arise number in companytract, but on his own title deed or in statute. It is number necesary that there should be some pre-existing companytractual relationship between the parties. The parties need number be in any companynt of legal relationship before the transaction from which the promissory estoppel takes its origin. The doctrine would apply even where there is numberpre-existing legal relation-ship between the parties, but the promise is intended to create legal relations or effect a legal relationship which will arise in nature. It was further held that it is indeed pride of companystitutional democracy and rule of law that the Government stands on the same footing as a private individual so far as the obligation of the law is companycerned-. The former is equally bound as the latter Therefore, the Government cannot claim any immunity from the doctrine of promissory estoppel and it cannot say that it is under numberobligation to act in a manner i.e. fair and just or that it is number bound by the companysi derations of honesty and good faith. In fact, the Government should be held to have a high standard of rectitude while dealing with its citizens. Since the doctrine Of promissory estoppel is an equitable doctrine, it must yield where the equity so requires. If it can be shown by the Govt. that having regard to the facts as they have transpired, it would be inequitable to hold the Govt. or public authority to the promise or representation made by it, the Court would number raise an equity in favour of the promise and enforce the promise against the Government. The doctrine of promissory estoppel would be displaced in such a case. because on the facts, equity would number require that the Government should be held bound by the promise made by it. But the Govt. must be able to show that in view of the fact as have been transpired, public interest. would number be prejudiced. Where the Govt.is required to carry out the promise the Court would have to balance, the public interest in the Governments carrying out the promise made to the citizens, which helps citizens to act upon and alter his position and the public interest likely to suffer if the promises were required to be carried out by the Government and determine which way the equity lies. It would number be enough just to say that the public interest require that the Govt. should number be companypelled to carry out the promise or that the public interest would suffer if the Govt. were required to honour it. In order to resist its liability the Govt. would disclose to the Court the various events insisting its claim to be exempt from liability and it would be for the Court to decide whether those events are such as to render it equitable and to enforce the liability against the Govt. There fore, we are holding that the doctrine of promissory estoppel would equally apply to a private individual as well as a public body like a Municipal Council. It was held that it cannot be applied in the teeth of an obligation or liability imposed by law. It cannot be invoked to companypell the Govt. to do an act prohibited by law. There may be numberpromissory estoppel against exercise of legislative functions. Legislature can never be precluded from exercise of its legislative functions by resorting to doctrine of promissory estoppel. The plea of executive necessity, though was rejected, its rigour was mellowed down to the above extent indicated above. The doctrine of promissory estoppel, though doubted in Jeer Ram v. State of Haryana, 1980 3 SCR 689 was affirmed and reiterated by a Bench of three Judges in Union of India v. Godfrey Philips India Ltd., 1985 Supp. 3 SCR 123 at 144 Bhagwati, the Chief Justice, while reiterating the law laid down in Motilal P Sugar Mills case supra made it clear thus there can be numberpromissory estoppel against the legislature in the exercise of its legislative functions number can the Govt. or public authority be debarred by promissory estoppel from enforcing a statutory prohibition. It is equally true that promissory estoppel Cannot be used to companypel the Government or a public authority to carry out a representation or promise which is companytrary to law or which was outside the authority or power of the officer of the Government or of the public authority to make. We may also point out that the doctrine of promissory estoppel being an equitable doctrine, it must yield when the equity so requires if it can be shown by the Government or public authority that having regard to the facts as they have transpired, it would be inequitable to hold the Government or public authority to the promise or representation made by it, the Court would number raise an equity in favour of the person to whom the promise or representation is made and enforce the promise or representation against the Government or public authority. Doctrine of Promissory Estoppel was reiterated by another Bench of three Judges in State of Bihar v. Usha Martin Industries Ltd., 1987 65 STC 430 and Asstt. Commissioner of Commercial Taxes, Dharwar Dharmendra Trading Co., etc. etc., 1988 3 SCR 946. It is equally settled law that the promissory estoppel cannot be used to companypel the Government or a public authority to carry out a representation or promise-which is prohibited by law or which was devoid of the authority or power of the officer of the Government or the public authority to make. We may also point out that the doctrine of promissory estoppel being an equitable doctrine, it must yield place to the equity, if larger public interest so requires, and if it can be shown by the Government or public authority, for having regard to the facts as they have transpired that it would be inequitable to hold the Government or public authority to .the promise or representation made by it. The Court on satisfaction would number, in those circumstances raise the equity in favour of the persons to whom a promise or representation is made and enforce the promise or representation against Government or the public authority. Equally Promissory estoppel should number be extended, though it may be rounded on an express or implied promise stammed from the companyduct or representation by an officer of the State or public authority when it was obtained play fraud on the companystitution and the enforcement would defeat or tend to defeat the companystitutional goals. For instance a fight to reservation either under Art. 15 4 or 16 4 in favour of the Scheduled Castes, Scheduled Tribes or backward classes was made with a view to ameliorate their status socially, economically and educationally so as to assimilate those sections into the main stream of the society. The persons who do number belong to those classes, but produce a certificate to mask their social status and secure an appointment to an office or post under the State or public employment or admission into an educational institution maintained by the State or receiving aid from the State, on later investigation, though belated, was found that the certificate produced was false and the candidate was dismissed from the post or office or debarred or sent out from the institution or from the balance companyrse of the study, the plea of promissory estoppel would always be found favour with the companyrts and being easily extended in favour of the candidate or party that played fraud on the Constitution. It would amount number only putting a premium on the fraud on the Constitution, but also a denial to a reserved candidate and the general candidate as well. Therefore, the plea of promissory estoppel should number be extended to such areas. Though Executive necessity is number always a good defence, this doctrine cannot be extended to legislative acts or to acts prohibited by the statute. When it seeks to relieve itself from its application the Government or the public authority are bound to place before the Court the material, the circumstances or grounds on which it seeks to resile from the promise made or obligation undertaken by insistence of enforcing the promise, how the public interest would be jeopardised as against the private interest. It is well settled legal proposition that the private interest would always yield place to the public interest. The question, therefore, is whether promise, in fact, was made by the Estate Manager on behalf of the respondent and whether the Estate Manager is companypetent to make such a promise and whether it binds the respondent. The letter dated April 3, 1972 written by the Estate Manager is a companyditional one, namely, that on fulfilling certain companyditions indicated in that letter he would make recommendation to the Board for grant of lease, companydition precedent being that the tenant would deposit the required sum of about Rs. 11,000 and odd with the respondent. Undoubtedly, the tenants companypleted that part of the obligation. Thereafter admittedly it was placed before the Board, who by resolution dated September 10, 1974 which is at page 228 to 237 of the paper book, companysidered it, but was rejected on the ground that after reconstruction the building would be required to its staff. Therefore, the decision has stemmed from its executive necessity, but that ground by itself would number be sufficient unless it is shown to the satisfaction of the Court that as against the interest of the private tenants the interest of its employees is of such as absolute importance that without allotment of the quarters to the staff the work of the Port Trust cannot be carried out. No such material has been placed before us. But the crucial circumstance would be whether an unequivocal promise in fact was made and the Estate Manager was companypetent to make promise. In Howell v. Falmouth Boat Construction Co. Ltd. 1951 A.C. 837 the facts are that ship repairers in a naval vessel carried out certain work in companytravention of para 1 of the Restriction of Repairs of Ships Order, 1940, the Admiralty acting under regulation 55 of the Defence General Regulations, 1939 directed that repairs or alteration of ships would number be carried out except under the authority of a licence granted by the Admiralty. The defence was that work was carried out with the oral permission of the licencing authority officer of the Admiralty. In the Court of Appeal Lord Denning, laid the rule of promissory estoppel that whenever Government Officers in the dealings with the subject, take on themselves to assume authority in a matter with which he is companycerned the subject is under entitlement to rely on their having the authority which they assume. He does number know and cannot be expected to know the limits of their authority and he ought number to suffer if they exceed it. On further appeal the House of Lords while reversing the view, Lord Simonds stated thus I know of numbersuch principle in our law number was any authority for it cited. The illegality of an act is the same whether or number the actor has been misled by an assumption of authority on the part of a Government officer however high or law in the hierarchy. I do number doubt that in criminal proceedings it would be a material factor that the actor had been thus misled if knowledge was a necessary element of the offence, and in any case it would have a bearing on the sentence to be imposed. But that is number the question. The question is whether the character of an act done in face of a statutory prohibition is affected by the fact that it has been induced by a misleading assumption of authority. In my opinion the answer is clearly No. Such an answer may make more difficult the task of the citizen who is anxious to walk in the narrow way, but that does number justify a different answer being given. Lord Normand stated at page 849 thus But it is certain that neither a minister number any subordinate officer of the Crown can by any companyduct or representation bar the Crown from enforcing a statutory prohibition or entitle the subject to maintain that there has been numberbreach of it. In Attorney General for Ceylon v. A.D. Silva, 1953 C. 461 the Privy Council was called upon to companysider whether the Collector of Custom was authorised to create a promise as against the crown. Considering that question at page 479 it was held that All ostensible authority involves a representation by the principal as to the extent of the agents authority. No representation by the agent as to the extent of his authority can amount to a holding out by the principal. No public officer, unless he possesses some special power, can hold out on behalf of the Crown that he or some other public officer has the right to enter into a companytract in respect of the property of the Crown when in fact numbersuch right exists Their Lordships think, therefore that numberhing done by the Principal Collector or the Chief Secretary amounted to a holding out by the Crown that the Principal Collector had the right to enter into a companytract to sell the goods which are subject matter of this action. In Administrative Law by Wade, 6th Edition at page 385 it is stated thus If the force of law is given to a ruling from an official merely because it is wrong, the official who has number legal power is in effect substituted for the proper authority , which is forced to accept what it companysiders a bad decision. To legitimate ultra vires acts in this way cannot be sound policy, being a negation of the fundamental cannons of administrative law. Thus we have numberhesitation to hold that before making the public authority responsible for acts of its subordinate, it must be established that the subordinate officer did in fact make the representation and as a fact. is companypetent to make a binding promise on behalf of the public authority or the Government, ultra vires acts do number bind the authority and insistence to abide by the said ultra vires promise would amount to putting premium and legitimacy to ultra vires acts of subordinate, officers. It is seen from the record that the Estate Manager is merely an intermediary to companylect the material between the respondent Port Trust and its tenants and to place the material for companysideration .to the Board. Thereby the Estate Manager is number clothed with any authority much less even ostensible authority to create a promise so as to bind the respondent, that the respondent would allot the rooms on reconstruction to the tenants. The promise by him is an ultra vires act, though companyditional and, therefore, it does number bind the respondent. Though the executive necessity has number been satisfactorily established, we hold that the doctrine of promissory estoppel in the light of the above facts cannot be extended in favour of the appellant and other tenants. Sri Tunara further submitted that the tenant did number derive title, namely, lease-hold right from the respondent Port Trust under the Central Act. That the tenant disputed the title and it is a sufficient defence under the explanation to section 43 to number suit the respondent in the summary proceeding. It was open to the respondent to file a regular suit. The Small Cause Court ought to have rejected the application on that ground and the High Court would have gone into the question. It being a pure question of law, this companyrt may permit the appellant to argue on the point for the first time in this Court. It is undoubtedly true as held by catena of decisions of this Court that a pure question of law, untraveled by questions of fact, which goes to the roots of the jurisdiction. companyld be permitted to be raised for the first time in an appeal under Art. 136 of the Constitution. We are afraid. we cannot permit the appellant to raise this point for the following reasons Firstly, except making a bald averment in the written statement that the suit is number maintainable numberhing has been pleaded in detail in the written statement. Admittedly this point was neither taken in the writ petition number argued in the High Court. It is number even raised in the grounds of appeal in this Court number even in points raised in the synopsis of the case, It is stated that remotely it was raised in the rejoinder. Since it is a mixed question of facts and law and number being a pure question of law, we cannot permit to raise the point for the first time, that too, when it would prejudice the respondent of their case at this stage. We accordingly decline to go into the question. We would also straighten the record and state that the appellants raised in the writ petition the vires of Sections 2, 3 and 4 of the Maharashtra Amending Act, 1963 introducing Sec. 42 A in Chapter VII of the Presidency Small Cause Courts Act and deleting Sections 45 to 47 from the Principal Act and of an amended Sec. 49 thereof as well as Sec. 46 2 of the Presidency Small Cause Courts Act as amended by Maharashtra Amendment Act of 1976 as offending Art. 14 of the Constitution, and unsuccessfully argued before the Division Bench of the High Court same point was raised in the grounds of appeal in this companyrt. Though the appeal was argued for three days, Mr. Tunara did number argue this point across the Bar, number we had the advantage of hearing the learned Solicitor General. Even in a written brief running into 44 pages submitted by the companynsel, he did number deal with this point. The companynsel, after arguing the two points dealt with earlier, has devoted his time on the question of jurisdiction of the trial companyrt under Sec. 41, despite our repeatedly reminding him that this point was neither raised, number argued in the High Court, At the end he stated that he had elaborately argued the point of vires before the Single Judge and the Division Bench and except repetition of the same once over, he companyld do numberbetter by-further arguing here. Therefore, this Court companyld go through the judgment and deal with the point. We deprecate this practice. When a companystitutional question has been raised and does arise for companysideration, unless there is a full-dressed argument addressed by either side before this companyrt numbersatisfactory resolution companyld be made. Mere paraphrasing the judgment of the High Court in particular when it relates to the local laws is numberproper decision making. Therefore, after giving our anxious companysideration, we, with great anguish. decline to go into the point. Except these. numberother points have been argued. Accordingly we do number find any merit in the appeal. The appeal is dismissed. but in the circumstances without companyts.

Case C-346/06 Dirk Rüffert, in his capacity as liquidator of the assets of Objekt und Bauregie GmbH & Co. KG v Land Niedersachsen (Reference for a preliminary ruling from the Oberlandesgericht Celle) (Article 49 EC – Freedom to provide services – Restrictions – Directive 96/71/EC – Posting of workers in the context of the provision of services – Procedures for the award of public works contracts – Social protection of workers) Summary of the Judgment 1. Freedom to provide services – Posting of workers in the framework of the provision of services – Directive 96/71 (European Parliament and Council Directive 96/71, Art. 3(1) and (8)) 2. Freedom to provide services – Posting of workers in the framework of the provision of services – Directive 96/71 (European Parliament and Council Directive 96/71, Art. 3) 3. Freedom to provide services – Posting of workers in the framework of the provision of services – Directive 96/71 (European Parliament and Council Directive 96/71) 4. Freedom to provide services – Restrictions – Posting of workers in the framework of the provision of services (Art. 49 EC; European Parliament and Council Directive 96/71, Art. 3(1)) 1. Legislation requiring the contracting authority to designate as contractors for public works contracts only contractors which, when submitting their tenders, agree in writing to pay their employees, in return for performance of the services concerned, at least the wage provided for in the collective agreement in force at the place where those services are performed, without that collective agreement being capable of being treated as universally applicable, does not fix a rate of pay according to one of the procedures laid down in the first and second indents of the first subparagraph of Article 3(1) and in the second subparagraph of Article 3(8) of Directive 96/71 concerning the posting of workers in the framework of the provision of services. Therefore, such a rate of pay cannot be considered to constitute a minimum rate of pay within the meaning of Article 3(1)(c) of Directive 96/71 which Member States are entitled to impose, pursuant to that directive, on undertakings established in other Member States, in the framework of the trans‑national provision of services. (see paras 26, 30‑31) 2. Article 3(7) of Directive 96/71 concerning the posting of workers in the framework of the provision of services cannot be interpreted as allowing the host Member State to make the provision of services in its territory conditional on the observance of terms and conditions of employment which go beyond the mandatory rules for minimum protection. As regards the matters referred to in Article 3(1), first subparagraph, (a) to (g), Directive 96/71 expressly lays down the degree of protection for workers of undertakings established in other Member States who are posted to the territory of the host Member State which the latter State is entitled to require those undertakings to observe. Therefore – without prejudice to the right of undertakings established in other Member States to sign of their own accord a collective labour agreement in the host Member State, in particular in the context of a commitment made to their own posted staff, the terms of which might be more favourable – the level of protection which must be guaranteed to workers posted to the territory of the host Member State is limited, in principle, to that provided for in Article 3(1), first subparagraph, (a) to (g), of Directive 96/71, unless, pursuant to the law or collective agreements in the Member State of origin, those workers already enjoy more favourable terms and conditions of employment as regards the matters referred to in that provision. (see paras 33‑34) 3. A Member State is not entitled to impose, pursuant to Directive 96/71, on undertakings established in other Member States, a rate of pay provided for by a collective agreement in force at the place where the services concerned are performed and not declared to be of general application, by requiring, by a measure of a legislative nature, the contracting authority to designate as contractors for public works contracts only contractors which, when submitting their tenders, agree in writing to pay their employees, in return for performance of the services concerned, at least the wage provided for in the collective agreement. (see para. 35) 4. Directive 96/71 concerning the posting of workers in the framework of the provision of services, read in the light of Article 49 EC, precludes an authority of a Member State from adopting a measure of a legislative nature requiring the contracting authority to designate as contractors for public works contracts only contractors which, when submitting their tenders, agree in writing to pay their employees, in return for performance of the services concerned, at least the wage provided for in the collective agreement in force at the place where those services are performed, where that remuneration was not determined by one of the means laid down in Article 3(1) and (8) of the directive. By requiring undertakings performing public works contracts and, indirectly, their subcontractors to apply the minimum wage laid down by such a collective agreement, such legislation may impose on service providers established in another Member State where minimum rates of pay are lower an additional economic burden that may prohibit, impede or render less attractive the provision of their services in the host Member State. Therefore, such a measure is capable of constituting a restriction within the meaning of Article 49 EC. Such a restriction cannot be considered to be justified by the objective of ensuring the protection of workers inasmuch as the rate of pay fixed by such a collective agreement is applicable, as a result of the legislation at issue, only to a part of the construction sector, since, first, that legislation applies solely to public contracts and not to private contracts and, second, that collective agreement has not been declared universally applicable, and inasmuch as there is no evidence to support the conclusion that the protection resulting from such a rate of pay is necessary for a construction sector worker only when he is employed in the context of a public works contract but not when he is employed in the context of a private contract. For the same reasons, the restriction also cannot be considered to be justified by the objective of ensuring protection for independence in the organisation of working life by trade unions. (see paras 36‑43, operative part) JUDGMENT OF THE COURT (Second Chamber) 3 April 2008 (*) (Article 49 EC – Freedom to provide services – Restrictions –Directive 96/71/EC – Posting of workers in the context of the provision of services – Procedures for the award of public works contracts – Social protection of workers) In Case C‑346/06, REFERENCE for a preliminary ruling under Article 234 EC by the Oberlandesgericht Celle (Germany), made by decision of 3 August 2006, received at the Court on 11 August 2006, in the proceedings Dirk Rüffert, in his capacity as liquidator of the assets of Objekt und Bauregie GmbH & Co. KG, v Land Niedersachsen, THE COURT (Second Chamber), composed of C.W.A. Timmermans (Rapporteur), President of the Chamber, J. Makarczyk, P. Kūris, J.‑C. Bonichot and C. Toader, Judges, Advocate General: Y. Bot, Registrar: B. Fülöp, Administrator, having regard to the written procedure and further to the hearing on 5 July 2007, after considering the observations submitted on behalf of: – Land Niedersachsen, by R. Thode, Rechtsanwalt, – the German Government, by M. Lumma, acting as Agent, – the Belgian Government, by A. Hubert, acting as Agent, – the Danish Government, by J. Bering Liisberg, acting as Agent, – the French Government, by G. de Bergues and O. Christmann, acting as Agents, – Ireland, by D. O’Hagan, acting as Agent, assisted by N. Travers, BL, and B. O’Moore, SC, – the Cypriot Government, by E. Neofitou, acting as Agent, – the Austrian Government, by M. Fruhmann, acting as Agent, – the Polish Government, by E. Ośniecka‑Tamecka and M. Szymańska, acting as Agents, and by A. Dzięcielak, expert, – the Finnish Government, by E. Bygglin, acting as Agent, – the Norwegian Government, by A. Eide and E. Sivertsen, acting as Agents, – the Commission of the European Communities, by E. Traversa and C. Ladenburger, acting as Agents, after hearing the Opinion of the Advocate General at the sitting on 20 September 2007, gives the following Judgment 1 This reference for a preliminary ruling concerns the interpretation of Article 49 EC. 2 The reference has been made in the context of proceedings between Mr Rüffert, acting in his capacity as liquidator of the assets of Objekt und Bauregie GmbH & Co. KG (‘Objekt und Bauregie’), and Land Niedersachsen (the Land of Lower Saxony), concerning the termination of a works contract which had been concluded between the Land and Objekt und Bauregie. Legal context Community legislation 3 Directive 96/71/EC of the European Parliament and of the Council of 16 December 1996 concerning the posting of workers in the framework of the provision of services (OJ 1997 L 18, p. 1), provides in Article 1, entitled ‘Scope’: ‘1. This Directive shall apply to undertakings established in a Member State which, in the framework of the transnational provision of services, post workers, in accordance with paragraph 3, to the territory of a Member State. … 3. This Directive shall apply to the extent that the undertakings referred to in paragraph 1 take one of the following transnational measures: (a) post workers to the territory of a Member State on their account and under their direction, under a contract concluded between the undertaking making the posting and the party for whom the services are intended, operating in that Member State, provided there is an employment relationship between the undertaking making the posting and the worker during the period of posting; …’ 4 Under Article 3 of Directive 96/71, entitled ‘Terms and conditions of employment’: ‘1. Member States shall ensure that, whatever the law applicable to the employment relationship, the undertakings referred to in Article 1(1) guarantee workers posted to their territory the terms and conditions of employment covering the following matters which, in the Member State where the work is carried out, are laid down: – by law, regulation or administrative provision, and/or – by collective agreements or arbitration awards which have been declared universally applicable within the meaning of paragraph 8, in so far as they concern the activities referred to in the Annex: … (c) the minimum rates of pay, including overtime rates; this point does not apply to supplementary occupational retirement pension schemes; … For the purposes of this Directive, the concept of minimum rates of pay referred to in paragraph 1(c) is defined by the national law and/or practice of the Member State to whose territory the worker is posted. … 7. Paragraphs 1 to 6 shall not prevent application of terms and conditions of employment which are more favourable to workers. … 8. “Collective agreements or arbitration awards which have been declared universally applicable” means collective agreements or arbitration awards which must be observed by all undertakings in the geographical area and in the profession or industry concerned. In the absence of a system for declaring collective agreements or arbitration awards to be of universal application within the meaning of the first subparagraph, Member States may, if they so decide, base themselves on: – collective agreements or arbitration awards which are generally applicable to all similar undertakings in the geographical area and in the profession or industry concerned, and/or – collective agreements which have been concluded by the most representative employers’ and labour organisations at national level and which are applied throughout national territory, provided that their application to the undertakings referred to in Article 1(1) ensures equality of treatment on matters listed in the first subparagraph of paragraph 1 of this Article between those undertakings and the other undertakings referred to in this subparagraph which are in a similar position. …’ The national legislation 5 The Law of Land Niedersachsen on the award of public contracts (Landesvergabegesetz Nds., ‘the Landesvergabegesetz’) contains provisions on the award of public contracts in so far as they have a minimum value of EUR 10 000. The preamble to the Law states: ‘The Law counteracts distortions of competition which arise in the field of construction and local public transport services resulting from the use of cheap labour and alleviates burdens on social security schemes. It provides, to that end, that public contracting authorities may award contracts for building works and local public transport services only to undertakings which pay the wage laid down in the collective agreements at the place where the service is provided. …’ 6 Under Paragraph 3(1) of the Landesvergabegesetz, headed ‘Declaration that the collective agreements will be complied with’: ‘Contracts for building services shall be awarded only to undertakings which, when lodging a tender, undertake in writing to pay their employees, when performing those services, at least the remuneration prescribed by the collective agreement at the place where those services are performed and at the time prescribed by the collective agreement. For the purposes of the first sentence, the term “services” means services provided by the principal contractor and by subcontractors. The first sentence shall also apply to the award of transport services in local public transport.’ 7 Paragraph 4(1) of the Law, headed ‘Use of subcontractors’, provides: ‘The contractor may assign to subcontractors services for which his establishment is set up only where the contracting authority has given written consent in a given case. The tenderers are required at the stage they lodge their tenders to state which services are to be devolved to subcontractors. In so far as services are assigned to subcontractors, the contractor must also undertake to impose on the subcontractors the obligations laid down in Paragraphs 3, 4 and 7(2) applicable to contractors and to monitor compliance with these obligations by the subcontractors.’ 8 Paragraph 6 of the Law, headed ‘Proof’, provides: ‘(1) A tender shall be excluded from assessment where the tenderer fails to produce the following documents: … 3. a declaration that the collective agreements will be complied with, pursuant to Paragraph 3. … (2) Where the performance of part of a contract is to be assigned to a subcontractor, the proof referred to in subparagraph (1) relating to the subcontractor must also be furnished when the contract is awarded.’ 9 Paragraph 8 of the Landesvergabegesetz, headed ‘Penalties’, provides: ‘(1) In order to ensure compliance with the obligations under Paragraphs 3, 4 and 7(2), public contracting authorities shall agree with the contractor for each case of culpable non-fulfilment a contractual penalty of 1%, and in the case of several cases of non-fulfilment a contractual penalty of up to 10%, of the contract value. The contractor shall be obliged to pay a contractual penalty under the first sentence also in the event that there is non‑fulfilment on the part of a subcontractor used by it or a subcontractor used by that subcontractor, unless the contractor was not aware or could not have been aware of the non-fulfilment. Where the contractual penalty imposed is disproportionately high, the contracting authority may reduce it to the appropriate amount at the request of the contractor. (2) The public contracting authorities shall agree with the contractor that failure to satisfy the requirements referred to in Paragraph 3 by the contractor or his subcontractors and any non-fulfilment stemming from gross negligence or repeated non-fulfilment of the obligations laid down in Paragraphs 4 and 7(2) will entitle the contracting authority to terminate the contract without notice. (3) Where an undertaking is proved to have failed to fulfil its obligations under this Law as a result, at least, of gross negligence or on a repeated basis, the public contracting authorities may exclude it from the award of public contracts within their field of competence for a period of up to one year. …’ The main proceedings and the question referred for a preliminary ruling 10 According to the order for reference, in autumn 2003, following a public invitation to tender, Land Niedersachsen awarded Objekt und Bauregie a contract for the structural work in the building of Göttingen‑Rosdorf prison. The value of the contract was EUR 8 493 331 net of value added tax. The contract contained a declaration regarding compliance with the collective agreements and, more specifically, with that regarding payment to employees employed on the building site of at least the minimum wage in force at the place where those services were to be performed pursuant to the collective agreement mentioned in the list of sample collective agreements under No 1 ‘Buildings and public works’ (‘the “Buildings and public works” collective agreement’). 11 Objekt und Bauregie used as a subcontractor an undertaking established in Poland. In summer 2004 this undertaking came under suspicion of having employed workers on the building site at a wage below that provided for in the ‘Buildings and public works’ collective agreement. After investigations had commenced, both Objekt und Bauregie and Land Niedersachsen terminated the contract for work which they had concluded with one another. The latter based the termination inter alia on the fact that Objekt und Bauregie had failed to fulfil its contractual obligation to comply with the collective agreement. A penalty notice was issued against the person primarily responsible at the undertaking established in Poland, accusing him of paying 53 workers engaged on the building site only 46.57% of the minimum wage laid down. 12 At first instance, the Landgericht Hannover (Regional Court, Hanover) held that Objekt und Bauregie’s outstanding claim under the contract for work was offset in full by the contractual penalty of EUR 84 934.31 (1% of the amount of the contract), in favour of Land Niedersachsen. It dismissed the remainder of that undertaking’s action. 13 The case having come before it on appeal, the Oberlandesgericht Celle (Higher Regional Court, Celle) considers that the resolution of the dispute turns on whether it is precluded from applying the Landesvergabegesetz, in particular Paragraph 8(1), on the ground that it is incompatible with the freedom to provide services laid down in Article 49 EC. 14 In that regard, the national court notes that the obligations to comply with the collective agreements mean that construction undertakings from other Member States must adapt the remuneration they pay to their workers to the normally higher level in force in the place in the Federal Republic of Germany where the contract is to be performed. Such a requirement causes those undertakings to lose the competitive advantage which they enjoy by reason of their lower wage costs. Consequently, the obligation to comply with the collective agreements constitutes an impediment to market access for persons or undertakings from Member States other than the Federal Republic of Germany. 15 In addition, the national court is uncertain as to whether the requirement to comply with the collective agreements is justified by overriding reasons related to the public interest. More specifically, such a requirement goes beyond what is necessary for the protection of workers. What is necessary for the protection of workers is defined by the mandatory minimum wage which results from the application, in Germany, of the Law on the posting of workers (Arbeitnehmer‑Entsendegesetz) of 26 February 1996 (BGBl. 1996 I, p. 227, ‘the AEntG’). In the case of foreign workers, the obligation to comply with the collective agreements does not enable them to achieve genuine equality of treatment with German workers but rather prevents workers originating in a Member State other than the Federal Republic of Germany from being employed in Germany because their employer is unable to exploit his cost advantage with regard to the competition. 16 As it took the view that the resolution of the dispute before it required the interpretation of Article 49 EC, the Oberlandesgericht Celle decided to stay the proceedings and to refer the following question to the Court of Justice for a preliminary ruling: ‘Does it amount to an unjustified restriction on the freedom to provide services under the EC Treaty if a public contracting authority is required by statute to award contracts for building services only to undertakings which, when lodging a tender, undertake in writing to pay their employees, when performing those services, at least the remuneration prescribed by the collective agreement in force at the place where those services are performed?’ The question referred for a preliminary ruling 17 By its question, the national court asks essentially whether, in a situation such as that in the main proceedings, Article 49 EC precludes an authority of a Member State from adopting a measure of a legislative nature requiring the contracting authority to designate as contractors for public works contracts only contractors which, when submitting their tenders, agree in writing to pay their employees, in return for performance of the services concerned, at least the wage provided for in the collective agreement in force at the place where those services are performed. 18 As suggested also by a number of the Governments which have submitted observations to the Court, as well as by the Commission of the European Communities, in order to give a useful answer to the national court, it is necessary to take into consideration the provisions of Directive 96/71 when examining the question referred for a preliminary ruling (see, to that effect, Case C‑60/03 Wolff & Müller [2004] ECR I‑9553, paragraph 27, and Case C‑275/06 Promusicae [2008] ECR I‑0000, paragraph 42). 19 As follows from Article 1(3)(a) thereof, Directive 96/71 applies, inter alia, to a situation in which an undertaking established in a Member State posts, in the framework of the transnational provision of services, workers on its account and under its direction to the territory of another Member State, under a contract concluded between the undertaking making the posting and the party for whom the services are intended, operating in the latter Member State, provided that an employment relationship exists between that undertaking and the employee during the period of the posting. Such appears essentially to be the situation in the main proceedings. 20 In addition, as the Advocate General stated at point 64 of his Opinion, the mere fact that the objective of the legislation of a Member State, in this case the Landesvergabegesetz, is not to govern the posting of workers does not have the effect of precluding a situation such as that in the main proceedings from coming within the scope of Directive 96/71. 21 Pursuant to the first and second indents of the first subparagraph of Article 3(1) of Directive 96/71, with regard to the provision of transnational services in the construction sector, posted workers are to be guaranteed terms and conditions of employment concerning the matters referred to under subparagraphs (a) to (g) of that provision, which include, under subparagraph (c), minimum rates of pay. Those terms and conditions of employment are fixed by laws, regulations or administrative provisions and/or by collective agreements or arbitration awards which have been declared universally applicable. According to the first subparagraph of Article 3(8) of that directive, the collective agreements or arbitration awards within the meaning of that provision are those which must be observed by all undertakings in the geographical area and in the profession or industry concerned. 22 The second subparagraph of Article 3(8) of Directive 96/71 gives Member States in addition the possibility, in the absence of a system for declaring collective agreements or arbitration awards to be of universal application, of basing themselves on collective agreements or arbitration awards which are generally applicable to all similar undertakings in the profession or industry concerned or agreements which have been concluded by the most representative employers’ and labour organisations at national level and which are applied throughout national territory. 23 It is necessary to examine whether the rate of pay laid down by a measure such as that at issue in the main proceedings – consisting of a legislative measure adopted by Land Niedersachsen concerning public contracts and seeking to make a collective agreement providing for the rate of pay in question binding, in particular on an undertaking such as the subcontractor Objekt und Bauregie – was fixed in accordance with one of the procedures described in paragraphs 21 and 22 of this judgment. 24 First, a legislative measure such as the Landesvergabegesetz, which does not itself fix any minimum rates of pay, cannot be considered to be a law, within the meaning of the first indent of the first subparagraph of Article 3(1) of Directive 96/71, which fixed a minimum rate of pay, as provided in Article 3(1)(c) of that directive. 25 Second, as to whether a collective agreement such as that at issue in the main proceedings constitutes a collective agreement which has been declared universally applicable within the meaning of the second indent of the first subparagraph of Article 3(1) of Directive 96/71, read in conjunction with the first subparagraph of Article 3(8) of that directive, it is apparent from the case‑file submitted to the Court that the AEntG, which seeks to transpose Directive 96/71, extends the application of provisions on minimum wages in collective agreements which have been declared universally applicable in Germany to employers established in another Member State which post their workers to Germany. 26 In answer to a written question from the Court, Land Niedersachsen confirmed that the ‘Buildings and public works’ collective agreement is not a collective agreement which has been declared universally applicable within the meaning of the AEntG. In addition, the case‑file submitted to the Court does not contain any evidence to support the conclusion that that agreement is nevertheless capable of being treated as universally applicable within the meaning of the second indent of the first subparagraph of Article 3(1) of Directive 96/71, read in conjunction with the first subparagraph of Article 3(8) of that directive. 27 Third, regarding the second subparagraph of Article 3(8) of Directive 96/71, it is clear from the actual wording of that provision that it is applicable only where there is no system for declaring collective agreements to be of universal application, which is not the case in the Federal Republic of Germany. 28 In addition, a collective agreement such as that at issue in the main proceedings cannot, in any event, be considered to constitute a collective agreement within the meaning of the second subparagraph of Article 3(8) and, more specifically, to be a collective agreement, as mentioned in the first indent to that provision, ‘generally applicable to all similar undertakings in the geographical area and in the profession or industry concerned’. 29 In a context such as that in the main proceedings, the binding effect of a collective agreement such as that at issue here covers only a part of the construction sector falling within the geographical area of that agreement, since, first, the law which gives it such an effect applies only to public contracts and not to private contracts and, second, the collective agreement has not been declared universally applicable. 30 It follows that a measure such as that at issue in the main proceedings does not fix a rate of pay according to one of the procedures laid down in the first and second indents of the first subparagraph of Article 3(1) and in the second subparagraph of Article 3(8) of Directive 96/71. 31 Therefore, such a rate of pay cannot be considered to constitute a minimum rate of pay within the meaning of Article 3(1)(c) of Directive 96/71 which Member States are entitled to impose, pursuant to that directive, on undertakings established in other Member States, in the framework of the transnational provision of services (see, to that effect, Case C‑341/05 Laval un Partneri [2007] ECR I‑0000, paragraphs 70 and 71). 32 Likewise, such a rate of pay cannot be considered to be a term and condition of employment which is more favourable to workers within the meaning of Article 3(7) of Directive 96/71. 33 More specifically, that provision cannot be interpreted as allowing the host Member State to make the provision of services in its territory conditional on the observance of terms and conditions of employment which go beyond the mandatory rules for minimum protection. As regards the matters referred to in Article 3(1), first subparagraph, (a) to (g), Directive 96/71 expressly lays down the degree of protection for workers of undertakings established in other Member States who are posted to the territory of the host Member State which the latter State is entitled to require those undertakings to observe. Moreover, such an interpretation would amount to depriving the directive of its effectiveness (see Laval un Partneri, paragraph 80). 34 Therefore – without prejudice to the right of undertakings established in other Member States to sign of their own accord a collective labour agreement in the host Member State, in particular in the context of a commitment made to their own posted staff, the terms of which might be more favourable – the level of protection which must be guaranteed to workers posted to the territory of the host Member State is limited, in principle, to that provided for in Article 3(1), first subparagraph, (a) to (g), of Directive 96/71, unless, pursuant to the law or collective agreements in the Member State of origin, those workers already enjoy more favourable terms and conditions of employment as regards the matters referred to in that provision (Laval un Partneri, paragraph 81). However, such does not appear to be the case in the main proceedings. 35 It follows that a Member State is not entitled to impose, pursuant to Directive 96/71, on undertakings established in other Member States, by a measure such as that at issue in the main proceedings, a rate of pay such as that provided for by the ‘Buildings and public works’ collective agreement. 36 That interpretation of Directive 96/71 is confirmed by reading it in the light of Article 49 EC, since that directive seeks in particular to bring about the freedom to provide services, which is one of the fundamental freedoms guaranteed by the Treaty. 37 As the Advocate General stated at point 103 of his Opinion, by requiring undertakings performing public works contracts and, indirectly, their subcontractors to apply the minimum wage laid down by the ‘Buildings and public works’ collective agreement, a law such as the Landesvergabegesetz may impose on service providers established in another Member State where minimum rates of pay are lower an additional economic burden that may prohibit, impede or render less attractive the provision of their services in the host Member State. Therefore, a measure such as that at issue in the main proceedings is capable of constituting a restriction within the meaning of Article 49 EC. 38 In addition, contrary to the contentions of Land Niedersachsen and a number of the Governments which submitted observations to the Court, such a measure cannot be considered to be justified by the objective of ensuring the protection of workers. 39 As stated at paragraph 29 of this judgment, since this case concerns the rate of pay fixed by a collective agreement such as that at issue in the main proceedings, that rate is applicable, as a result of a law such as the Landesvergabegesetz, only to a part of the construction sector falling within the geographical area of that agreement, since, first, that legislation applies solely to public contracts and not to private contracts and, second, that collective agreement has not been declared universally applicable. 40 The case‑file submitted to the Court contains no evidence to support the conclusion that the protection resulting from such a rate of pay – which, moreover, as the national court also notes, exceeds the minimum rate of pay applicable pursuant to the AEntG – is necessary for a construction sector worker only when he is employed in the context of a public works contract but not when he is employed in the context of a private contract. 41 For the same reasons as those set out at paragraphs 39 and 40 of this judgment, the restriction also cannot be considered to be justified by the objective of ensuring protection for independence in the organisation of working life by trade unions, as the German Government contends. 42 Lastly, with regard to the objective of ensuring the financial balance of the social security systems, also raised by the German Government in support of its contention that the effectiveness of the social security system depends on the level of workers’ salaries, it does not appear from the case‑file submitted to the Court that a measure such as that at issue in the main proceedings is necessary in order to avoid the risk of seriously undermining the financial balance of the social security system, an objective which the Court has recognised cannot be ruled out as a potential overriding reason in the general interest (see, inter alia, Case C‑372/04 Watts [2006] ECR I‑4325, paragraph 103 and the case‑law cited). 43 Having regard to all of the foregoing, the answer to the question referred must be that Directive 96/71, interpreted in the light of Article 49 EC, precludes an authority of a Member State, in a situation such as that at issue in the main proceedings, from adopting a measure of a legislative nature requiring the contracting authority to designate as contractors for public works contracts only those undertakings which, when submitting their tenders, agree in writing to pay their employees, in return for performance of the services concerned, at least the remuneration prescribed by the collective agreement in force at the place where those services are performed. Costs 44 Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable. On those grounds, the Court (Second Chamber) hereby rules: Directive 96/71/EC of the European Parliament and of the Council of 16 December 1996 concerning the posting of workers in the framework of the provision of services, interpreted in the light of Article 49 EC, precludes an authority of a Member State, in a situation such as that at issue in the main proceedings, from adopting a measure of a legislative nature requiring the contracting authority to designate as contractors for public works contracts only those undertakings which, when submitting their tenders, agree in writing to pay their employees, in return for performance of the services concerned, at least the remuneration prescribed by the collective agreement the minimum wage in force at the place where those services are performed. [Signatures] * Language of the case: German.

O R D E R CIVIL APPEAL NO.2186 OF 2008 Arising out of S.L.P. C No.4260 OF 2007 Heard learned companynsel for the parties. Leave granted. Though the case was placed under the heading Incomplete After Notice Matters, but both the parties agreed that the matter should be taken up and finally disposed of. It appears that the District Consumer Disputes Redressal Forum for short, District Forum directed the respondent to allot an alternative plot and to refund the balance amount to the appellants and pursuant to the said order, the plot was alloted and possession thereof was made over to the appellants and the amount was refunded. It appears that, in the meantime, an appeal was filed before the State Consumer Disputes Redressal Commission for short, State Commission challenging the order of the District Forum which sets aside the order passed by the District Forum without taking into companysideration the fact that the order of 2/- - 2 - the District Forum had been already implemented. The said order has been companyfirmed by the National Consumer Disputes Redressal Commission for short, National Commission . Hence, this appeal by special leave.

Opinion of Mr Advocate General Léger delivered on 5 November 1996. - Commission of the European Communities v Italian Republic. - Failure of a Member State to fulfil its obligations - Directive 91/271/EEC - Urban waste water treatment. - Case C-302/95. European Court reports 1996 Page I-06765 Opinion of the Advocate-General 1 In the present action, brought under Article 169 of the EC Treaty, the Commission maintains that, by not adopting the laws, regulations and administrative provisions necessary to comply with Council Directive 91/271/EEC of 21 May 1991 concerning urban waste water treatment (1) (`the Directive') or, in any event, by not notifying the Commission thereof, the Italian Republic has failed to fulfil its obligations under that Directive and under the EC Treaty. The Commission also asks that the Italian Government be ordered to pay the costs. 2 Article 19 of the Directive provides that the Member States are to bring into force the laws, regulations and administrative provisions necessary to comply with it no later than 30 June 1993 and immediately to inform the Commission thereof. 3 On 9 August 1993, having received no notification of measures for transposing the Directive into Italian law and possessing no other information to support a conclusion that the Italian Republic had complied with its obligations, the Commission initiated the infringement procedure by letter of formal notice. It was made clear in that letter that, even if the Italian Government considered the rules of domestic law already in force to be in conformity with the Directive, it was still under a duty to communicate them to the Commission. 4 Since there was no reply to the letter of formal notice, the Commission sent the Italian Republic a reasoned opinion on 11 January 1995. The Italian Republic neither responded to the reasoned opinion nor adopted the measures necessary to transpose the Directive into domestic law. Consequently, on 25 September 1995, the Commission decided to bring the present action. 5 In its defence, the Italian Government contends that the matters covered by the Directive are governed in Italy by Law No 319 of 10 May 1976 (2) (rules for the protection of water from pollution; hereinafter `Law 319/76'), which incorporates the main relevant measures. The Italian Government points out that the provisions of Law 319/76 are implemented through rules adopted by the Regions, which have both legislative and administrative competence in matters concerning water. While admitting that the Directive has not yet been fully transposed, particularly as regards the requirements laid down in its annexes, the Italian Government states that full transposition will be brought about `as quickly as possible' by the adoption of a legislative decree. Pending definitive implementation of the Directive, the Italian Government has asked the Regions - by Decree Law No 79 of 17 March 1995 (3) (`Decree Law 79/95') - to comply with the principles and criteria laid down by the Directive in respect of rules requiring amendment (particularly the implementing rules concerning the discharge of waste water from public drains and the discharge from private installations of waste water which does not go into the public drains). In those circumstances, the Italian Republic considers that it has, at least partially, fulfilled its obligation to transpose the Directive and undertakes to ensure that it is fully transposed as soon as possible. 6 In its reply, the Commission argues that Law 319/76 and Decree Law 79/95 do not constitute measures transposing Directive 91/271. Law 319/76, as amended, merely lays down general criteria and principles in accordance with which the Regions are asked to enact legislation. Moreover, the regional rules implementing Law 319/76 have not been communicated to the Commission and it therefore possesses no evidence that the Italian Republic has complied with the Directive. That is why it continues to press its application to the Court. 7 It is not disputed that when the period prescribed in Directive 91/271 expired, the Italian Government had not adopted the laws, regulations and administrative provisions necessary to comply with that Directive. Nor had it made any communication to the Commission. 8 It should therefore be held that the Italian Government has failed to fulfil its obligations under Article 19 of the Directive. 9 Furthermore, as the Commission very rightly pointed out, the arguments put forward by the Italian Republic to justify the delay in adopting the required measures cannot be accepted. 10 According to established case-law of this Court, formal and procedural difficulties such as those relied on by the Italian Republic in order to justify the delay in adopting the legislative decree are irrelevant. The Court unfailingly holds that arguments based on internal legal constraints are inadmissible: `a Member State may not plead provisions, practices or circumstances existing in its internal legal system in order to justify a failure to comply with the obligations and time-limits laid down in a directive'. (4) 11 Furthermore, by way of a minor point, the provisions of Decree Law 79/95, amending Decree Law 319/76, and providing that the Regions must comply with the principles and criteria laid down by Directive 91/271 in respect of rules requiring adjustment, cannot be construed as measures transposing that Directive. According to settled case-law, if domestic measures are to meet the fundamental requirements appropriate to transposition measures as such, they must give effect to the principles of publicity and legal certainty. For this reason, the Court has held that recommendations, opinions, memoranda and judicial decisions (5) cannot satisfy `the requirement for legal certainty, [namely] that individuals should have the benefit of a clear and precise legal situation enabling them to ascertain the full extent of their rights and, where appropriate, to rely on them before the national courts'. (6) 12 Accordingly, the action brought by the Commission should be upheld. 13 I therefore propose that the Court declare that, by not adopting the laws, regulations and administrative provisions necessary to comply with Council Directive 91/271/EEC of 21 May 1991 concerning urban waste water treatment, and by not notifying the Commission thereof within the period prescribed, the Italian Republic has failed to fulfil its obligations under Article 19 of that Directive. I further propose that the Italian Republic be ordered to pay the costs, in accordance with Article 69(2) of the Court's Rules of Procedure. (1) - OJ 1991 L 135, p. 40. (2) - GURI, 29 May 1976, No 141. (3) - GURI, 8 June 1995, No 132, p. 32. (4) - See one of the more recent judgments: C-236/95 Commission v Greece [1996] ECR I-4459, paragraph 18, or Case-312/95 Commission v Luxembourg [1996] ECR I-5143, paragraph 9. (5) - See Case C-236/95, cited in footnote 4, paragraph 12. (6) - Ibid., paragraph 13.

OPINION OF ADVOCATE GENERAL MENGOZZI delivered on 8 October 2014 ( ) Case C‑523/13 Walter Larcher v Deutsche Rentenversicherung Bayern Süd (Request for a preliminary ruling from the Bundessozialgericht (Germany)) ‛Reference for a preliminary ruling — Social security for migrant workers — Article 45 TFEU — Article 3(1) of Regulation (EEC) No 1408/71 — Old-age benefit — Principle of non-discrimination — Worker covered, in a Member State by the scheme of part-time work for older employees prior to retirement — Consideration for entitlement to benefits in another Member State’ I – Introduction 1. By this reference for a preliminary ruling, the Bundessozialgericht (Federal Social Court, Germany) seeks to ascertain, first, whether the principle of equal treatment precludes a national provision which lays down that an old-age pension following a period of part-time work for older employees can be granted only if that period of part-time work was pursued on the basis of the national provisions of the Member State awarding the pension and not on the basis of the provisions of the Member State within whose territory that period of part-time work was pursued. Secondly, and in the event that the answer to the first question is in the affirmative, the national court asks whether the principle of equal treatment requires the carrying out of a comparative examination of the conditions laid down by the provisions of the two Member States in question and, if that is the case, to what extent those conditions or, more generally, the schemes of part-time work for older employees of those two States must be similar or identical. 2. Those questions arise in the context of proceedings between Mr Larcher and the Deutsche Rentenversicherung Bayern Süd. Mr Larcher, an Austrian national, worked in Germany for a period of more than 29 years and then returned to work in Austria, where, after working full time, he decided to take advantage of part-time work for older employees, reducing his working hours by 60% of normal working time, in accordance with Austrian law. ( ) 3. In connection with the various periods worked in the course of his working life, Mr Larcher has, since 2006, been in receipt of an Austrian retirement pension known as an ‘early old-age pension by virtue of long insured periods’, and since 2009 he has received a German old-age pension known as an ‘old-age pension for the long-term insured’. Those two pensions are not the subject-matter of the dispute in the main proceedings. 4. The main proceedings, however, relate to the old-age pension granted after a period of part-time work for older employees, which Mr Larcher requested from the relevant German authorities in 2006. 5. That request was rejected by the Deutsche Rentenversicherung Bayern Süd on the grounds that the period of part-time work for older employees, which occurred between 1 March 2004 and 30 September 2006 in Austria, had not been pursued under the German provisions. When his administrative complaint was rejected, Mr Larcher brought the case before the German courts. However, both his application at first instance and his appeal were dismissed. In dismissing the appeal, the Bayrisches Landessozialgericht (Higher Social Court of Bavaria, Germany) relied on the fact that the applicant in the main proceedings did not fulfil the condition relating to the reduction in working time laid down by the German Law on part-time work for older employees (Altersteilzeitgesetz), ( ) namely that working time should be reduced to half of the hours worked up to that time, since Mr Larcher had reduced his working time by 60%, that is by more than the 50% required by the German legislation. 6. Consequently, Mr Larcher decided to lodge an appeal on a point of law (‘Revision’) before the Bundessozialgericht. 7. In support of his appeal, he maintains that the appellate court infringed the provisions of the German law on the reduction in working time by interpreting them in a way which is not in accordance with EU law. According to the applicant in the main proceedings, the interpretation made by the appellate court infringes the prohibition on discrimination on grounds of nationality and the principle of free movement. On the basis of the judgment in Öztürk, ( ) Mr Larcher takes the view that there is unjustified indirect discrimination in this case. 8. For its part, the national court observes that the questions raised in the main proceedings cannot be dealt with solely on the basis of the existing case-law. However, it states that, where a worker accepts a job in another Member State, it is likely that he will be penalised at the time of retirement because of the differences that exist between the laws which are applicable to him, compared to retired persons who have spent all of their working life in a single Member State. The national court takes the view that Articles 45 TFEU to 48 TFEU and Council Regulation (EEC) No 1408/71 of 14 June 1971 on the application of social security schemes to employed persons, to self-employed persons and to members of their families moving within the Community, as amended and updated by Regulation (EC) No 1992/2006 of the European Parliament and of the Council of 18 December 2006 ( ) should prevent obstacles to the free movement of migrant workers. In its view, such an obstacle could exist in this case. Finally, in examining the justification for such an obstacle, the national court, which is inclined to compare the schemes of part-time work for older employees of the two Member States in question, raises the question of the elements to be taken into account for that purpose. 9. It is against that background that the Bundessozialgericht decided to stay the proceedings and to refer the following questions to the Court of Justice for a preliminary ruling: ‘(1) Does the principle of [equal treatment] laid down in Article 39(2) EC (now Article 45(2) TFEU) and Article 3(1) of Regulation … No 1408/71 preclude a national provision under which it is a condition of entitlement to an old-age pension following part-time work for older employees that the part-time work for older employees was pursued under the legislation of that Member State, and not of another Member State? (2) If so, what requirements does the principle of equal treatment in Article 39(2) EC … and Article 3(1) of Regulation … No 1408/71 impose on the assimilation of part-time work for older employees completed under the legislation of the other Member State as a condition of entitlement to a national old-age pension? (a) Is a comparative examination of the conditions for part-time work for older employees needed? (b) If so, is it sufficient that the part-time work for older employees in both Member States is essentially the same in content, in terms of its functioning and structure? (c) Or must the conditions for part-time work for older employees in both Member States be identical in content?’ 10. Mr Larcher, the German Government and the European Commission submitted written observations on those questions. II – Analysis A – The schemes of part-time work for older employees in general and the first question referred 11. Faced with the rapidly ageing European population, the European Union and the Member States included among the aims of the various employment strategies launched since the early 2000s ( ) measures designed both to encourage ‘older’ workers to extend their active life and also to contribute towards attempts to ensure the viability of health and social security systems and pension schemes. ( ) 12. It is in that context, in particular, that a number of EU Member States have adopted schemes of part-time work for older employees. ( ) 13. The common feature of those schemes is to allow a gradual transition from an active life to retirement by means of a reduction in working time. ( ) Thus, workers who have reached a specified age may reduce their working time, for example by changing from a full-time job to a part-time job for the period up until their retirement, with compensation for the loss of earnings generally in the form of a pension or benefits provided by their employer or by an employment fund. ( ) Some of those schemes also have other objectives, such as the stability of the national social security system or, like the German and Austrian schemes which gave rise to the dispute in the main proceedings, combatting unemployment, since the working time made available by the person benefitting from part-time work for older employees allows a (young) job seeker or an apprentice to be recruited. ( ) 14. In Germany, where Mr Larcher unsuccessfully applied for payment of the pension following part-time work for older employees, that pension is made subject to fulfilment of the conditions laid down in Paragraph 237 of the Social Security Code, Book VI, (Sozialgesetzbuch Sechstes Buch, ‘the SGB VI’), which include the conditions of access to part-time work for older employees, including the condition relating to the reduction in working time by 50% of the weekly time worked up until then. 15. It is clear from the information in the order for reference, first, that Mr Larcher fulfils all the conditions laid down in Paragraph 237 of the SGB VI, except for that of reducing working time to 50% during the period of part-time work for older employees, since, as has already been pointed out, Mr Larcher reduced his working time to 40%, in accordance with Austrian law, and, secondly, that a period of part-time work for older employees pursued in another Member State does not constitute an obstacle to payment, by the German social insurance funds, of the pension relating to part-time work for older employees provided for by the SGB VI, provided that the conditions of the SGB VI are fulfilled. 16. The purpose of the first question referred for a preliminary ruling is specifically to establish whether freedom of movement for workers, as laid down by Article 45 TFEU, rather than the principle of equal treatment, precludes a requirement by a Member State that all of the conditions laid down by its national legislation for entitlement to that pension must be satisfied in order for an old-age pension following part-time work for older employees to be paid. 17. Mr Larcher and the Commission propose that that question be answered in the affirmative on the ground that such legislation constitutes indirect discrimination against migrant workers and, in any event, deters them from pursuing part-time work for older employees in other Member States. Essentially, by referring to the case which gave rise to the judgment in Öztürk (EU:C:2004:232) and, more generally, to the case-law of the Court relating to the assimilation of facts, those interested parties take the view that a Member State cannot, without infringing the right to freedom of movement, require that the conditions governing part-time work for older employees in the other Member State must be identical in content to those of the Member State from which the pension is sought in order for a migrant worker to be awarded a retirement pension following part-time work for older employees. 18. As for the German Government, it points out, primarily, that a worker who makes use of his freedom of movement must take into account the disadvantages of the disparity between the social security laws of the Member States. Nevertheless, it considers that, with regard to receipt of the pension, a Member State must not from the outset preclude the possibility that the period of part-time work for older employees may be pursued in another Member State which also has such a scheme of part-time work for older employees. In that case, the worker must be able to satisfy the conditions imposed by the Member State from which the pension is sought. 19. In so far as I am concerned, I take the view that the answer to be given should be confined to the relationship between the condition at issue in the main proceedings, namely the 50% reduction in working time laid down in Paragraph 237 of the SGB VI, and the freedom of movement for workers, since that condition must, in my view, be regarded as an obstacle to that freedom and must be considered disproportionate to the objectives pursued by the German legislature. 20. First of all, contrary to what Mr Larcher and the Commission maintain, the first question referred cannot, in my opinion, be resolved by applying the case-law relating to the assimilation of facts, in particular the judgment in Öztürk (EU:C:2004:232). 21. The concept of the assimilation of facts developed by that case-law is aimed essentially at ensuring that situations arising in a Member State are assessed in the same way as if they had arisen in the Member State in which they must take effect. ( ) 22. Developed largely in the context of the interpretation of Article 45 TFEU and/or Regulation No 1408/71, that case-law requires, in principle, that each Member State which makes the payment of social benefits subject to the completion by a worker, exclusively within its territory, of a period of insurance or a given reference period must recognise equivalent periods completed by that same worker within the territory of other Member States. 23. That was the solution specifically adopted by the Court in Öztürk. In that case, the Court considered that a Member State, in that case the Republic of Austria, could not make entitlement to an early old-age pension in the event of unemployment conditional upon fulfilment of the requirement that the person concerned (in that case a worker of Turkish nationality who had worked partly in Austria and in Germany before becoming unemployed in the latter Member State) has received, within a certain period prior to his application for the pension, unemployment insurance benefits from the first Member State alone. ( ) 24. Similarly, the Court has previously ruled that the free movement of workers precluded both the legislation of a Member State where it permits the reference period for entitlement to an invalidity pension to be prolonged, subject to certain conditions, but does not provide for the possibility of a prolongation where events or circumstances corresponding to the events or circumstances which would enable a prolongation to be granted occur in another Member State, ( ) and a Member State’s refusal to take into account, for the acquisition of the right to a pension, periods of employment completed by a person subject to a special scheme for civil servants or persons treated as such (in that case, a doctor in the Greek public sector, subject to a special scheme within the meaning of Regulation No 1408/71) in public hospitals in another Member State, where the relevant national legislation allows such periods to be taken into account if they have been completed in comparable establishments within that State. ( ) 25. In various situations, the Court has also held that it is contrary to the Treaties for a Member State not to take into consideration, for the purpose of the grant of an old-age pension, periods devoted to child-rearing completed in another Member State as though they had been completed in the territory of the first Member State. ( ) 26. That line of case-law could have been applicable to the main proceedings if, for example, this case were concerned with a situation in which Mr Larcher, in spite of fulfilling all the conditions laid down by the German legislation, including that concerning the 50% reduction in working time, had been refused the retirement pension following part-work for older employees on the ground that the period of part-time work for older employees had not been completed within German territory. 27. However, as I have already made clear, at least formally, on the one hand, the German legislation does not require, for the purpose of granting the pension, that the part-time work for older employees was completed in Germany and, on the other hand, Mr Larcher did not fulfil the condition, laid down by the German legislation, that his working time should be reduced by 50% during the part-time work for older employees pursued in Austria. 28. Accordingly, the fundamental question raised by the present case does not concern the assimilation of situations or circumstances arising in a Member State as if those situations and circumstances had arisen within the territory of the Member State to which an application has been made for a social security benefit for the purpose of fulfilling the conditions laid down by the legislation of the Member State in question. 29. Rather, it relates to the possible obligation on the part of a Member State, for the purposes of granting an old-age pension, to recognise as comparable to its own conditions the legal conditions laid down by another Member State allowing an identical period of part-time work for older employees to be completed. 30. In other words, the national court is raising a question concerning not the assimilation of factual situations, but the comparison of legal conditions. 31. That having been said, it is not disputed that the old-age pension following part-time work for older employees constitutes an old-age benefit within the meaning of Article 4(1)(c) of Regulation No 1408/71 and that, as the Court has accepted, in the absence of harmonisation at EU level, it is for the legislation of each Member State to determine the conditions for granting social security benefits. ( ) 32. However, that power must be exercised in compliance with EU law, in particular the provisions relating to the freedom of movement for workers. ( ) 33. It is appropriate, therefore, to verify whether the requirement under German legislation that a worker has reduced his working time by 50% during the period of part-time work for older employees completed in a Member State other than the Federal Republic of Germany, for the purposes of subsequently obtaining an old-age pension following part-time work for older employees in the latter State, is incompatible with Article 45 TFEU, since it is established that that requirement applies irrespective of the nationality of the worker in question. 34. According to the Court’s case-law, provisions which preclude or deter a national of a Member State from leaving his State of origin, and thus from exercising his right to freedom of movement, constitute an obstacle to that freedom even if they apply without regard to the nationality of the workers concerned. ( ) 35. As the German Government maintained with reference to the judgment in von Chamier-Glisczinski, it is true that, in the present state of development of EU law, the freedom of movement for workers does not extend to simple disparities in the national social security laws, the disadvantages of which must be borne by the persons who have decided to exercise their freedom of movement. ( ) 36. However, the present case differs from the case which led to the judgment in von Chamier-Glisczinski. 37. In that judgment, the Court found, first, that the situation in which Mrs von Chamier-Glisczinski found herself resulted from the combined application of two bodies of social security legislation, in as much as, she, a German national, was living in Austria and was seeking a care benefit in kind from the German authorities, whereas such a benefit did not exist in Austria and, secondly, that that situation would have been different if the Austrian legislation had made it possible to grant such a benefit in kind, so that that benefit would have been provided to the interested party by the Austrian authorities. ( ) 38. In the present case, by contrast, not only is there no information in the file to suggest that Mr Larcher applied to the German authorities for payment of the old-age pension following part-time work for older employees on the ground that such a pension does not exist in Austria, there is also no information to suggest that Mr Larcher’s situation would have been different if the Austrian legislation had been amended. 39. In fact, the condition at issue, namely the reduction in working time to 50% during the period of part-time work for older employees, is concerned less with a problem of coordination or of disparity between social security laws relating to old-age benefits than with the pursuit of transitional occupational activity prior to the start of retirement. 40. However, as regards the conditions relating to the pursuit of an occupational activity, the Court has already found that national provisions which ‘affect access of workers to the labour market’, ( ) including those which relate to the manner in which that activity is pursued, ( ) constitute an obstacle to freedom of movement for workers and not mere disadvantages. 41. In this case, there is little doubt that a national measure requiring a worker to pursue his occupational activity by working for half the time he previously worked, in order to be eligible subsequently for a pension following part-time work for older employees, constitutes both a manner in which that activity is pursued and, in particular with regard to older workers, a condition for accessing and remaining on the labour market. 42. In my opinion that measure is therefore likely to be covered by the concept of obstacle within the meaning of Article 45 TFEU, as interpreted by the Court. 43. It also seems likely to me to constitute an obstacle to freedom of movement for workers. 44. A person who has spent most of his working life in Germany, like Mr Larcher, and who would like to be eligible for a pension following part-time work for older employees would be deterred from leaving that Member State if he could pursue the period of part-time work for older employees only by reducing his working time by 50%, and thus would be unable to respond to offers of employment, even better paid employment, in other Member States which have a similar scheme but in which, as in Austria, the condition regarding the reduction in working time during part-time work for older employees may as a matter of law vary between 40 and 60% of normal working time. 45. Similarly, the condition at issue would be liable to deter an employer established in a Member State, other than the Federal Republic of Germany, which has a scheme of part-time work for older employees from taking on a national from the latter Member State in accordance with arrangements for reducing working time different from those required in Germany. 46. Therefore, at this stage, it is necessary to verify whether, in accordance with the Court’s case-law, such an obstacle may nevertheless be justified by the pursuit of an objective of general interest, it being understood that it must be such as to ensure achievement of that objective and not go beyond what is necessary for that purpose. ( ) 47. As I have pointed out in point 13 of this Opinion, and as the German Government stated in its written observations, the 50% reduction in working time during the period of part-time work for older employees, on the one hand, seeks to allow a transition by the worker to retirement and, on the other hand, pursues the objective of encouraging the recruitment of unemployed persons or apprentices to fill the working time made available by the person who benefits from the scheme of part-time work for older employees. 48. In itself, pursuit of those two objectives cannot be criticised. With respect to encouragement of recruitment in particular, the Court has already accepted that it constitutes a legitimate aim of social policy. ( ) 49. On the other hand, without there being any need to assess the suitability of the condition at issue for attaining the objectives pursued, it must be stated that that condition is disproportionate, as the German Government acknowledges, moreover, in its written observations. 50. In a situation such as the one in the main proceedings, the rigid application of the condition regarding the reduction in working time to 50% is tantamount to prohibiting a worker who is pursuing part-time work for older employees in another Member State from receiving payment of the ‘old-age pension following part-work for older employees’, when he has made available more than 50% of his previous working time in order to allow a young unemployed person or an apprentice to be recruited and has also met all the other conditions imposed by the German legislation. 51. As both the national court and the German Government point out in their written observations, in such a situation, the objective of the German legislature is therefore also attained by a 60% reduction in working time since this makes available an even larger part of the job. ( ) 52. The condition of a 50% reduction in working time required by the German legislation and applied rigidly in the main proceedings by the German authorities as well as by the courts of first instance and of appeal therefore seems to me to go beyond what is necessary to attain the social policy objective of encouraging the recruitment of young unemployed persons or apprentices to fill the time made available by the person benefitting from the scheme of part-time work for older employees. 53. Furthermore, the fact that a Member State pursuing such a social policy objective must, under EU law, accept a reduction of more than 50% in working time during a period of part-time work for older employees pursued in another Member State entails no serious budgetary consequences. ( ) 54. It is true that, in the Member States which have introduced a scheme of part-time work for older employees, the loss of earnings of the person benefitting from that scheme and having reduced his working time is compensated for either directly by the public authorities or, in one way or another, by the employer who, in turn, is generally reimbursed by the State, in various forms, for the additional costs. ( ) 55. However, the wage compensation offered to Mr Larcher during the period of part-time work for older employees completed in Austria, including, of course, the additional 10% reduction in working time in relation to that required by the German legislation, was borne in full not by the Federal Republic of Germany but by the Republic of Austria. Moreover, that additional 10% reduction in working time does not have a significant effect on the amount of old-age pension following part-time work for older employers paid by the German authorities as compared with the amount which would have been awarded to a worker who had reduced his working time by 50% for a period of part-time work for older employees pursued within German territory or within the territory of another Member State, such as the Republic of Austria. 56. In the light of all those considerations, I suggest that the answer to the first question should be to the effect that Article 45 TFEU precludes a Member State from making payment of an old-age pension following part-time work for older employees subject to the condition that the worker reduced his working time by 50% during the period of part-time work for older employees, in so far as, in view of the objective of encouraging recruitment of young unemployed persons or apprentices pursued by that Member State, a greater reduction in working time, completed lawfully in the context of part-time work for older employees in another Member State, automatically entails refusal of the right to receive payment of that pension. B – The second question referred 57. By its second question, the national court seeks to ascertain whether, in order to ensure compliance with the principle of equal treatment, it is necessary to carry out a comparative examination of the conditions laid down by the national legislation on part-time work for older employees of the two Member States concerned. If the answer is in the affirmative, the national court raises the question of the extent to which those conditions or, more generally, the schemes of part-time work for older employees of those Member States must be similar or identical. 58. In my view, it is not strictly necessary to answer that question in view of the answer I have proposed for the first question, which is sufficient to enable the national court definitively to settle the dispute in the main proceedings. 59. That being so and in the alternative, the answer to the first question has already provided several elements which also allow the second question to be answered, at least in part. 60. As is evident from the preceding arguments, it seems to me to be essential to carry out a comparative examination of the fundamental conditions laid down by the legislation of the two Member States in question, in the light of the objective or objectives pursued by the Member State from which the pension following part-time work for older employees is sought. 61. The argument adopted by Mr Larcher before the national court and rightly rejected by that court, according to which, in essence, the Member State from which a pension following part-time work for older employees is sought should automatically recognise the conditions in which the part-time work for older employees was completed in another Member State, cannot be upheld. 62. Such a proposal, apart from ignoring the fact that Member States retain the competence to lay down the conditions for payment of social benefits, entails great risks of ‘forum shopping’, enabling citizens of the Union to complete a period of part-time work for older employees in the Member State of their choice but not allowing the Member State responsible for awarding the pension following that period to object to payment of that pension. 63. It can also be inferred from the answer to the first question — and as rightly maintained by the national court — that it is also necessary to reject the line of argument of the defendant in the main proceedings, namely Deutsche Rentenversicherung Bayern Süd (a line of argument which is also supported by the German Government in its written observations to the Court), according to which the pension following part-time work for older employees paid in Germany should be made subject to the requirement that the conditions governing the systems of part-time work for older employees are identical in the Member States. 64. As I have already pointed out, that approach is likely to have an adverse effect on the freedom of movement for workers, since to require that the conditions of eligibility for part-time work for older employees are similar in all respects to those governing German part-time work for older employees for the purpose of granting a pension could be disproportionate to the objectives pursued by the system of part-time work for older employees in Germany. 65. As the national court itself suggested, the answer to the second question does not, therefore, lie in the extreme proposals made by the parties to the main proceedings. Rather, the solution is to be found in an intermediate answer. In my opinion, therefore, it is appropriate to verify whether the conditions laid down in the Member State where part-time work for older employees was pursued make it possible to attain the objectives pursued by the Member State where the pension following part-time work for older employees is sought. Those objectives may be attained even where the conditions for part-time work for older employees differ between the Member State where the pension is sought and that where the period of part-time work for older employees was completed. 66. That solution maintains the principle that Member States have competence to determine the conditions for granting social benefits, while ensuring that, in the case of migrant workers, their freedom of movement within the Union can be respected. 67. When analysing the conditions providing entitlement to the pension following part-time work for older employees, it is possible to identify three categories of conditions. 68. First of all, the first of those categories comprises the conditions which, in my opinion, are of no relevance for obtaining the pension and which should not constitute obstacles to payment of that pension to a national of a Member State who has completed his part-time work for older employees in another Member State. Those conditions include, in my view, those connected with the methods of financing the system of part-time work for older employees. 69. As has already been pointed out, the loss of earnings of the person who benefits from a national scheme of part-time work for older employees and who has reduced his working time is compensated for by the public authorities, directly or indirectly. 70. In spite of the variety of systems for financing schemes of part-time work for older employees established in the Member States and the importance of that condition from the point of view of national law, this does not seem to me to be in any way essential for examination of the right to receive a pension following part-time work for older employees in the case of migrant workers. Refusing that pension to a migrant worker who has completed his part-time work for older employees in a Member State with methods of financing different from those of the Member State where the pension is claimed would constitute an obstacle to the freedom of movement for workers which, in my opinion, cannot be justified. In particular, the Member State from which the pension is sought could not lawfully rely on reasons relating to the equilibrium of its social security system, since, as I have already pointed out, that Member State will not have borne the costs incurred during the period of part-time work for older employees. 71. Secondly, there are the conditions which raise fewest problems because their scheme is taken into account in Regulation No 1408/71. That category includes conditions relating to the contribution periods required in order to receive the pension following part-time work for older employees. Article 45(1) of that regulation lays down that contribution periods completed in a Member State must be taken into account in the Member State which is responsible for granting the pension ‘as if they had been completed under its own legislation’. Furthermore, the national court applies that article in the main proceedings, since it recognised that Mr Larcher fulfilled the conditions connected with the mandatory insurance periods ( ) laid down by German law. However, although the condition laid down by the German legislation relating to contribution periods is actually fulfilled in the present case, this is achieved, as the national court explains, by taking into account the Austrian insurance periods. ( ) 72. Finally, as illustrated by the present case, the most problematic conditions are those which are specific to part-time work for older employees, namely the age of taking up part-time work for older employees and the rate of reduction in working time. Those conditions vary from one Member State to another and the conflicts between those conditions are not directly governed in an act of EU secondary legislation. Accordingly, the Member States, since they retain competence to lay down the conditions for granting social security benefits, may consequently establish a body of disparate rules, which might adversely affect migrant workers. 73. It is possible to mention several hypothetical examples, which might, however, occur in the future. 74. As regards the age at which part-time work for older employees may start, could a Member State refuse to grant all or part of the pension following part-time work for older employees to a worker who pursued part-time work for older employees in a Member State from the age of 59, while the first Member State does not allow such part-time work for older employees to be pursued within its territory until the age of 60? 75. Similarly, is the beneficiary of part-time work for older employees in a Member State who has reduced his working time by 35% (and thus continues to work for 65% of his previous working time) entitled to payment of a pension following part-time work for older employees in a Member State where the reduction in working time must be 50% when pursuing part-time work for older employees? 76. As the Commission essentially suggested in its written observations, the resolution of those questions requires, in my view, a specific examination of the particular situation in the light of the objectives pursued at national level in order to ensure compliance with EU law and, in particular, the principle of proportionality. In other words, the role of the national authorities and court is therefore to verify the importance of the conditions at issue in relation to the national objectives pursued. 77. It is in the course of that examination that the national authorities and, where appropriate, the national court must assess whether or not age and the reduction in working time are important to the objectives pursued by the national law and verify whether or not the difference between the condition laid down by national law and that laid down by the law of the Member State in which the part-time work for older employees was completed is capable of affecting the pursuit of those objectives. 78. Thus, where a reduction in working time is not sufficient to allow recruitment of a young job seeker or apprentice, the national authorities of the Member State in which that objective is pursued will, in my opinion, be able to refuse to grant the pension following part-time work for older employees requested by a worker who completed his period of part-time work for older employees in another Member State. 79. However, that is not the case with Mr Larcher. As I have shown in the arguments concerning the answer to the first question, because he reduced his working time for part-time work for older employees completed in Austria by more than the required reduction of 50% laid down by German law, the working time released made it possible to recruit a young job seeker or apprentice in accordance with the objective pursued by the German legislature, as the German Government conceded in its written observations. III – Conclusion 80. In the light of the foregoing considerations, I propose that the Court should give the following answer to the questions referred by the Bundessozialgericht: Article 45 TFEU precludes a Member State from making payment of an old-age pension following part-time work for older employees subject to the condition that the worker reduced his working time by 50% during the period of part-time work for older employees, in so far as, in view of the objective of encouraging recruitment of young unemployed persons or apprentices pursued by that Member State, a greater reduction in working time, completed lawfully in the context of part-time work for older employees in another Member State, automatically entails refusal of the right to receive payment of that pension. ( ) Original language: French. ( ) Paragraph 27(2)(2) of the Austrian Law on unemployment insurance of 1977 (Arbeitslosenversicherungsgesetz 1977), as amended by the Amending Law of 30 December 2003 (BGBl. I, 128/2003), which lays down that the reduction in working time under the scheme of part-time work for older employees may be between 40 and 60% of normal working time. ( ) Paragraph 2(1) and (2) of that law, as amended by the Law of 23 April 2004 (BGBl. 2004 I, p. 602). ( ) C‑373/02, EU:C:2004:232. ( ) OJ 2006 L 392, p. 1, ‘Regulation No 1408/71’. ( ) See the Lisbon Strategy for growth and jobs, launched in 2000, the Europe 2020 Strategy, initiated by the Commission in 2010, and the annual guidelines adopted by the Council of the European Union for the employment policies of the Member States (see Council Decision 2010/707/EU of 21 October 2010 (OJ 2010 L 308, p. 46) and, finally, Council Decision 2014/322/EU of 6 May 2014 (OJ 2014 L 165, p. 49)). ( ) In the context of the Europe 2020 Strategy, see in particular the eleventh recital of Decision No 940/2011/EU of the European Parliament and of the Council of 14 September 2011 on the European Year for Active Ageing and Solidarity between Generations (2012) (OJ 2011 L 246, p. 5), which promotes the creation of a culture of active ageing, helping to ‘raise the labour market participation of older people, enable them to be active in society for longer, improve their individual quality of life and limit pressure on health, social care and pension systems’. ( ) Currently, eight Member States (the Federal Republic of Germany, the Republic of Austria, the Kingdom of Denmark, the Italian Republic, the Grand-Duchy of Luxembourg, Hungary, the Portuguese Republic and the Republic of Finland) have such schemes. The French Republic and the Kingdom of Sweden, which did have such schemes, have abolished them, however. ( ) In Germany, that feature is referred to in Paragraph 1(1) of the Law on part-time work for older employees. ( ) It should be pointed out with respect to the Federal Republic of Germany that the supplementary remuneration paid to workers benefitting from the scheme of part-time work for older employees was at the source of the dispute in the main proceedings giving rise to the judgment in Erny, C‑172/11, EU:C:2012:399. ( ) With respect to the Federal Republic of Germany, pursuit of that objective was at the heart of the cases which led to the judgments in Kutz-Bauer, C‑187/00, EU:C:2003:168, and Steinicke, C‑77/02, EU:C:2003:458, regarding access for female workers to the scheme of part-time work for older employees. ( ) See Opinion of Advocate General Ruiz-Jarabo Colomer in Öztürk, C‑373/02, EU:C:2004:95, point 53. ( ) Öztürk, EU:C:2004:232, paragraph 68 and the operative part of the judgment. ( ) Judgment in Paraschi, C‑349/87, EU:C:1991:372, paragraph 27. See also the judgment in Duchon, C‑290/00, EU:C:2002:234, paragraphs 39 and 46. ( ) Judgment in Vougioukas, C‑443/93, EU:C:1995:395, paragraph 44. ( ) See the judgments in Elsen, C‑135/99, EU:C:2000:647, paragraph 36; Kauer, C‑28/00, EU:C:2002:82, paragraph 52; and Reichel-Albert, C‑522/10, EU:C:2012:475, paragraph 45. ( ) See, in particular, the judgments in von Chamier-Glisczinski, C‑208/07, EU:C:2008:455, paragraph 63, and da Silva Martins, C‑388/09, EU:C:2011:439, paragraph 71. ( ) See, in particular, the judgment in von Chamier-Glisczinski, EU:C:2008:455, paragraph 63 and the case-law cited. ( ) See the judgments in Bosman, C‑415/93, EU:C:1995:463, paragraph 96; Commission v Denmark, C‑464/02, EU:C:2005:546, paragraph 35; and Commission v Germany, C‑269/07, EU:C2009:527, paragraph 107. ( ) See in that respect, in particular, the judgments in Leyman, C‑3/08, EU:C:2009:595, paragraph 45 and the case-law cited, and von Chamier-Glisczinski, EU:C:2009:455, paragraph 85. ( ) von Chamier-Glisczinski, EU:C:2009:455, paragraph 86. ( ) Judgments in Graf, C‑190/98, EU:C:2000:49, paragraph 23, and Commission v Denmark, EU:C:2005:546, paragraph 36. ( ) See Commission v Denmark, EU:C:2005:546, paragraph 37. ( ) Ibid., paragraph 53 and the case-law cited. ( ) See the judgments in ITC, C‑208/05, EU:C:2007:16, paragraph 39, and Caves Krier Frères, C‑379/11, EU:C:2012:798, paragraph 51. See also, particularly as regards equal treatment for male and female workers, Kutz-Bauer, EU:C:2003:168, paragraph 56 and the case-law cited. ( ) It should be pointed out that the German legislation does not require that the young worker or apprentice recruited to fill the working time made available must be German or even be employed within German territory. ( ) Moreover, the German Government has not objected that its budgetary equilibrium or social security system is called into question. ( ) The Federal Republic of Germany, the Republic of Austria and the Portuguese Republic make the employer bear the financial burden, while the Kingdom of Denmark, the Italian Republic and the Republic of Finland finance part-time work for older employees through a direct payment by public bodies. Finally, Hungary and Luxembourg have a hybrid system, since the employer pays the sums to the recipient and is then fully reimbursed by the public bodies. ( ) See paragraph 34 of the order for reference. ( ) Ibid.

ORlGlNAL JURlSDlCTlON Writ Petition Nos. 3614 3647 of 1981. Harjinder Singh for the Petitioner. S. Das Bahl and M. S. Dhillon for Respondent No. 1. The Judgment of the Court was delivered by CHANDRACHUD, C.J. By this petition under Article 32 of the Constitution the petitioner challenges the validity of an order dated March 27, 1981 passed by respondent 1, the State of Punjab, under section 3 1 of the Conservation of Foreign enchange and Prevention of Smuggling Activities Act, 1974. On April 19, 1981, while the petitioner was in detention, his advocate, Shri Harjinder Singh, wrote a letter to the Superintendent of Central Jail, Amritsar, enclosing therewith two representations drafted on behalf of the petitioner, one of which was addressed to D the Joint Secretary, Department of Home, Government of Punjab, Chandigarh, and the other to the Secretary, Union Ministry of Finance, Department of Revenue, New Delhi. The Jail Superintendent was requested by the aforesaid letter that the representations be forwarded to the State Government and the Central Government after obtaining the signatures of the detenu thereon. The companytention of the petitioner is that in spite of the long passage of time, the representation to the Central Government has number so far been companysidered by it, rendering his detention illegal. In his companynter-affidavit dated July 29, 1981, the Under Secretary to the Government of India, Ministry of Finance Department of Revenue , COFEPOSA Unit, New Delhi says that numberrepresentation by or on behalf of the detenu relating to his detention has been received by the Central Government. As such, the question of any delay in the disposal of such a representation does number arise. In his affidavit dated July 21, 1981 the P.P.S. 1 , Superintendent, Central Jail, Amritsar says that the representation of the detenu Rattan Singh was forwarded to the Punjab Government. The affidavit of Smt. Shyama Mann, Joint Secretary to Government, Punjab, Home Department, Chandigarh shows that the representation of the detenu was companysidered by the Government of Punjab and was rejected on April 28, 1981. 1012 There is numberdifficulty in so far as the representation to the Government of Punjab is companycerned. But the unfortunate lapse on the part of the authorities is that they overlooked totally the representation made by the detenu to the Central Government. The representations to the State Govermnent and the Central Government were made by the detenu simultaneously through the Jail Superintendent. The Superintendent should either have for warded the representations separately to the Governments companycerned or else he should have forwarded them to the State Government with a request for the onward transmission of the other representation to the Central Government. Some one tripped somewhere and the representation addressed to the Central Government was apparently never forwarded to it, with the inevitable result that the detenu has been unaccountably deprived of a valuable right o defend and assert his fundamental right to personal liberty. May be that the detenu is a smuggler whose tribe and how their numbers increase deserves numbersympathy since its activities have paralysed the Indian economy. But the laws of preventive detention afford only a modicum of safeguards to persons detained under them and if freedom and liberty are to have any meaning in our democratic set-up, it is essential that at least those safeguards are number denied to the detenus. Section 11 1 of COFEPOSA companyfers upon the Central Government the power to revoke an order of detention even if it is made by the State Government or its officer. That power, in order to be real and effective, must imply the right in a detenu to make a representation to the Central Government against the order of detention. The failure in this case on the part either of the Jail Superintendent or the State Government to forward the detenus representation to the Central Government has deprived the detenu of the valuable right to have his detention revoked by that Government. The companytinued detention of the detenu must therefore be held illegal and the detenu set free. In Tata Chand v. State of Rajasthan 1 , it was held by this Court that even an inordinate delay on the part of the Central Government in companysideration of the representation of a detenu would be in violation of Article 22 5 of the Constitution, thereby rendering the detention unconstitutional In Shyam Anbalal Siroya v. Union of India 2 this Court held that when a properly addressed representation is made by the detenu to the Central Government for 1013 revocation of the order of detention, a statutory duty is cast upon the Central Government under section 11, COFEPOSA to apply its mind and either revoke the order of detention or dismiss the petition and that a petition for revocation of an order of detention should be disposed of with reasonable expedition. Since the representation was left unattended for four months, the companytinued detention of the detenu was held illegal. In our case, the representation to the Central Government was number forwarded to it at all. These then are our reasons for the order dated October 1, 198 1 whereby we directed that the detenu be released, Writ Petition No. 3647 of 1981. C For the reasons given above in Writ Petition No. 3614 of 1981, this Petition must also succeed and the detenu set at liberty as directed in our order dated October 1. It was on July 2, 1981 that the detenu made a representation to the Central Government through the Superintendent of Jail, Amritsar, and it is number denied that the representation has still number been companysidered by that Government.

FIRST SECTION CASE OF OHNEBERG v. AUSTRIA (Application no. 10781/08) JUDGMENT STRASBOURG 18 September 2012 FINAL 11/02/2013 This judgment has become final under Article 44 § 2 of the Convention. It may be subject to editorial revision. In the case of Ohneberg v. Austria, The European Court of Human Rights (First Section), sitting as a Chamber composed of: Nina Vajić, President,Anatoly Kovler,Peer Lorenzen,Elisabeth Steiner,Khanlar Hajiyev,Mirjana Lazarova Trajkovska,Julia Laffranque, judges,and Søren Nielsen, Section Registrar, Having deliberated in private on 28 August 2012, Delivers the following judgment, which was adopted on that date: PROCEDURE 1. The case originated in an application (no. 10781/08) against the Republic of Austria lodged with the Court under Article 34 of the Convention for the Protection of Human Rights and Fundamental Freedoms (“the Convention”) by an Austrian national, Mr Wolfgang Ohneberg (“the applicant”), on 19 February 2008. 2. The applicant was represented by Mr W.L. Weh, a lawyer practising in Bregenz. The Austrian Government (“the Government”) were represented by their Agent, Ambassador H. Tichy, Head of the International Law Department at the Federal Ministry for European and International Affairs. 3. The applicant alleged a violation of Article 6 § 1 of the Convention because neither the Appeals Commission nor the Constitutional Court had held an oral hearing. 4. On 23 September 2009 the application was communicated to the Government. It was also decided to rule on the admissibility and merits of the application at the same time (Article 29 § 1). THE FACTS I. THE CIRCUMSTANCES OF THE CASE 5. The applicant was born in 1950 and lives in Hard. 6. The applicant worked for the Bregenz Tax Authority (Finanzamt) as a civil servant. He was the head of a tax assessment division (Leiter der Veranlagungsabteilung). 7. As the Austrian Tax Authorities were to be reformed, the applicant was removed from his post as head of the tax assessment division by a decision of the Bregenz Tax Authority of 29 March 2005. On 28 April 2005 the Tax Authority appointed the applicant to the post of specialist (Fachexperte im Fachbereich), a post that had a lower grade. Upon the applicant’s appeal the Appeals Commission at the Federal Chancellery (Berufungskommission beim Bundeskanzleramt - “the Appeals Commission”) set aside those two decisions on 28 July 2005. 8. By letter dated 24 November 2005 the Tax Authority sent the applicant the job profiles for both the post of head of division and the post of specialist. 9. The job profile for his former post as head of the tax assessment division stated that the applicant was responsible for, among other tasks, organising, coordinating and supervising the procedural requirements within the tax-assessment division, and dealing with case files in special circumstances. The applicant was also the supervisor of forty-three other civil servants and employees. 10. The job profile for the new post of specialist stated that, among other tasks, the applicant would assist the leading specialist (Fachvorstand), especially in the areas of coordination, quality check and supervisory measures. He would further participate in several working groups and deal autonomously and on his own initiative with legal remedies. He was not entitled to directly assign that task to someone else. He would also have to take decisions on questions of procedural and material law, give advice in difficult cases in his area of expertise (Fachgebiet), and represent the authority before the Independent Finance Panel (Unabhängiger Finanzsenat). The job profile did not state that any employees or civil servants were to be under his direct supervision. 11. On 27 April 2006 the Bregenz Tax Authority issued a decision by which the applicant was transferred to the post of specialist without any team-leading responsibilities. The applicant’s new post was graded lower than his former post in the internal categorisation of public-service positions. However, with regard to a three-year moratorium provided by the law in the context of transfers involving downgrading due to re-organisation, the applicant would only be subject to a salary reduction after three years. 12. The applicant appealed against the decision to the Appeals Commission on 18 May 2006. He argued, inter alia, that his actual work had not changed sufficiently to justify the lower grade. Consequently the legal requirements for justifying a transfer to another post with a reduction in salary had not been met. The applicant requested the Appeals Commission to hold an oral hearing. 13. On 21 July 2006, and without holding an oral hearing, the Appeals Commission dismissed the applicant’s appeal. It held that the applicant’s job profile had changed to a sufficient extent to qualify as a transfer to another post. Furthermore, the transfer had been strictly necessary in the interests of the service, specifically, the implementation of the overall reform of the Tax Authorities. 14. The applicant complained to the Constitutional Court, arguing, inter alia, that the transfer had been arbitrary and violated his civil rights, as his salary had decreased in the new position. He also complained that the Appeals Commission had failed to hold an oral hearing and requested the Constitutional Court to do so. 15. The Appeals Commission replied on 30 October 2006 and stated, referring to the Constitutional Court’s case-law, that the rights and obligations arising from employment in public service did not amount to civil rights and obligations within the meaning of Article 6 of the Convention. 16. In his reply of 19 June 2007 the applicant argued that Article 6 of the Convention was applicable to his case and that the Constitutional Court was obliged to compensate the lack of an oral hearing before the Appeals Commission by holding one in the course of the complaint proceedings. 17. The Constitutional Court, without holding a hearing, dismissed the complaint on 11 July 2007, finding that none of the legal provisions on which the contested decision had been based was in violation of the Austrian Constitution. The decision was served on the applicant’s counsel on 21 August 2007. II. RELEVANT DOMESTIC LAW 18. Pursuant to section 41a § 6 of the Civil Servants Act (Beamten-Dienstrechtsgesetz) an appeal must be decided upon by the Appeals Commission at the Federal Chancellery. 19. The decisions of the Appeals Commission are not subject to an appeal to the Administrative Court. They are, however, subject to a complaint to the Constitutional Court. 20. Proceedings before the Appeals Commission are governed by the Code of General Administrative Procedure (Allgemeines Verwaltungsverfahrensgesetz), which provides in section 39 that administrative authorities can hold an oral hearing of their own motion or upon a motion by one of the parties in the course of the proceedings. As concerns oral hearings, section 40 § 1 further determines as follows: “Oral hearings shall be held in the presence of all known parties and the necessary witnesses and experts. ...” THE LAW I. ALLEGED VIOLATION OF ARTICLE 6 OF THE CONVENTION 21. The applicant complained under Article 6 § 1 of the Convention that neither the Appeals Commission nor the Constitutional Court had held an oral hearing in the course of the proceedings concerning the transfer. Article 6 § 1, as far as relevant, reads as follows: “In the determination of his civil rights and obligations ... everyone is entitled to a fair and public hearing ... by an independent and impartial tribunal established by law.” A. Admissibility 22. The Government stated that in their opinion Article 6 of the Convention was not applicable to the present case. Firstly, referring to the case of Pellegrin v. France, a civil servant working in the financial administration of a government must be considered a “civil servant exercising specific public activities and acting as an agent of public authority responsible for protecting the general interests of the State or other public authorities” (see Pellegrin v. France [GC], no. 28541/95, ECHR 1999‑VIII). The Government, taking note of the subsequent Eskelinen case (see Vilho Eskelinen and Others v. Finland [GC], no. 63235/00, ECHR 2007‑II), further distinguished that case from the present case in that the present one only concerned a post transfer and thus was not an ordinary employment dispute. They further emphasised that the post transfer had only been executed on account of an extensive general reform of the government financial administration. Applying Article 6 to situations arising from such an administrative reform process would effectively make such a reform impossible in the future. Furthermore, the Government noted that the case in question did not involve proceedings concerning monetary disadvantage, but only the transfer itself. Finally, the Government stated that the Eskelinen case (cited above) would seem to allow for a member State to exclude groups of civil servants entirely from access to a court, which would lead to the undesirable result that, even though in some cases such civil servants would benefit from at least a number of the guarantees of Article 6, a member State might be forced to exclude them from access to a court altogether. 23. The applicant, referring to the Eskelinen case (cited above) and the Stojakovic case (Stojakovic v. Austria, no. 30003/02, 9 November 2006), asserted that Article 6 of the Convention was applicable to the present case. 24. The Court reiterates that it established in the Eskelinen case that there is a presumption that Article 6 applies to ordinary labour disputes between a civil servant and the State and that it will be for the respondent Government to show that a civil servant does not have a right of access to a court under national law and that this exclusion of the rights under Article 6 is justified (see Vilho Eskelinen and Others, cited above, § 62). 25. The Court is not convinced by the Government’s argument that the dispute at hand was not a labour dispute and did not involve any monetary disadvantage. The appointment to a specific post is an essential criterion defining an employment relationship and the scope of work required from the employee. A second essential criterion is the salary attached to the post. A transfer to another post directly affects the job profile, which is one of the defining factors of the employment relationship. If such a transfer is accompanied by a salary adjustment, a second major defining factor of that relationship is involved. In the present case, the applicant was transferred to a post with a lower grade and was subject to a reduction in salary after a three-year moratorium (see paragraph 11 above). It follows, in the Court’s view, that the dispute regarding the post transfer in the present case was in fact an ordinary labour dispute. 26. It is not contested that the applicant had access to a court (see paragraph 31 below). The Court further notes that the Government do not substantiate their claim that the exercise of the guarantees under Article 6, in particular the requirement of an oral hearing before a tribunal, would make administrative reform impossible in the future or would require the Government to exclude tax officers entirely from access to a court. 27. In line with its findings in the Eskelinen case (cited above), the Court therefore concludes that Article 6 of the Convention is applicable to the present case. 28. The Court notes that the application is not manifestly ill-founded within the meaning of Article 35 § 3 (a) of the Convention. It further notes that it is not inadmissible on any other grounds. It must therefore be declared admissible. B. Merits 29. The applicant stated that he had explicitly requested an oral hearing before the Appeals Commission and before the Constitutional Court. He defined the question to be answered in the appeal proceedings as being how much the applicant’s actual work had changed in the new post, which needed to be considered as a question regarding the facts and the law. 30. The Government contested that argument, claiming that the proceedings before the Appeals Commission and before the Constitutional Court had not included questions regarding the facts of the case or legal questions that could not be dealt with on the basis of the case file. Furthermore, the domestic proceedings had been fair overall and the applicant had had sufficient opportunity to present his arguments in the course of the written proceedings. 31. In a comparable case the Court has already found that the Appeals Commission at the Federal Chancellery is to be regarded as a tribunal within the meaning of Article 6 § 1 (see, with further references to the characteristics of a “tribunal”, Stojakovic, cited above, §§ 46 et seq). Furthermore, the Court observes that the Constitutional Court, which dealt with the applicant’s case at last instance, did not have, in the circumstances, the required scope of review in order to constitute a “tribunal” within the meaning of Article 6 § 1 of the Convention (see Stojakovic, cited above, § 45 with a further reference to Zumtobel v. Austria, 21 September 1993, § 30, Series A no. 268‑A). No appeal could be brought before the Administrative Court in the present proceedings. 32. Turning to the issue of the lack of a public oral hearing before the Appeals Commission, the Court notes that according to its established case-law an applicant is in principle entitled to a hearing before the first and only tribunal examining his case, unless there are exceptional circumstances which justify dispensing with such a hearing (see Fredin v. Sweden (no. 2), 23 February 1994, § 21, Series A no. 283‑A; Fischer v. Austria, 26 April 1995, § 44, Series A no. 312; and Allan Jacobsson v. Sweden (no. 2), 19 February 1998, § 46, Reports of Judgments and Decisions 1998‑I). The Court has accepted such exceptional circumstances in cases where the proceedings concerned exclusively legal or highly technical questions (see Schuler-Zgraggen v. Switzerland, 24 June 1993, § 58, Series A no. 263; Varela Assalino v. Portugal (dec.), no. 64336/01, 25 April 2002; and Speil v. Austria (dec.), no. 42057/98, 5 September 2002). 33. The Court considers, however, that there were no such exceptional circumstances justifying dispensing with a hearing in the applicant’s case, especially in view of the factual questions raised in the course of the proceedings regarding the profile of the new post, and the ensuing legal issues. 34. There has accordingly been a violation of Article 6 § 1 of the Convention in respect of the applicant’s right to a hearing before the Appeals Commission. II. APPLICATION OF ARTICLE 41 OF THE CONVENTION 35. Article 41 of the Convention provides: “If the Court finds that there has been a violation of the Convention or the Protocols thereto, and if the internal law of the High Contracting Party concerned allows only partial reparation to be made, the Court shall, if necessary, afford just satisfaction to the injured party.” A. Damage 36. The applicant claimed 91,893.61 euros (EUR) in respect of pecuniary damage. He claimed to have suffered “burnout syndrome” and a slipped disc because of the post transfer and claimed medical costs in that regard. The applicant further claimed damages on account of early retirement in 2010, loss of monetary advantage due to lack of automatic advancement, and loss of future pension payments. 37. The Government contested these claims. 38. The Court reiterates that it cannot speculate what the outcome of the proceedings would have been if they had been in conformity with Article 6 of the Convention. Moreover, the Court cannot discern any causal link between the damage claimed and the violation found. Accordingly, it dismisses the applicant’s claims. B. Costs and expenses 39. The applicant also claimed EUR 16,047.54, including value-added tax (VAT), for the costs and expenses incurred in the domestic proceedings, and EUR 9,024.84, including VAT, for those incurred before the Court. 40. The Government contested the claim in respect of the costs of the domestic proceedings and submitted that the claim for costs in connection with the proceedings before this Court was excessive. 41. According to the Court’s case-law, an applicant is entitled to the reimbursement of costs and expenses only in so far as it has been shown that these have been actually and necessarily incurred and are reasonable as to quantum. In the present case, as regards the costs claimed for the domestic proceedings, the applicant has not proved that specific costs were incurred in relation to the request for a public oral hearing and the complaint that no such hearing had taken place (see Stojakovic, cited above, § 62). Consequently, the Court dismisses the applicant claims in this connection. 42. As regards the costs and expenses incurred before the Court, it notes that the applicant, who was represented by counsel, did not benefit from legal aid. Making an assessment on an equitable basis, and in view of the awards made by the Court in a comparable case (see Stojakovic, cited above, § 63), the Court finds it reasonable to award EUR 3,500 under this head, plus any tax that may be chargeable to the applicant. The amount includes VAT. C. Default interest 43. The Court considers it appropriate that the default interest rate should be based on the marginal lending rate of the European Central Bank, to which should be added three percentage points. FOR THESE REASONS, THE COURT UNANIMOUSLY 1. Declares the application admissible; 2. Holds that there has been a violation of Article 6 § 1 of the Convention in respect of the applicant’s right to a hearing before the Appeals Commission; 3. Holds (a) that the respondent State is to pay the applicant, within three months of the date on which the judgment becomes final in accordance with Article 44 § 2 of the Convention, EUR 3,500 (three thousand five hundred euros) in respect of costs and expenses, plus any tax that may be chargeable to the applicant; (b) that from the expiry of the above-mentioned three months until settlement simple interest shall be payable on the above amount at a rate equal to the marginal lending rate of the European Central Bank during the default period plus three percentage points; 4. Dismisses the remainder of the applicant’s claim for just satisfaction. Done in English, and notified in writing on 18 September 2012, pursuant to Rule 77 §§ 2 and 3 of the Rules of Court. Søren NielsenNina VajićRegistrarPresident

Mr Justice Lewison : Introduction 1 Background 3 The possibilities 6 Absolute gift to Diocese of Westminster 8 Trust for the benefit of the CCC 13 Gift to the Diocese of Westminster on charitable trusts 15 As on an intestacy 28 Introduction As she lay dying in St Bartholomew's hospital, Sister Joseph Harding made a will. It was written out for her in manuscript and she duly executed it on 25 March 2003. It said: "I Sister Joseph Harding (Winsome Joy Harding) being of sound mind and aware of what I am doing, wish to revoke my last will and testimony made previous to todays date. I am not satisfied with certain aspects of the contents of that said will which are contrary to my express wishes. If I should die in the meantime before making another will it is my wish that everything I possess be taken over by the Diocese of Westminster to hold in trust for the Black community of Hackney, Haringey, Islington and Tower Hamlet." The question is whether the last paragraph of the will created a valid testamentary gift and, if so, on what terms. Background Sister Joseph was born in Liberia and brought up in the West Indies. She entered a convent in the USA as a novice but was never finally professed. It seems she took private vows. In the 1970s Sister Joseph and Father Robson became involved in running the Caribbean Community Centre ("CCC") which was designed to provide a spiritual and community centre for the Caribbean people in North London. It operated from premises at 416 Seven Sisters Road Manor House London N4. The premises were provided free of charge by the Roman Catholic Diocese of Westminster. Working with the CCC was Sister Joseph's main lifetime work. In 1981 Father Robson and Sister Joseph set up the Father Love Trust. At that time Father Robson and Sister Joseph owned a property known as 7 Brownswood Road in Stoke Newington which was rented to London University students; and the rents from which were donated to the Father Love Trust which in turn provided financial support for the CCC. Father Robson died in April 2000 at which time Sister Joseph had been diagnosed with cancer. Under his will he left his estate to Sister Joseph. Thereafter Sister Joseph had discussions with the Diocese with a view to giving them properties and passing over the running of the Father Love Trust. On 4 November 2002 Sister Joseph made a will. It was professionally drawn. In that will she made legacies to certain family members; and left the residue of her estate to the Westminster Roman Catholic Diocesan Trust and other Trust funds administered by Westminster Roman Catholic Diocesan Trustees. The residue would have formed the bulk of her estate, which is valued at close on £870,000. It was that will to which she referred in her manuscript will of 25 March 2003. The possibilities The various possibilities canvassed by the claim form are that Sister Joseph's estate is held: i) on trust for the Roman Catholic Diocese of Westminster absolutely; ii) by the Roman Catholic Diocese of Westminster on charitable trusts; iii) by the Roman Catholic Diocese of Westminster on trust for the Caribbean Community Centre; iv) as on intestacy. The argument in favour of the first and third of these possibilities was advanced by Ms Penelope Reed, who appears on behalf of the Financial Secretary for the Roman Catholic Diocese of Westminster. He is the administrator of the estate. While Ms Reed fairly put the arguments so that they should be before the court, she rightly stressed that the administrator's own position was neutral. The argument in favour of the second possibility was advanced by Mr Will Henderson, appearing on behalf of the Attorney General. The argument in favour of the fourth possibility was advanced by Mr Stephen Schaw Miller, appearing on behalf of Sister Joseph's niece and nephews, who would take in the event of an intestacy. Absolute gift to Diocese of Westminster It is common ground that the reference in the will to the "Diocese of Westminster" is a reference to the Roman Catholic Diocese of Westminster. The first step in the argument in favour of the interpretation that the will confers an absolute gift on the Roman Catholic Diocese of Westminster is that that the words "it is my wish" govern the manner in which the Diocese is to hold the property. In other words the will should be construed as meaning:- "I give everything I possess to the Diocese of Westminster and it is my wish that they should hold it on trust for the black community of Hackney, Haringey, Islington and Tower Hamlets…" The second step is that the words "it is my wish" should be construed as precatory words and as not imposing a trust. Ms Reed referred me to the decision of Hart J in Harrison v Gibson [2006] 1 WLR 1212 in which the judge said: "The mere fact that the testator has used the words "in trust" is not in itself inconsistent with an intention on his part that his wife should be the absolute beneficial owner." The effect of those words is a question of construction of the will as a whole. I cannot place quite as much weight on that dictum as Ms Reed for two reasons. First, the distinction that Hart J seems to have had in mind was that between "the "trust" which a layman might think results from the appointment of executors" on the one hand, and a limited gift on the other. Second, Hart J in fact decided that the words "in trust" in the will he was considering were incompatible with an absolute gift. I do not consider that either of the two steps in this argument is correct. So far as the first step is concerned, it requires a re-ordering of the words that Sister Joseph actually used. The effect of the re-ordering is to downgrade the force of the phrase "in trust" which immediately follows the identification of the recipient of the gift. Second, there is nothing in the remainder of the will which displaces the ordinary meaning of that phrase. I therefore reject the first possibility. Trust for the benefit of the CCC As everyone agreed, the main difficulty with construing the will as creating a trust in favour of the CCC is that it is not what the will says. Sister Joseph was well acquainted with the CCC and if she had wished the CCC (and the CCC alone) to benefit from her will, she would surely have said so. Moreover it is not at all clear on the evidence what kind of entity the CCC is. It appears that it has some form of trust deed, although the terms of the deed are not in evidence. It is not a registered charity. If it is a non-charitable unincorporated association, there are difficulties in concluding that a gift either to the members of the association (whether absolutely or subject to the terms of any rules of the association) was intended. I reject this possibility. Gift to the Diocese of Westminster on charitable trusts It is common ground that a trust for the benefit of a fluctuating body of individuals, such as the inhabitants of a locality, can only take effect as a charitable trust, if it has effect at all: Attorney General v Webster (1875) LR 20 Eq 483. It is also common ground that a private trust for such a large class as the black community in four London Boroughs would be so large as to make a private trust unworkable, and hence void: McPhail v Doulton [1971] AC 424; R v District Auditor No 3 Audit District of West Yorkshire MCC ex p West Yorkshire MCC [1986] RVR 24. The principles applicable in order to determine whether a gift such as the one I am considering creates a valid charitable gift are, I think, as follows: i) The court leans in favour of making a testator's testamentary dispositions effective if possible within the limitations and in accordance with the principles of law: Re Smith [1932] Ch 153, 158; ii) A gift to the inhabitants of a locality, without specifying a particular purpose for which the gift is to be applied, is a valid charitable gift: Re Smith ("my country England"); iii) The same principle applies to a gift to a particular class of inhabitants within a locality: Mitford v Reynolds (1842) 1 Ph 185 (native inhabitants of Dacca); Goodman v Mayor of Saltash (1882) 7 App Cas 633 (freemen of the borough of Saltash); Re Mellody [1918] 1 Ch 228 (schoolchildren of Turton); iv) The rationale for this principle is that the court construes the gift as implicitly limited to charitable purposes: Re Strakosch [1949] 1 Ch 529, 539. This principle applies unless there is something in the gift to exclude it: Peggs v Lamb [1994] Ch 172, 195. I suspect that the reason for this principle is, first, that it is a way of saving a gift that would otherwise be invalid; and second, that an absolute gift for the inhabitants of a locality is likely to produce such a small dividend as to be an absurd intention to impute to a testator; v) However, if an express purpose is stated, that purpose must itself be charitable; and a non-charitable purpose trust cannot be validated by localising the gift: Williams Trustees v. IRC [1947] AC 447. Since Mr Schaw Miller relied heavily on Williams Trustees v IRC, I should say a little more about it. The case concerned the charitable status of a trust created by the memorandum and articles of association of a company. The overall objects of the company were to promote Welsh interests in London. The principal object of the trust was to create a centre in London "for promoting the moral social spiritual and educational welfare of Welsh people and fostering the study of the Welsh language and of Welsh history literature music and art." The House of Lords decided that the property was not vested in the trustees for charitable purposes only, and consequently the company was not a charitable company. In reaching this conclusion Lord Simonds, with whom the other Law Lords agreed, said that the mere fact that a purpose is beneficial to the community did not make that purpose charitable. Towards the end of his speech Lord Simonds referred to the line of cases about gifts to localities and said (p. 459): "But I would suggest that it is possible to justify as charitable a gift to "my country England" upon the ground that, where no purpose is defined, a charitable purpose is implicit in the context; it is at least not excluded by the express prescription of "public" purposes. Where the gift is localized but the nature of the benefit is defined, no reconciliation is possible except on the assumption that the particular purpose was in each case regarded as falling within the spirit and intendment of the preamble to the statute of Elizabeth, though I find it difficult to ascribe this quality to the benefit taken by the freemen of Saltash." (Emphasis added) The benefit taken by the freemen of Saltash was a right to fish. That benefit is not, on the face of it, a charitable benefit, and that is why, in my judgment, Goodman v Mayor of Saltash is generally regarded as a difficult case whose application is not to be extended. Indeed, it seems to me that the nature of the benefit to which the freeman claimed to be entitled was the reason that caused Lord Blackburn to dissent in Goodman v Mayor of Saltash itself. Thus analysed, I do not consider that Williams Trustees v IRC gives Mr Schaw Miller the support that he needs. Mr Schaw Miller argued that the reference in the will to the black "community" was itself the specification of an express purpose. The purpose was widely expressed in terms that could embrace non-charitable purposes, with the consequence that the gift fell within the second of Lord Simonds' categories. I do not agree. First, the phrase "the Black community" is no more than another way of saying, in modern usage, black people. Second, judicial usage does not suggest that a reference to "the community" negatives a charitable intention. In Re Mellody Eve J, in upholding the gift to the schoolchildren of Turton, described the gift as a gift "for purposes beneficial to a section of the community"; and described the schoolchildren themselves as "a very important section of the community". He did not appear to regard the use of this word as being incompatible with a charitable gift. In Peggs v Lamb the Attorney General submitted that: "the trust [in question] was one for the benefit of the community in a particular area without the specification of any particular purpose with the consequence that the permitted purposes are limited to those within the spirit and intendment of the preamble." Morritt J did not regard this submission as an oxymoron. On the contrary, he accepted it. I therefore reject the submission that the use of the word "community" takes the case outside the principle in Re Smith. Mr Schaw Miller next fastened on the word "Black". This, he said, presented two insuperable difficulties. The first was that it was uncertain. Who was entitled to be considered a member of the "Black community"? What about a white spouse of a black person? What about a child of mixed race parentage? However, in my judgment Mr Henderson was right in saying that the class of inhabitants of a specified area need not be identified with the same degree of certainty as the beneficiaries of a private trust. As Sir William Grant MR said in Morice v Bishop of Durham (1804) 9 Ves Jun 399, 405: "But it is settled, upon authority, which it is too late to controvert, that where a charitable purpose is expressed, however general, the bequest shall not fail on account of uncertainty of the object: but the particular mode of application will be directed by the King in some cases, in others by this Court." And in Glazebrook v University of Leeds [1944] 1 Ch 193 Uthwatt J upheld a charitable gift, the meaning of which was (or was assumed to be) uncertain. If there is any uncertainty in the phrase, the uncertainty can nowadays be cured by a scheme. The second suggested difficulty was that a gift for the benefit of the black community was contrary to public policy because it was discriminatory on racial grounds. There is no trace in previous authority of any such public policy. In Mitford v Reynolds Lord Lyndhurst LC upheld a gift for the benefit of the native inhabitants of Dacca. In the course of his judgment he said that: "the term "the native inhabitants of Dacca" is used in contradistinction to the European inhabitants or the descendants of European inhabitants." He did not regard this as inconsistent with a charitable gift. In Re Dominion Students' Hall Trust [1947] 1 Ch 183 Evershed J removed a "colour bar" from a trust deed by way of sanctioning a scheme. But he said in the course of his judgment that notionally there could be two complementary charities "one for white and one for coloured students". He did not regard these notional trusts as being incompatible with charitable objects. Of course times have changed. But the remedy in cases where charitable benefits are to be provided to a class defined by colour is not to invalidate the gift completely, but to remove the reference to colour. This is the mechanism for which section 34 of the Race Relations Act 1976 provides. It says: "(1) A provision which is contained in a charitable instrument (whenever that instrument took or takes effect) and which provides for conferring benefits on persons of a class defined by reference to colour shall have effect for all purposes as if it provided for conferring the like benefits— (a) on persons of the class which results if the restriction by reference to colour is disregarded; or (b) where the original class is defined by reference to colour only, on persons generally; but nothing in this subsection shall be taken to alter the effect of any provision as regards any time before the coming into operation of this subsection. (2) Nothing in Parts II to IV shall— (a) be construed as affecting a provision to which this subsection applies; or (b) render unlawful an act which is done in order to give effect to such a provision. (3) Subsection (2) applies to any provision which is contained in a charitable instrument (whenever that instrument took or takes effect) and which provides for conferring benefits on persons of a class defined otherwise than by reference to colour (including a class resulting from the operation of subsection (1)). (3A) Subsection (2)(b) does not apply to an act which is unlawful, on grounds of race or ethnic or national origins, by virtue of section 4 or 7. (4) In this section "charitable instrument" means an enactment or other instrument passed or made for charitable purposes, or an enactment or other instrument so far as it relates to charitable purposes, and in Scotland includes the governing instrument of an endowment or of an educational endowment as those expressions are defined in section 135(1) of the Education (Scotland) Act 1962. In the application of this section to England and Wales, "charitable purposes" means purposes which are exclusively charitable according to the law of England and Wales." Section 34 (1) presupposes that an instrument is capable of being a charitable instrument (i.e. an instrument made for exclusively charitable purposes) even though benefits are conferred on a class of persons defined by colour. This presupposition gives no support to Mr Schaw Miller's submission that the whole gift is invalidated on public policy grounds. If Mr Schaw Miller were right, it is difficult to see that the section could ever apply. Mr Schaw Miller said that it could apply to a gift, for example, for the education of black persons, because a gift for education was independently charitable. I do not think that this meets the point, for two reasons. First, because if it is a fundamental objection to a gift that it discriminates on racial grounds, then the fact that the particular head of charity is specified ought not to matter. Second, because in the present case the gift is to be construed, conformably with the principle in Re Smith, as impliedly limited to charitable purposes. So just as in Mr Schaw Miller's example, the gift is independently a valid charitable gift, absent the reference to colour. Accordingly, in my judgment the clause in Sister Joseph's will took effect as a gift to the Roman Catholic Diocese of Westminster on charitable trusts. The precise nature of the trusts can be dealt with by a scheme. As on an intestacy This possibility is necessarily excluded by my conclusion that the gift is a valid charitable gift.

THIRD SECTION CASE OF FRANEK v. SLOVAKIA (Application no. 14090/10) JUDGMENT STRASBOURG 11 February 2014 FINAL 11/05/2014 This judgment has become final under Article 44 § 2 of the Convention. It may be subject to editorial revision. In the case of Franek v. Slovakia, The European Court of Human Rights (Third Section), sitting as a Chamber composed of: Josep Casadevall, President,Alvina Gyulumyan,Ján Šikuta,Luis López Guerra,Nona Tsotsoria,Johannes Silvis,Valeriu Griţco, judges,and Santiago Quesada, Section Registrar, Having deliberated in private on 21 January 2014, Delivers the following judgment, which was adopted on that date: PROCEDURE 1. The case originated in an application (no. 14090/10) against the Slovak Republic lodged with the Court under Article 34 of the Convention for the Protection of Human Rights and Fundamental Freedoms (“the Convention”) by a Slovak national, Mr Ján Franek (“the applicant”), on 18 February 2010. 2. The applicant was represented by Mr R. Slamka, a lawyer practising in Dolný Kubín. The Government of the Slovak Republic (“the Government”) were represented by their Agent, Ms M. Pirošíková. 3. The applicant alleged, in particular, that his right to a fair hearing by a tribunal had been breached in the context of civil proceedings and their subsequent review by the Constitutional Court. 4. On 17 January 2013 the application was communicated to the Government. THE FACTS I. THE CIRCUMSTANCES OF THE CASE 5. The applicant was born in 1964 and lives in Liptovský Mikuláš. 6. The applicant is an enforcement officer. In the context of enforcement proceedings, he seized movable property of a company with a view to having it sold. Subsequently bankruptcy (insolvency) proceedings were brought against the debtor. The administrator in bankruptcy asked the applicant to transfer the property to him in accordance with the required legal procedure in such cases. The applicant stored some of the items at the premises of one of the creditors. The representatives of the latter decided to retain the property until the debtor discharged the debt. They later revoked that decision. 7. On 21 October 2003 the Liptovský Mikuláš District Court, on an application by the administrator, ordered the applicant to transfer the property to the administrator within fifteen days. It further ordered the applicant to pay his costs amounting to EUR 1,130. 8. On 14 April 2005 the Žilina Regional Court quashed the judgment. It held that the first-instance court had not duly examined whether the applicant had standing in the case as a defendant, given that the property in question was being retained by a third party. 9. A hearing was scheduled for 21 March 2006, but on 14 March 2006 the applicant asked the District Court for an adjournment “on account of his incapacity for work”. 10. On 21 March 2006 the District Court, after taking further evidence, again ordered the applicant to transfer the property to the administrator, with reference to sections 14 and 18 of the Bankruptcy Act 1991. He was further ordered to reimburse the administrator’s costs amounting to EUR 1,964. The District Court held that, under the relevant law, the property had been at the applicant’s disposal. The creditor company where the applicant had stored the property had no obligation towards the bankruptcy administration. In those circumstances, the applicant’s argument, that the creditor had availed itself of its right to retain the property, could not be upheld. 11. The judgment indicated that the applicant had not submitted any documentary evidence to prove that he had been unable to attend the hearing. The District Court had therefore proceeded with the case in his absence. 12. The applicant appealed. He indicated, among other things, that he had been bedridden and unable to submit relevant documentary evidence of his sick leave for the period 16 February to 2 May 2006. He enclosed a medical certificate drawn up on 17 February 2006 confirming his inability to work until 2 May 2006 because of an accident. 13. On 6 September 2007 the Žilina Regional Court upheld the first‑instance judgment. The decision on the claim in issue became final on 10 December 2007. 14. The applicant lodged an appeal on points of law. Relying on Article 237(f) of the Code of Civil Procedure, he argued that the first-instance court had not accepted his excuse and had proceeded with the case in his absence. He further argued, among other things, that he had no standing in the case as a defendant, and that the lower courts had applied the law incorrectly and had decided arbitrarily. In particular, the applicant maintained that he could not have been ordered to transfer the movable property to the administrator as it was not in his possession. The decision against the applicant was therefore unenforceable. 15. In addition, the applicant argued that the administrator also lacked standing to bring the claim, as the law did not entitle him to realise property which one of the creditors had exercised its right to secure a debt by retaining. Since, in the course of the proceedings, the company which had been storing the property had indicated that it no longer wished to exercise that right, the courts should have discontinued the proceedings, as nothing had prevented the administrator from recovering the property. 16. The Supreme Court rejected the appeal on points of law on 7 April 2009. It noted that on 14 March 2006 the applicant had sent a written excuse and a request for the District Court hearing on 21 March 2006 to be adjourned. However, he had not submitted any documentary evidence to that court in support of his argument that ill-health had prevented him from attending the hearing. In those circumstances, the District Court had been entitled to proceed with the case, and it had not prevented the applicant from asserting his rights in the proceedings within the meaning of Article 237(f) of the Code of Civil Procedure. With reference to its case-law, the Supreme Court further held that the alleged lack of standing of both the applicant and the administrator was not a relevant reason for an appeal on points of law within the meaning of Article 237(b) of the Code of Civil Procedure. That provision extended exclusively to situations where a person lacked legal capacity. That was not the situation in the applicant’s case. As a result, the applicant’s appeal on points of law was declared inadmissible, and the Supreme Court could not deal with his arguments as to the alleged errors of fact and law by courts at a lower level of jurisdiction. 17. On 12 June 2009 the applicant submitted a constitutional complaint. He alleged a breach of Article 6 of the Convention in the proceedings leading to the above decisions being taken by the three levels of ordinary court. In particular, the applicant alleged that (i) the first‑instance and appellate courts had committed errors of fact and law when determining the merits and had decided in an arbitrary manner, (ii) he had had no standing in the case as a defendant, and (iii) the District Court had proceeded with the case in his absence. As to the last-mentioned complaint, he submitted that he had been immobilised because of a broken leg and had therefore been unable to attend the hearing or to enclose a medical certificate in support of his request for its adjournment. 18. The Constitutional Court dismissed the complaint on 17 September 2009. It held that the complaint had been lodged outside the statutory time‑limit of two months in so far as it concerned the first-instance and appellate courts’ decisions, which had become final on 10 December 2007. As the Supreme Court had declared the applicant’s appeal on points of law inadmissible, and since the Constitutional Court found no reason to disagree with that conclusion, the applicant’s use of that remedy could not affect the running of the above time-limit in respect of the judgments of the District Court and the Regional Court. 19. The Constitutional Court further carried out a detailed examination of the reasons for the Supreme Court’s decision, and concluded that it was neither arbitrary nor otherwise contrary to the applicant’s right to a fair hearing. II. RELEVANT DOMESTIC LAW AND PRACTICE A. Code of Civil Procedure and the Supreme Court’s practice 20. Article 101 § 1 provides that parties are obliged to assist the court in achieving the purpose of the proceedings by, inter alia, complying with the court’s instructions. Article 101 § 2 entitles the court to proceed with a case even when the parties remain inactive. When a party to the proceedings fails to appear at a hearing despite the fact that he or she has been duly summoned, and when such a party requests that the hearing be adjourned without a legitimate excuse, the court may proceed with the case in the absence of that party, having regard to the contents of the file and the evidence which has already been taken. 21. Article 237(b) allows for an appeal on points of law to be lodged on the grounds that a person acting as a party to proceedings lacked capacity to do so. 22. Under Article 237(f), an appeal on points of law against an appellate court judgment is available when a court, by its conduct, prevented a party from having access to it. 23. Further statutory rules concerning appeals on points of law are summarised in the Court’s judgment in the case of Ringier Axel Springer Slovakia, v. Slovakia (no. 41262/05, §§ 61-68, 26 July 2011). 24. The Supreme Court has acknowledged as contrary to Article 237(f) the courts’ practice of proceeding with a case despite a party’s timely request for the adjournment of a hearing, where such a request is based on the party’s medically certified inability to work (Collection of Judicial Decisions and Opinions, R 31/1995). B. Constitutional Court Act 1993 and the Constitutional Court’s practice 25. Under section 53(1) of the Constitutional Court Act 1993, a complaint to the Constitutional Court is admissible only where the claimant has exhausted the effective remedies provided for by law to protect his or her fundamental rights. Section 53(3) provides that a complaint to the Constitutional Court can be lodged within two months of a decision taking final effect, or from the date of a contested measure or notification of another interference with a person’s rights. 26. As a rule, the Constitutional Court has required, with reference to the principle of subsidiarity, that a party should lodge an appeal on points of law where the alleged breach of his or her rights is of such a nature that an appeal on points of law is available under the relevant provisions of the Code of Civil Procedure. 27. In a number of earlier cases, the Constitutional Court’s assessment of admissibility of a complaint depended on the nature of the decision which the Supreme Court had given on a party’s appeal on points of law. 28. Thus, where the Supreme Court rejected an appeal on points of law as inadmissible, the Constitutional Court refused to take that decision into account when determining the compliance with the two-month time‑limit in respect of an alleged breach of a claimant’s rights at first instance or before the appellate court (see, for further details, Stavebná spoločnosť TATRY Poprad, s.r.o. v. Slovakia, no. 7261/06, § 44, 3 May 2011, and Zborovský v. Slovakia, no. 14325/08, §§ 24-26, 23 October 2012). 29. At a later point the Constitutional Court modified its practice with reference to judgments which the Court had delivered on several cases against the Czech Republic giving rise to a similar issue (see Zvolský and Zvolská v. the Czech Republic, no. 46129/99, ECHR 2002‑IX; Bulena v. the Czech Republic, no. 57567/00, 20 April 2004; and Soffer v. the Czech Republic, no. 31419/04, 8 November 2007). 30. Thus, from 2009 it held in a number of cases that, where a party simultaneously lodges an appeal on points of law and a constitutional complaint, the principle of subsidiarity prevented the Constitutional Court from dealing with the case pending the determination of the former remedy. In such cases, the Constitutional Court rejected the claimants’ complaints in respect of the first and second-instance decisions as premature. It emphasised that the statutory two-month time-limit would be respected in respect of those decisions if the Supreme Court ultimately declared the appeal on points of law inadmissible and the unsuccessful party submitted a fresh constitutional complaint (decision nos. I. ÚS 169/09; I. ÚS 237/09; III. ÚS 462/2011; I. ÚS 312/2011; and II. ÚS 65/2012). 31. At the same time, in a number of cases decided in 2010 and later (for example decision nos. IV. ÚS 245/2010; II. ÚS 324/2010; IV. ÚS 406/2011; III. ÚS 237/2011; IV. ÚS 468/2011; III. ÚS 87/2012; and III. ÚS 316/2012) the claimants had lodged their constitutional complaints against judicial decisions of the appellate court and court of appeal on points of law within two months of the delivery of the Supreme Court’s decision declaring their appeal on points of law inadmissible. The Constitutional Court examined the merits of their complaints under Article 6 of the Convention in respect of the proceedings leading to the decisions of the appellate court and the Supreme Court in its capacity as the court of appeal on points of law. It held, in particular, that in such cases a constitutional complaint was admissible only after the Supreme Court’s decision on the appeal on points of law, while the time-limit in respect of both the Supreme Court’s and appellate court’s decisions started running from the service of the former. The above-mentioned decisions indicate that such an approach has corresponded to the current practice of the Constitutional Court. C. Bankruptcy Act 1991 32. The following provisions of the Bankruptcy Act 1991 (Act No. 328/1991 Coll.) are relevant in the present case. 33. Pursuant to section 14(1)(a), upon the declaration of bankruptcy all rights related to the assets of the bankrupt pass over to the administrator. At the same time, any pending judicial, enforcement or other proceedings are stayed to the extent that they concern the assets of the bankrupt or claims which are to be satisfied from those assets (section 14(1)(d)). 34. Section 18(2) obliges all those who have at their disposal property belonging to the assets of a bankrupt to inform the administrator as soon as they learn of the declaration of bankruptcy. They are further obliged to allow the administrator to include such property in the schedule of assets and to have them valued. Failure to comply renders such parties liable for damages. THE LAW I. ALLEGED VIOLATION OF ARTICLE 6 § 1 OF THE CONVENTION 35. The applicant complained that his right to a fair hearing by a tribunal had been breached in the proceedings before the ordinary courts and the Constitutional Court. He relied on Article 6 § 1 of the Convention, which reads as follows: “In the determination of his civil rights and obligations ... everyone is entitled to a fair ... hearing ... by [a] ... tribunal ...” 36. The Government contested that argument. A. Admissibility 37. The Court notes that this complaint is not manifestly ill-founded within the meaning of Article 35 § 3 (a) of the Convention. It further notes that it is not inadmissible on any other grounds. It must therefore be declared admissible. B. Merits 1. Alleged breach of the applicant’s “right to a court” (a) The arguments of the parties 38. The applicant argued that several of the shortcomings in the proceedings of which he complained constituted statutory grounds for an appeal on points of law. With a view to exhausting the remedies as required by the Constitutional Court Act 1993, he had been obliged to lodge an appeal on points of law. The Constitutional Court’s decision to reject his complaint in respect of the first-instance and appellate courts’ decisions as belated had been contrary to both the Constitutional Court’s practice in a number of cases and the Court’s case-law under Article 6 § 1. 39. The Government referred to a document submitted by the Registry of the Constitutional Court and maintained that the applicant should have simultaneously lodged a constitutional complaint and an appeal on points of law against the appellate court’s decision. In such cases the statutory time-limit for lodging the former remedy would have been respected in respect of the appellate court’s decision following the Supreme Court’s decision to declare the appeal on points of law inadmissible. In that connection the present application differed from the case of Stavebná spoločnosť TATRY Poprad, s.r.o. (cited above) where the applicant company had used the constitutional remedy both in parallel with its appeal on points of law and after the Supreme Court had declared the latter inadmissible. 40. The Government further argued that the Supreme Court, in its capacity as the court of appeal on points of law, had examined the alleged shortcomings which, according to the applicant, had constituted grounds for that remedy. The Supreme Court had given relevant and sufficient reasons for disagreeing with the applicant’s arguments. In the Government’s view, its conclusions had not been arbitrary and the applicant’s right to a fair hearing by a tribunal had been respected in the proceedings complained of taken as a whole. (b) The Court’s assessment (i) Recapitulation of the relevant principles 41. The relevant principles as regards the right of access to a court are set out, for example, in Stavebná spoločnosť TATRY Poprad, s.r.o.(cited above, §§ 35-37); Zborovský (cited above, §§ 44-48); and Ferenčíková (no. 39912/09, 25 September 2012, §§ 50-51); all with further references. They may be summarised as follows. 42. Article 6 § 1 does not guarantee a right of appeal as such. However, where several levels of jurisdiction do exist, each of those levels must comply with its guarantees, including the right of effective access to court. 43. Parties to proceedings must be able to exercise usefully the rights of appeal or other remedy available to them. The “right to court”, of which the right of access is one aspect, is not absolute; it is subject to limitations permitted by implication, in particular where the conditions of admissibility of an appeal are concerned, since by its very nature it calls for regulation by the State, which enjoys a certain margin of appreciation in this regard. Nonetheless, a restrictive interpretation of the right of access to court guaranteed by Article 6 § 1 would not be consonant with the object and purpose of that provision. The limitations applied must not restrict or reduce the individual’s access in such a way or to such an extent as to impair the very essence of the right. Furthermore, limitations will only be compatible with Article 6 § 1 if they pursue a legitimate aim and there is a reasonable relationship of proportionality between the means employed and the aim pursued. 44. In a number of cases, the Court has found a violation of Article 6 § 1 of the Convention because of lack of access to court, when a procedural rule was construed in a way that was unpredictable and at variance with the principle of legal certainty or where the domestic court showed excessive formalism (see Bureš v. the Czech Republic, no. 37679/08, § 144, 18 October 2012, with further references). 45. The Court has noted earlier that in the Slovakian legal system an appeal on points of law is an extraordinary remedy which is only available as long as any of the admissibility grounds are given in a particular case. While the existence of some admissibility grounds is easy to establish, the existence of others, for example that under Article 237(f) of the Code of Civil Procedure, depends on the assessment by the Supreme Court in its capacity as the court of appeal on points of law. The Court held that, in view of the applicable statutory rules and the existing practice of their application in respect of admissibility of appeals on points of law, its determination is susceptible of raising various Convention issues, in particular under its Articles 6 § 1 and 35 § 1 (see Ferenčíková, cited above, § 58). 46. The guarantees of Article 6 § 1 were found to extend to proceedings before the Constitutional Court of the Slovak Republic related to complaints concerning breaches of the right to a fair hearing by a tribunal in proceedings before the ordinary courts. Thus in the cases of Stavebná spoločnosť TATRY Poprad, s.r.o. and Zborovský (both cited above) the Court found a breach of Article 6 § 1. In those cases the Constitutional Court had rejected the first complaint (which the applicants had lodged after the appellate court’s decision) as premature on the grounds that, in parallel, they had lodged an appeal on points of law. After the Supreme Court had declared the latter remedy inadmissible, the Constitutional Court held, when dealing with the applicants’ second complaint, that the statutory two‑month time‑limit allowed it to examine the Supreme Court’s decision exclusively. (ii) Application of those principles to the present case 47. In the present case, the situation is different from the two cases mentioned in the preceding paragraph, in that the applicant sought redress before the Constitutional Court in respect of all the levels of ordinary courts involved only once, after the Supreme Court had declared his appeal on points of law inadmissible. The Court must therefore determine whether this justifies reaching a different conclusion from that in Stavebná spoločnosť TATRY Poprad, s.r.o. and Zborovský. The following considerations are relevant in that context. 48. The Constitutional Court has required, with reference to the principle of subsidiarity, that a party should lodge an appeal on points of law where the alleged breach of his or her rights is of such a nature that an appeal on points of law is available under the relevant provisions of the Code of Civil Procedure. It held initially that, where the Supreme Court had rejected an appeal on points of law as inadmissible, that decision could not be taken into account when determining the compliance with the two month time-limit in respect of a complaint concerning a breach of a claimant’s rights in proceedings leading to the decision of the appellate court (see paragraphs 26-28 above). 49. The Constitutional Court subsequently modified its practice in that it considered the above time-limit to have been respected in cases where an appeal on points of law was rejected as inadmissible and a constitutional complaint had been lodged in parallel with the appeal on points of law. In cases where the parties used those two remedies simultaneously the Constitutional Court rejected the constitutional complaint against the appellate court’s decision as premature, as the proceedings on appeal on points of law were pending. It emphasised that the statutory two-month time-limit under the Constitutional Court Act 1993 would be respected in cases where the appeal on points of law was declared inadmissible and the unsuccessful party lodged a fresh constitutional complaint (see paragraphs 29-30 above). 50. The Court acknowledges that it is essentially for the domestic courts to interpret and apply domestic law, including rules on admissibility and the use of domestic remedies. Nevertheless, the documents before it suggest that it would serve no practical purpose to require parties to use the two remedies in question in parallel with the inevitable consequence of (i) having the first constitutional complaint rejected as premature and (ii) the obligation to lodge a second complaint against the appellate court’s decision after the Supreme Court’s decision declaring an appeal on points of law inadmissible. 51. At the same time, a different practice on the same issue may be found in a number of the Constitutional Court’s decisions which are subsequent to the facts of the present case. In those cases, the parties lodged a single constitutional complaint after the Supreme Court’s decision on their appeal on points of law, and the Constitutional Court found the statutory time-limit to have been respected also as regards the appellate court’s decision (see paragraph 31 above). The Constitutional Court indicated in those decisions that such an approach corresponded to its current practice. 52. For the Court, such an approach is more appropriate from the point of view of a person’s right of access to a court in situations where, as in the present case, (i) in the appeal on points of law a party relies on arguments which are foreseen by the Code of Civil Procedure as grounds for an appeal on points of law, and (ii) the admissibility of that remedy in the particular circumstances depends on the discretion of the Supreme Court. It corresponds to the Court’s practice under which it is appropriate to examine compliance with the right to a fair hearing in the context of the proceedings taken as a whole (see Pélissier and Sassi v. France [GC], no. 25444/94, §§ 45-46, ECHR 1999‑II, and Bulena v. the Czech Republic, no. 57567/00, § 33, 20 April 2004). 53. The preceding consideration is relevant in the present case, since some of the alleged shortcomings complained of by the applicant constituted grounds for an appeal on points of law, and since the Constitutional Court Act 1993 and the Constitutional Court’s practice required that the applicant should lodge an appeal on points of law in that respect prior to using the constitutional remedy. 54. As to the Government’s argument that the applicant should have lodged his appeal on points of law simultaneously with the constitutional complaint, that requirement seems to have been abandoned by the Constitutional Court shortly after the facts of the present case (see paragraph 31 above). That requirement amounted to excessive formalism, since the latter remedy was bound to be rejected as premature pending the determination of the former remedy. The Court does not see such a course of action as pursuing a legitimate aim, and considers that it did not offer an adequate solution (see, mutatis mutandis, Zvolský and Zvolská, cited above, § 53). 55. As a result of its rejection of the complaint in respect of the appellate court’s decision, the Constitutional Court excluded from its review part of the arguments the applicant made, namely the alleged unfairness in the context of the determination of the merits of the case by the courts at first and second instance and the alleged lack of standing of the parties. 56. In view of the foregoing, the Court concludes that by rejecting part of the applicants’ complaint the Constitutional Court prevented him from asserting his right and effectively using the remedy available under Article 127 of the Constitution as regards relevant aspects of the proceedings in issue. The applicant’s “right to court” was thereby disrespected. There has therefore been a violation of Article 6 § 1 on that account. 2. Alleged unfairness of the proceedings 57. The applicant further complained that the proceedings had been unfair in that (i) the Regional Court had proceeded with the case in his absence and in disregard of his excuse, and (ii) the courts had not accepted his argument that he lacked standing as a defendant in the proceedings and that they had decided arbitrarily. 58. The Government argued that the proceedings taken as a whole had complied with the requirement of fairness laid down in Article 6 § 1. 59. Having regard to its conclusion that there was an infringement of the applicant’s right of access to a court, for the reasons stated above, and in view of the documents before it, the Court does not find it necessary to examine separately the applicant’s other complaints which relate to the alleged unfairness of the proceedings. II. ALLEGED VIOLATION OF ARTICLE 13 OF THE CONVENTION 60. The applicant complained that he had had no effective remedy at his disposal in respect of his complaint under Article 6 § 1. He relied on Article 13 of the Convention which reads as follows: “Everyone whose rights and freedoms as set forth in [the] Convention are violated shall have an effective remedy before a national authority notwithstanding that the violation has been committed by persons acting in an official capacity.” 61. The Government contested that argument. 62. The Court notes that this complaint is linked to the ones examined above and must therefore likewise be declared admissible. 63. Having regard to the finding of a breach of the applicant’s right under of access to a court and its conclusion on the applicant’s remaining complaints under Article 6 § 1 (see paragraphs 56 and 59 above), the Court considers that it is not necessary to examine whether, in this case, there has been a violation of Article 13 in conjunction with Article 6 § 1 (see A.B. v. Slovakia, no. 41784/98, § 71, 4 March 2003 or Komanický, cited above, § 60). III. APPLICATION OF ARTICLE 41 OF THE CONVENTION 64. Article 41 of the Convention provides: “If the Court finds that there has been a violation of the Convention or the Protocols thereto, and if the internal law of the High Contracting Party concerned allows only partial reparation to be made, the Court shall, if necessary, afford just satisfaction to the injured party.” A. Damage 65. The applicant claimed 200,000 euros (EUR) in respect of non‑pecuniary damage. 66. The Government objected to the claim as excessive. 67. The Court considers that the above finding of a violation of Article 6 § 1 of the Convention constitutes in itself sufficient just satisfaction in the circumstances for any non-pecuniary damage the applicant might have sustained. B. Costs and expenses 68. With reference to the Ministry of Justice Regulation no. 655/2004, which governs lawyers’ fees, the applicant also claimed EUR 292.38 for the costs and expenses incurred before the Constitutional Court and EUR 457.94 for those incurred before the Court. 69. The Government argued that the applicant had not shown that the sums claimed had actually been incurred. 70. According to the Court’s case-law, an applicant is entitled to the reimbursement of costs and expenses only in so far as it has been shown that these have been actually and necessarily incurred and are reasonable as to quantum. In the present case, regard being had to the fact that the applicant was legally represented both before the Constitutional Court and in the proceedings under the Convention, the Court considers it reasonable to award the sum of EUR 700 covering costs under all heads. C. Default interest 71. The Court considers it appropriate that the default interest rate should be based on the marginal lending rate of the European Central Bank, to which should be added three percentage points. FOR THESE REASONS, THE COURT, UNANIMOUSLY 1. Declares the application admissible; 2. Holds that there has been a violation of Article 6 § 1 of the Convention as regards the applicant’s right of access to a court; 3. Holds that it is not necessary to examine separately the applicant’s remaining complaints under Article 6 § 1 of the Convention; 4. Holds that there is no need to examine the complaint under Article 13 of the Convention; 5. Holds that the finding of a violation of Article 6 § 1 as regards the applicant’s right of access to a court constitutes in itself sufficient just satisfaction for non-pecuniary damage; 6. Holds (a) that the respondent State is to pay the applicant, within three months from the date on which the judgment becomes final in accordance with Article 44 § 2 of the Convention, EUR 700 (seven hundred euros), plus any tax that may be chargeable to the applicant, in respect of costs and expenses; (b) that from the expiry of the above-mentioned three months until settlement simple interest shall be payable on the above amount at a rate equal to the marginal lending rate of the European Central Bank during the default period plus three percentage points; 7. Dismisses the remainder of the applicant’s claim for just satisfaction. Done in English, and notified in writing on 11 February 2014, pursuant to Rule 77 §§ 2 and 3 of the Rules of Court. Santiago QuesadaJosep CasadevallRegistrarPresident

Opinion of Mr Advocate General Tesauro delivered on 2 October 1990. - SARPP - Société d'application et de recherches en pharmacologie et phytotherapie SARL v Chambre syndicale des raffineurs et conditionneurs de sucre de France and others. - Reference for a preliminary ruling: Tribunal de grande instance de Paris - France. - Artificial sweeteners - Labelling - Advertising. - Case C-241/89. European Court reports 1990 Page I-04695 Opinion of the Advocate-General ++++ Mr President, Members of the Court, 1 . In this reference for a preliminary ruling the Tribunal de grande instance ( Regional Court ), Paris, asks the Court whether Article 10(1 ) of Law No 88-14 of 5 January 1988 and the Order of 11 March 1988 are compatible with Article 30 of the EEC Treaty inasmuch as they prohibit any statement alluding to the physical, chemical or nutritional properties of sugar or to the word "sugar" in the labelling or advertising of artificial sweeteners . I refer to the Report for the Hearing for an account of the relevant legal provisions and the facts of the dispute in the main proceedings . 2 . Before dealing with the substance of the question referred to the Court, I consider it necessary to make several brief comments . Firstly, it is clear that the question referred by the national court must be reformulated . The Court of Justice has consistently held that in the context of a reference for a preliminary ruling it has no jurisdiction to decide whether provisions of national law are compatible with Community law . However, if a reference for a preliminary ruling is imprecisely formulated, it may identify the question of Community law in terms which enable it to give a ruling . Moreover, as the Commission has rightly pointed out, in order to give satisfactory guidance to the national court, it is necessary in particular to refer to the rules laid down in Council Directive 79/112/EEC of 18 December 1978 on the approximation of the laws of the Member States relating to the labelling, presentation and advertising of foodstuffs, ( 1 ) in compliance with the case-law of the Court of Justice according to which, in order to provide a satisfactory answer to a national court which has referred a question to it, the Court of Justice may deem it necessary to consider provisions of Community law to which the national court has not referred in the text of its question . ( 2 ) 3 . Directive 79/112/EEC, which enacts Community rules of a general nature applicable horizontally to foodstuffs, was conceived with the intention of improving the functioning of the common market and the free movement of goods while at the same time ensuring that consumers received correct information and adequate protection . ( 3 ) The scope of the directive, as defined in Article 1(1 ), appears to coincide with the scope of the French provisions at issue, which also apply to products intended for the ultimate consumer . ( 4 ) The title itself of Law No 88-14 makes it clear that the law concerns legal actions brought by recognized associations of consumers and information supplied to consumers themselves . Moreover, the directive appears to cover both cases in which artificial sweeteners are intended for sale as such and cases in which they are an ingredient of another food product intended for sale to the ultimate consumer ( Articles 1(1 ) and 3(1 ) ). 4 . There may in fact be some doubt as to whether the directive and the French law correspond exactly in extending the prohibition to advertising since that is a matter which the Community directive touches upon only in passing . However, it must be accepted that the French law does not set out to regulate the forms and methods of promoting sales but merely extends to advertising the prohibition imposed with regard to the labelling of the products in question, and that the directive deals with some aspects of advertising, in particular the requirement that information supplied to the consumer should not be misleading ( Article 2 ). In my view, therefore, the French law in question, taken as a whole, falls within the scope of the directive . 5 . The rules laid down in the Community directive provide in particular, in Article 2, that the labelling and the methods used ( paragraph 1(a ) ) and the presentation and advertising of foodstuffs ( paragraph 3 ) must not be such as could mislead the purchaser to a material degree, particularly as to the characteristics of the foodstuff or by attributing to it effects or properties which it does not possess, or, finally, by suggesting that it possesses special characteristics when in fact all similar foodstuffs possess such characteristics . Article 3 lists the only particulars which are compulsory on the labelling of foodstuffs, subject to a number of conditions and derogations provided for in the articles which follow . Finally, Article 15 provides that the Member States may not prohibit trade in foodstuffs which comply with the directive by the application of non-harmonized national provisions governing the labelling and presentation of foodstuffs unless such provisions are justified on grounds of, in particular and for our purposes here, protection of public health or prevention of unfair competition . 6 . That having been said, with regard to the legislation at issue, let me say straight away that a prohibition of the use of the word "sugar" which is as general as that imposed by the French legislature, and which even prohibits the use of the expression "sucré avec" [sweetened with] and brand names which contain the radical "suc" ( for example Maxi-suc, Pouss-suc, Sucredulcor ), goes, in my opinion, far beyond what is required by Directive 79/112 and in particular Article 2 thereof . Far from ensuring that the information supplied to consumers is accurate, a prohibition which is so comprehensive and indiscriminate is likely to achieve the opposite effect, forming an obstacle to the satisfactory and full provision of information . There is thus no way, for example, of indicating that a product does not contain sugar, which is precisely what the purchaser wishes to know . Similarly, if the use of the words "sucré avec" or "pouvoir sucrant" is prohibited, understanding the function of the artificial sweetener is certainly made more difficult, since in French there are no corresponding expressions which are easily understood by the great majority of people . That is confirmed by the fact that the French law itself, with reference to artificial sweeteners ( Article 10(a ) ), refers to "pouvoir sucrant ". Moreover, the derogation provided for in the French law, which allows sweeteners marketed in the medical and pharmaceutical sectors before 1 December 1987 to retain their former brand names and trade marks, is potentially discriminatory because, given the situation on the market, it would seem to favour French products, and it removes all credibility and force from the argument that consumers must be protected ( and, in fact, all the other arguments relied on ) because if there is in fact a possibility of confusion, it is not clear why some products should be allowed to retain their previous names . 7 . If therefore, in the light of what has already been said, it is found to be the case that the French law goes beyond what is allowed by Article 2 of the directive for the protection of consumers, the only possible justification could be the derogation provided for in Article 15(2 ). With regard in particular to the prevention of unfair competition, the argument put forward in the observations submitted by the Chambre syndicale des raffineurs and conditionneurs de sucre is, in substance, that since campaigns have been repeatedly mounted against sugar, merely using that word in the labelling of a product which is in some way a competitor constitutes unfair competition . Clearly, that is not the strongest and most convincing of arguments . It is frankly difficult to accept the argument that the information "without sugar" is in itself a derogatory remark about sugar since a consumer would associate a product referred to in that context with harmful effects on his own health . If that line of reasoning were followed, we would also have to regard a reference to a decaffeinated or alcohol-free beverage not as information supplied to the purchaser but as a derogatory remark about caffeine and alcohol . Let me add that that argument appears to be motivated by a rather low opinion of the ability of consumers to understand and to form judgments . Nor is it reasonable to argue, as the French Government does, that the law in question is justified by the need to "prevent abusive practices" ( p . 11 of the observations of the French Government ), since a prohibition of that kind is, in any event, manifestly disproportionate to that objective . If abusive practices exist, they can be suppressed by means of the general legal provisions which seek to protect consumers or prevent unfair competition . It is clear that Community law does not preclude the prevention of unfair competition which consists in disparaging a rival product by stating or implying that it is harmful to health . However, in my opinion, that is not the point at issue in the present case . 8 . With regard next to any grounds concerning the requirement to protect public health ( raised to some extent by the national court itself ), in my opinion they are not seriously tenable since, as I have already said, mention of or reference to the word "sugar" in the labelling of a product does not in itself mislead the consumer; on the contrary, it may enable the consumer to make a more informed choice . In fact, the provisions of the French law at issue in this case are not those intended to ensure the protection of public health but rather other specific provisions concerning, for example, the obligation to indicate the presence of phenylalanine or to warn pregnant women not to use large amounts of the product . 9 . Before concluding, I would like to emphasize that the same conclusion would be reached even if the Court were to consider the aspects of the law at issue which relate to advertising in the light of Article 30 of the Treaty . In that regard, it should first be pointed out that, as the Court has consistently held, ( 5 ) the prohibition of measures having an effect equivalent to quantitative restrictions laid down in Article 30 of the Treaty applies to all trading rules enacted by Member States which are capable of hindering, directly or indirectly, actually or potentially, intra-Community trade . In particular, a law which restricts or prohibits certain forms of advertising and certain means of sales promotion may, although it does not directly affect imports, be such as to restrict their volume because it affects marketing opportunities for the imported products . The possibility cannot be ruled out that to compel a producer either to adopt advertising or sales promotion schemes which differ from one Member State to another or to discontinue a scheme which he considers to be particularly effective may constitute an obstacle to imports even if the legislation in question applies, as in this case, to domestic products and imported products without distinction . ( 6 ) It should then be pointed out that, as the Court has emphasized on a number of occasions, citing the judgment in Rewe, ( 7 ) in the absence of common rules relating to the marketing of the products at issue, obstacles to movement within the Community resulting from disparities between the national laws must be accepted if they apply to national and imported products alike and are necessary for reasons of public interest such as those laid down in Article 36 of the Treaty, for example the protection of public health or mandatory requirements relating, inter alia, to consumer protection and fair trading . As I have just shown, such reasons do not arise in the present case . 10 . In the light of the foregoing considerations, I propose that the Court of Justice should give the following reply to the national court : "The provisions of Directive 79/112/EEC, in particular Articles 2 and 15 thereof, are to be interpreted as precluding the application of national legislation which prohibits use of the word "sugar" or any reference to the physical, chemical or nutritional properties of sugar in the labelling of artificial sweeteners and in their advertising if the artificial sweeteners also possess those properties ." (*) Original language : Italian . ([ suprscpt]1)1 OJ 1979 L 33, p . 1 . ( 2 ) Judgment in Case 35/85 Procureur de la République v Tissier [1986] ECR 1207, paragraph 9 . ( 3 ) See the second, third, fourth and seventh recitals in the preamble . ( 4 ) It should be noted that Directive 79/112/EEC was amended by Directive 89/395/EEC of 14 June 1989 ( OJ 1989 L 186, p . 17 ), which extended the scope of the directive to foodstuffs intended for supply to restaurants, hospitals, canteens and other similar mass caterers . ( 5 ) See primarily the judgment in Case 8/74 Procureur du Roi v Dassonville [1974] ECR 837, paragraph 5 . ( 6 ) Judgment in Case 286/81 Oosthoek' s Uitgeversmaatschappij [1982] ECR 4575, paragraph 15 . ( 7 ) Judgment in Case 120/78 Rewe v Bundesmonopolverwaltung fuer Branntwein [1979] ECR 649, paragraph 8 .

Opinion of Mr Advocate General Darmon delivered on 13 November 1990. - Trave-Schiffahrtsgesellschaft mbH & Co. KG v Finanzamt Kiel-Nord. - Reference for a preliminary ruling: Bundesfinanzhof - Germany. - Raising of capital - Capital duty - Interest-free loan granted by a member. - Case C-249/89. European Court reports 1991 Page I-00257 Opinion of the Advocate-General ++++ Mr President, Members of the Court, 1. As in Case C-15/89, the preliminary question submitted by the Bundesfinanzhof in this case requests the Court to interpret Article 4(2)(b) of Council Directive 69/335 of 17 July 1969 concerning indirect taxes on the raising of capital (1) (hereinafter referred to as "the Directive"). 2. The facts are very simple. Trave Schiffahrts-Gesellschaft mbH & Co. KG (hereinafter referred to as "Trave"), which was created on 27 June 1975, received from its members loans totalling DM 131 million. As regards the years 1977 to 1983, the loans were granted free of interest. By a notice of 7 December 1984 the Finanzamt (Finance Office) Kiel-Nord subjected the making available of those loans to capital duty amounting to DM 361 335. Trave contested that charge before the competent German courts. 3. The case came before the Bundesfinanzhof which has referred for a preliminary ruling a question essentially seeking to establish whether, firstly, an interest-free loan granted to a heavily over-indebted capital company by one of its members can be charged capital duty and, secondly, how the capital duty is to be calculated. 4. Under Article 4(2)(b) of the Directive, the Member States may subject to capital duty "an increase in the assets of a capital company through the provision of services by a member which do not entail an increase in the company' s capital, but which do result in variation in the rights in the company or which may increase the value of the company' s shares". 5. The Court has consistently held that: "according to the principles on which harmonized capital duty is based, such duty should be charged only on transactions which constitute in law the raising of capital and only in so far as they contribute to increasing the company' s economic potential". (2) 6. In my view, it is indisputable that the granting of an interest-free loan by a member is a service which contributes to "increasing the company' s economic potential" in so far as it provides it with finance for which it does not have to bear the cost, which, depending on the state of the finance market, may be quite a considerable advantage. However, the Bundesfinanzhof inquires whether this is also the case where a heavily indebted company has a negative asset position. It points out in its order for reference that in previous decisions it has made no distinction in this regard. (3) According to the Bundesfinanzhof, that case-law is, however, criticized by some German academic writers who take the view that Article 4(2)(b) of the Directive allows duty to be charged only on increases in the net assets of the company and is inapplicable where the service in question does not render the balance positive since the liabilities far exceed the assets. 7. I do not consider it necessary to follow that school of thought. As I explained in my Opinion in Case C-15/89 Deltakabel BV, the reduction of a deficit by the provision of a service, even if only a partial reduction, may increase the value of the company' s shares, even where its asset position is markedly negative and continues to be so after the provision of the service, since such a reduction increases the undertaking' s ability to become viable again and reduces the additional efforts needed to achieve a financial balance. 8. The view held by some of those German commentators stems from a confusion between the terms net assets and company assets. As the Court held in its recent judgment in Siegen, "A company' s assets include all the property which the shareholders have contributed, together with any increase in its value ... the assets of a company which incurs losses will decline". (4) 9. A company' s asset position, being the sum of the assets of the company less its liabilities, if any, therefore represents in effect the value of the company, which may be a negative value. That concept is not to be confused with the net assets, which represent the net amount of the assets, which may be reduced to zero if the amount of the liabilities exceeds the amount of the assets. 10. The grant of an interest-free loan may therefore be subjected to the levying of capital duty. 11. However, the Bundesfinanzhof goes on to inquire as to the way in which the duty is to be calculated. According to Article 5(1)(d) of the Directive, "in the case of an increase in the assets, as referred to in Article 4(2)(b)", the duty is to be charged "on the actual value of the services provided, after deduction of the liabilities assumed and the expenses borne by the company as a result of the provision of such services". In the specific case of the grant of an interest-free loan, the value of the service is, in my view, the saving of interest made by the company. The rate of interest in force on the corporate finance market at the time when the loan is granted is undoubtedly to be taken into account since it determines the sum which the recipient company would have had to pay if it had been obliged to obtain finance on the market. 12. I therefore propose that the Court should rule: "(1) Article 4(2)(b) of Council Directive 69/335/EEC of 17 July 1969 concerning indirect taxes on the raising of capital allows the Member States to subject to capital duty the grant to a capital company of interest-free loans by its members, even if the grant of such loans does not have the effect of completely clearing the liabilities of the company. (2) In application of Article 5(1)(d) of the Directive, the amount of capital duty must be calculated on the basis of the amount of interest thus saved at the market rate applicable when the loans were granted, less any expenses borne by the company arising from those loans." (*) Original language: French. (1) OJ, English Special Edition 1969 (II), p. 412. (2) Judgment in Case 270/81 Felicitas Rickmers-Linie KG & Co. v Finanzamt fuer Verkehrsteuern [1982] ECR 2771; see also the judgment in Case 36/86 Ministeriet for Skatter og Afgifter v Investeringsforeningen Dansk Sparinvest [1988] ECR 409, paragraphs 13 and 14. (3) Judgment of 12 April 1972, II 37/63, BFHE 106, 123, BStBl. II 1972, 714; judgment of 31 January 1979, II R 46/77, BFHE 127, 227, BStBl. II 1979, 382; judgment of 11 July 1984, II R 87/82, BFHE 141, 569, BStBl. II 1984, 840. (4) Judgment of 28 March 1990 in Case C-38/88 Waldrich Siegen Werkzeugmaschinen GmbH v Finanzamt Hagen [1990] ECR I-1447. Translation

Opinion of Mr Advocate General Mischo delivered on 18 May 2000. - Sarrió SA v Commission of the European Communities. - Appeal - Competition - Article 85(1) of the EC Treaty, now Article 81(1) EC - Concept of single infringement - Information exchange - Order - Fine - Determination of the amount - Method of calculation - Statement of reasons - Mitigating circumstances. - Case C-291/98 P. European Court reports 2000 Page I-09991 Opinion of the Advocate-General 1. By application lodged on 28 July 1998 Sarrió SA (hereinafter Sarrió) appealed against the judgment of the Court of First Instance of 14 May 1998 in Sarrió v Commission (hereinafter the contested judgment), which had ruled on its action against Commission Decision 94/601/EC of 13 July 1994 relating to a proceeding under Article 85 of the EC Treaty (IV/C/33.833 - Cartonboard) (hereinafter the Decision). 2. In that decision fines were imposed on 19 manufacturers supplying cartonboard on the Community market on the ground that they had infringed Article 85(1) of the EC Treaty (now Article 81(1) EC). As regards the amount of the fine imposed on Sarrió, Article 3(xv) of the Decision stated: Sarrió SpA, a fine of ECU 15 500 000. 3. In its action before the Court of First Instance, Sarrió claimed that the Court should annul the Decision, in the alternative annul Article 2 of the Decision and Article 3 in so far as it imposed a fine on the applicant, and, in the further alternative, reduce the amount of the fine. 4. By the contested judgment the Court of First Instance upheld Sarrió's application in part, by partly annulling the order in Article 2 of the Decision prohibiting the appellant from participating in the future in certain forms of information exchange between companies in the cartonboard sector and by reducing the amount of the fine to ECU 14 000 000, but dismissed the remainder of the action. 5. For the full statement of the complaints formulated by Sarrió against the Decision and the grounds on which the Court considered it should uphold them in part only, I refer you to the contested judgment. However, I would point out here that the reduction in the amount of the fine made by the Court of First Instance was stated by the Court to be the consequence of its finding that Prat Carton, one of Sarrió's subsidiaries, had participated only in certain constituent elements of the infringement and for a shorter duration than the Commission claimed. 6. In its appeal, Sarrió claims that the Court of Justice should: (1) set aside the contested judgment - in so far as the Court of First Instance held that the Decision did not hold Sarrió responsible for an infringement relating to transaction prices and did not consider it necessary to evaluate Sarrió's conduct regarding the prices actually applied; - in so far as the Court of First Instance held that Sarrió's participation in the PG Paperboard meetings is in itself sufficient to implicate it in the collusion on market shares and downtime, or - in the alternative - in so far as the Court did not take account of the fact that Sarrió's failure to implement any concerted initiatives reduces the gravity of the infringement committed by Sarrió in comparison to that committed by other undertakings, and did not take into consideration the evidence offered to that end by Sarrió, or - in the further alternative - in so far as its categorisation of the infringement committed by Sarrió is incorrect with regard to the collusion on market shares and downtime; - in so far as the Court of First Instance did not consider it necessary to annul, in whole or in part, the fine imposed on Sarrió on the ground that the statement of reasons was defective, that defect being that the parameters systematically taken into consideration by the Commission for the purpose of calculating the said fine were not indicated in the Decision itself; - in so far as the Court of First Instance approved the Commission's method of calculating the fine, which consisted in converting the turnover for the reference year into ecus at the average exchange rate for that year and, on the basis of that conversion, fixing the amount of the fine directly in ecus, without evaluating the legal consequences or assessing the harm caused to Sarrió by the use of such a method; - in so far as the Court of First Instance granted a reduction of ECU 1 500 000 in the fine by reason of the short duration of Prat Carton's participation in the infringement; (2) refer the case back to the Court of First Instance if the Court of Justice considers that the state of the proceedings does not allow a final ruling to be given; (3) in any circumstances in which the Court allows this appeal against the contested judgment, annul the corresponding parts of the Decision; (4) reduce the fine by the amount the Court thinks appropriate; (5) order the Commission to bear the costs of the proceedings before both the Court of First Instance and the Court of Justice. 7. The Commission, the respondent in the appeal and defendant in the proceedings before the Court of First Instance, contends that the Court should: - dismiss the appeal; - order the appellant to pay the costs; 8. In support of the form of order sought, Sarrió submits five pleas, which are contained in point 1 of the form of order set out above and allege as follows: - the first plea: misinterpretation of the Decision in so far as concerns the infringement actually alleged; - the second plea: misinterpretation and misapplication of Community law as regards the inevitably anti-competitive effect of Sarrió's participation in the meetings of the producers; in the alternative, failure to take into consideration the fact that Sarrió did not implement the cartel; and, in the further alternative, incorrect categorisation of the infringement committed; - the third plea: failure to take into consideration the inadequate statement of reasons in the calculation of the fine and inconsistency between the grounds and the operative part of the judgment; - the fourth plea: failure to take into consideration the error in the method of calculating the fine; - the fifth plea: inconsistency between the grounds and the operative part of the judgment in so far as concerns the reduction in fine which was granted. 9. In order to avoid needless repetition, the details of those pleas will be set out as necessary as and when I examine them. The first plea: interpretation of the Decision as regards the alleged infringement 10. The first plea raised by the appellant seems at first sight paradoxical. The appellant is criticising the Court of First Instance for having held that the infringement which it was alleged to have committed and for which it was fined was not as wide-ranging as it thought could be inferred from the Decision. 11. According to the appellant, the Decision cannot be interpreted as alleging, as far as concerns prices, that the appellant participated in a cartel on both the announced prices, that is to say, the list prices, and the transaction prices, that is to say, the invoice prices to purchasers. 12. It claims to find confirmation of this point of view in the Commission's defence before the Court of First Instance, in which it states that the price cartel operated by the PWG in collaboration with the JMC was not merely a cartel on announced prices, but a cartel that went as far as agreeing periodic price increases for each type of product in each national currency and planning and applying simultaneous price rises throughout the Community. 13. For Sarrió, the distinction between collusion on announced prices and collusion on transaction prices has a particularly relevant legal significance, which was highlighted by the Court of Justice in its judgment in Ahlström Osakeyhtiö and Others v Commission, the so-called woodpulp case. 14. The Court of First Instance was therefore wrong to hold that, [i]n the present case, it follows from the foregoing that the Commission adequately explained in the grounds of the Decision that the concerted action related to list prices and aimed to bring about an increase in transaction prices (paragraph 60). 15. In fact, if Sarrió is so insistent that it should be accepted that it has been penalised for participating in a cartel on both announced prices and transaction prices, it is because it is seeking to establish that it has been penalised for acts it did not commit and thus obtain a reduction in the fine imposed on it. 16. Before the Court of First Instance and before the Court of Justice, it has expounded lengthy arguments designed to prove that, although it did indeed participate in a cartel on announced prices, which it acknowledged without any difficulty during the administrative procedure, it never participated in any way in a cartel on transaction prices. 17. By interpreting the Decision as not having held those involved in the cartel responsible for colluding on transaction prices, the Court of First Instance rendered those arguments completely irrelevant and deprived the claim for a reduction of the fine of any foundation. 18. In so far as it alleges that the contested judgment misinterpreted the Decision, the plea is admissible, contrary to the contention of the Commission, which regards it only as a dispute on the facts. 19. To assess the validity of the plea, it is necessary to look into the grounds put forward by the Court of First Instance for not considering that the Decision holds Sarrió responsible for participating in a cartel on transaction prices. 20. The Court of First Instance started with the finding that the Decision does not clearly indicate the prices - list prices or transaction prices - on which the members of the cartel agreed, and we cannot but agree with the Court on this point. Indeed, Article 1 of the Decision states that the parties to the cartel participated in an agreement and concerted practice originating in mid-1986 whereby the suppliers of cartonboard in the Community ... - agreed regular price increases for each grade of the product in each national currency, - planned and implemented simultaneous and uniform price increases throughout the Community, - reached an understanding on maintaining the market shares ..., - increasingly from early 1990, took concerted measures to control the supply of the product in the Community in order to ensure the implementation of the said concerted price rises, - exchanged commercial information on deliveries, prices, plant standstills, order backlogs and machine utilization rates in support of the above measures. 21. To dispel that uncertainty, the Court of First Instance, as required by the settled case-law of the Court of Justice, directed its examination at the statement of reasons for the Decision. 22. At the end of that examination it reached the conclusion that the Decision is indeed interested in the transaction prices, if only because the fine imposed on the members of the cartel had to take into account the cartel's effects on the market, as a factor in determining the gravity of the infringement; however, what is held to be an infringement is only the collusion on fixing the list prices, which were quite clearly intended to achieve a rise in the invoice prices. 23. Indeed, I cannot see why a cartel would be interested in reaching agreement on list prices by which the various sellers would not feel at all bound in their negotiations with their customers. 24. Identical list prices - even if not accompanied by absolutely identical transaction prices, since buyers could, in specific cases, depending on the quantities bought or other factors, obtain transaction terms which were more favourable than the list prices - are in themselves clearly a factor seriously restricting competition, because they are liable to convince buyers that they will probably not obtain significantly better terms from one supplier than from another, and should give rise to a fine. 25. The Decision sought to fine an infringement, collusion on announced prices, in so far as it had an unlawful purpose in the light of competition law, namely the standardisation of transaction prices. 26. However, it definitely did not state that that purpose had been systematically achieved during the whole period of the infringement nor did it consider that the fact that the purpose had, in most cases, been achieved, itself constituted a different infringement, in addition to the one which the undertakings involved in the cartel had committed by standardising the list prices. 27. In that, it is clearly distinguishable from the decision which gave rise to the woodpulp case, which was presented as penalising two different infringements, a collusion on announced prices and an agreement on transaction prices. 28. The fact that, when an undertaking deviated in its commercial dealings from the list prices agreed at the periodic meetings of the members of the cartel, the others complained and drew its attention to posted prices, cannot be regarded as evidence that the transaction prices had also been fixed by common accord. 29. It confirms only that the ultimate aim, clearly agreed between the parties, of the collusion on list prices, was to standardise transaction prices as fully as possible and to ensure that any deviation from the agreed list prices in the prices charged by one undertaking should appear to the others as likely to jeopardise the achievement of the cartel's objective. 30. It was the list prices which were fixed by common accord, but if an undertaking deviated too far from them in its commercial dealings, this was seen as a breach of the duty to act in good faith towards the other members of the cartel, that is if it is possible to invoke the principle of acting in good faith in the case of an unlawful agreement. 31. The Commission was indeed interested in the transaction prices and in the discussions to which a price gave rise if it differed too much from the list prices, but this was to establish that the aim was the implementation of standard transaction prices and to assess the true extent of the commitments made by the members of the cartel. 32. As pointed out above, the Commission's concern to evaluate the effects of the cartel was totally reasonable, and Sarrió is in no position to describe it as a reflection of the Commission's intention to penalise, in addition to the cartel on announced prices, a cartel on transaction prices. 33. In fact, it is the appellant which can be criticised for misinterpreting the Decision, not the Court of First Instance, and therefore its first plea should, in my view, be rejected. There is no need to assess the relevance of the arguments it puts forward to show that at no time did it participate in a cartel on invoiced prices, an infringement with which, as we have just seen, it was never charged. The second plea: the inferences properly drawn from the finding that the appellant took part in the meetings of the members of the cartel 34. In its second plea the appellant's main complaint is that the contested judgment rejected its argument that its participation in the meetings of the various bodies of the PG Paperboard, a professional association whose aims are essentially lawful, is not sufficient to establish its participation in a cartel to maintain market shares and to arrange planned production stoppages to control supply. 35. The appellant considers that the Court of First Instance erred in law in stating, in paragraph 118 of the contested judgment, that the fact that an undertaking does not abide by the outcome of meetings which have a manifestly anti-competitive purpose is not such as to relieve it of full responsibility for the fact that it participated in the cartel, if it has not publicly distanced itself from what was agreed in the meetings (see, for example, the judgment in Case T-141/89 Tréfileurope v Commission [1995] ECR II-791, paragraph 85). Even assuming that the applicant's conduct on the market was not in conformity with the conduct agreed, that in no way affects its liability for an infringement of Article 85(1) of the Treaty. 36. From the appellant's point of view, participation in a meeting which has an anti-competitive purpose does not in itself constitute conduct which can be fined, and it was for the Commission to adduce evidence that the undertaking implemented the decisions adopted during such a meeting. To require the undertaking to prove that it did indeed distance itself from those decisions, that is to say, that it neither approved nor implemented them, was to place it under an impossible burden of proof. 37. I shall begin by stating, as does the Commission, that the conclusion reached by the Court of First Instance, namely that Sarrió was correctly fined for having participated in a collusion to stabilise market shares and control supply, is not based only on paragraph 118 of the contested judgment, cited above. This argument is described as taking third place, the Court having previously established that it was the collusion which the Commission considered an infringement, not its implementation, and that Sarrió had definitely participated fully in that collusion. 38. That participation clearly raises issues of fact on which the Court of Justice is not to give a ruling on appeal. However, I would point out that, apart from the fact that the Court of First Instance carefully considered the probative value of the evidence adduced by the Commission to establish both that there had been collusion and that the appellant had participated in it, Sarrió's denials seem to me singularly lacking in credibility. 39. Indeed, the appellant, without disputing that it attended the meetings during which the collusion was arranged, is trying to attribute to that attendance a significance and effect which it believes exculpates it. 40. If we are to believe the appellant, its attendance was merely a defensive measure, since all it meant was that the appellant had the opportunity to protect itself against the aggressivity of the Scandinavian, German and Austrian producers, whose competitive position was much more favourable than its own. 41. I am not sure that this explanation regarding the concerns which motivated it, when it participated in the meetings held by the members of the cartel, serves the appellant's cause. Quite the contrary, since it thus appears that Sarrió had, from its own point of view, an obvious interest in participating in a cartel which, by eliminating price wars, by sanctioning the distribution of market shares and by regulating supply, could mitigate the effects of the weakness of its competitive position. 42. In any event, the possibility that conduct which objectively constitutes an infringement of the competition rules may be penalised is completely unconnected with the aggressive or defensive motives of the participants; however, the second of these is in practice by far the more frequent because only those who fear the effects of competition have a genuine interest in restricting it. 43. Moreover, whatever Sarrió's motives may have been, de facto the effect of its participation in the meetings of the members of the cartel has been to support them, by allowing the cartel to bring together all the important sellers in the Community market and, consequently, to lend the infringement a degree of gravity rarely achieved. 44. All these factors preclude the finding that the Court of First Instance infringed Community law by rejecting Sarrió's argument that it did not participate in a collusion arranged during the meetings it attended. 45. Nevertheless, I do not intend to evade the issue of the validity of paragraph 118 of the contested judgment, namely the attribution of liability to an undertaking merely because it has participated in meetings which clearly have an anti-competitive purpose, if it has not publicly distanced itself from them. Actually I am convinced that an undertaking's participation in such meetings must be taken to mean that it intends to participate in the decisions made, and that it would be impossible to prevent infringements of competition law committed by cartels if it were to be accepted that an undertaking may attend such meetings with impunity. A meeting between directors of undertakings trying to agree on prices or market shares is quite different from a literary circle, and the representatives of an undertaking who realise, during a meeting, that the agenda is not the one on which they took the decision to participate, are still free to leave the meeting, without even needing to criticise the other participants for leading them into a trap. 46. Nor do I find anything unlawful in the Court's requirement that an undertaking, if its participation in the meeting is not to be considered as participation in an infringement, should publicly distance itself from it. Although Sarrió argues that it may prove difficult to distance oneself in the circumstances, the answer to that is that an undertaking which attends a meeting whose purpose is completely unambiguous takes a deliberate risk and is therefore in no position to claim that it found it difficult to prevent the implementation of that purpose. Moreover, in view of the skill with which the members of the cartonboard cartel concealed their anti-competitive practices, I have no doubt that an undertaking which has become involved in a meeting to whose aims it does not subscribe can adduce evidence that it has distanced itself from an infringement. 47. The main allegation contained in the appellant's second plea should therefore be rejected as unfounded. 48. It is also necessary to reject the complaint, submitted in the alternative, that the Court failed to take into account that there was no evidence whatsoever that the appellant had implemented the decisions taken with regard to stabilising market shares and controlling supply. 49. Sarrió points out that its sales volume has been falling, its market shares have been cut back and it has never arranged production stoppages other than those ordered for technical reasons. 50. With regard to the infringement for which it has been penalised, this evidence is of no consequence. As the contested judgment states, the probative value of the proof adduced by the Commission is such that information as to the applicant's actual conduct on the market cannot affect the Commission's conclusions concerning the fact of the existence of collusion on the two aspects of the policy at issue (paragraph 116). 51. In any event, even supposing that this evidence reflects Sarrió's actual conduct, it could not contradict the Commission's conclusions, as the Court points out in paragraph 117 of the contested judgment. It has never been claimed that the collusion regarding market shares led to a complete freeze of these shares and it has always been acknowledged that, prior to 1990, the restriction of supply by planned production stoppages was not necessary, because demand was brisk, so that the fact that, in 1990 and 1991, Sarrió did not itself stop production as part of the concerted action which the members of the cartel are alleged to have taken, does not prove that it was not involved in it. 52. There is still one final complaint, submitted in the further alternative, to be considered: that the Court of First Instance was wrong to hold that there was a cartel in respect of the freeze on market shares and planned production stoppages, since the only complaint which can be made against Sarrió is that it participated in an exchange of information, the insignificance of which could, at the very most, if we are to believe the appellant, justify only a token fine. We do not need to dwell on this complaint since it is clear, after examining the previous claims, that it conflicts with the facts as established by the Commission and confirmed by the Court of First Instance. 53. All the arguments expounded by the appellant concerning the distinction which must be drawn, with respect both to the gravity of the infringement and to the fine imposed in respect of it, between a mere exchange of information and a cartel are irrelevant since it has been established that, in this case, it did not merely participate in an exchange of information but was actively involved in a collusion on market shares and volume of production, so that there were, in so far as the appellant was concerned, multiple infringements. 54. Finally, the appellant describes as disappointing the reasoning which led the Court of First Instance to hold that its argument contesting the Commission's evaluation of the information exchange scheme, in which it acknowledged taking part, was inadmissible because it was presented for the first time in the reply. In this connection I shall merely point out that the appellant's disappointment is obviously not likely to lead the Court of Justice hearing its appeal to question the validity of the conclusion reached by the Court of First Instance. That conclusion is well founded in law and, as the Commission points out, Sarrió has not submitted any evidence to contradict the finding of the Court of First Instance that this plea appeared only at the reply stage. 55. I therefore propose that Sarrió's second plea be rejected in its entirety. The third plea: the inadequate statement of reasons in the Decision as regards the fixing of the fine 56. The appellant claims that the Court of First Instance could not, without being inconsistent, hold that the statement of reasons in the Decision was insufficient in so far as the fine imposed on the appellant was concerned and, at the same time, refuse to annul it on this point. 57. As this criticism is the same as that made by the appellant Mo och Domsjö AB in Case C-283/98 P, I refer, as regards the reasons which justify the rejection of this plea, to the Opinion which I am delivering today in that case. The fourth plea: the Commission's use of an incorrect method of calculating the amount of the fine 58. By this plea the appellant contests the Court's refusal to agree with its criticism of the method used by the Commission to calculate the amount of the fine imposed on it. Before examining Sarrió's claims point by point, it is expedient to recall the method used. 59. The Commission opted to fix the amount of the fines in ecus. In order to determine the amount, it took into consideration the turnover, expressed in ecus, of the various members of the cartel for 1990, the last full year in which the cartel operated. The conversion into ecus was made using the average rate of exchange during 1990 of the national currencies of the various members of the cartel. 60. Sarrió's first complaint against the contested judgment is that the statement of grounds is defective, in that at no time did the Court of First Instance expressly determine the issue, raised by the appellant, of the discrimination suffered by those undertakings whose national currency had depreciated between 1990, the Commission's year of reference for fixing the amount of the fines, and 1994, the year in which the Decision imposing those fines was adopted. 61. In point of fact, Sarrió's complaint against the Court is that it did not rule on one of its arguments. On that point, I have to share in the Commission's surprise, since the considerations set out in paragraphs 392 to 404 of the contested judgment regarding the method used by the Commission to fix the amount of the fines are, in essence, specifically designed to show that the method makes it possible, by the use of objective data expressed in the same unit of currency, to avoid the distortions which would be the inevitable consequence of using the different national currencies which, over the years, have moved in different directions. 62. Now, what is the aim of using a single unit of currency when fixing the fines to be imposed on the undertakings belonging to a cartel - depending on the degree of liability of each undertaking - if not to avoid discrimination? Sarrió is wrong to claim that it cannot find a response to an allegation of discrimination in a line of argument which makes every effort to show that the principle of equal treatment has been observed. 63. It is true that Sarrió is entitled to consider that the Court's arguments are not convincing, but it cannot seriously argue that the question of possible discrimination was passed over in the contested judgment. 64. The appellant's second complaint concerns the Court's failure to criticise the Commission's decision to fix the fine according to the turnover of the last full year in which the cartel operated, a decision which introduces a dualism arising from the fact that two turnovers are taken into account, one by reference to which the fine is fixed and one of the last financial year prior to the adoption of the Decision imposing the penalty, which is applied in order to verify compliance with the limit of 10% of the turnover of the penalised undertaking, established by Article 15(2) of Council Regulation No 17 of 6 February 1962, First Regulation implementing Articles 85 and 86 of the Treaty. 65. To this complaint is added, once again, a complaint relating to the reasoning. Sarrió maintains that the innovative nature of this dualism required particularly detailed reasoning, which it claims not to have found in the Court's arguments on this matter. 66. In fact, the appellant is careful not to state that, by using the turnovers of two different years, the Commission infringed Article 15(2) of Regulation No 17, but seeks to establish that the choice of the turnover for the last year of the cartel's activity, far from ensuring that the fine will reflect the gravity of the infringement and the economic power of the penalised undertakings, risks producing the opposite result. 67. Thus, according to the appellant, if an undertaking's turnover increased significantly during the period between the end of the infringement and the imposition of the fine, the Commission will inevitably be tempted - in order to make sure that, compared with the turnover for the last financial year before the penalty, the amount of the fine does not seem, if not derisory, at least too low, because very much below the 10% threshold fixed by Article 15(2) of Regulation No 17 - to fix the fine by applying a very high rate to the turnover used for that purpose, that is to say, to impose on the undertaking a fine wholly disproportionate to its economic power at the time of the infringement 68. I would say, in the first place, that this argument is not at all convincing. 69. Indeed, as well as the fact that it ascribes very dark designs to the Commission and makes light of the judicial review to which the institution is subject, it completely and wrongly disregards the fact that it only needs the turnover of one member of the cartel to slump, or at least stagnate or fall off, for the Commission, having regard to its obligation to observe the principle of equal treatment and the limit fixed by Regulation No 17, to be prevented from using such tactics, even if it were tempted to do so. 70. However, I should point out above all that it is not a question of determining whether the method used by the Commission is the only one which is admissible or the best, but of ascertaining whether it is admissible, that is to say, whether or not it is rendered inadmissible by Regulation No 17 or the general principles laid down by the case-law of the Court of Justice. 71. Now, on this point, Sarrió is hard put to adduce evidence to cast doubt on the validity of the finding of the Court of First Instance. 72. From my point of view, the Court, by listing the advantages of the method chosen by the Commission to assess both the scale of the infringement and the size and power of its perpetrators, gave a wholly convincing explanation of why the method is not unlawful. In other words, the dualism criticised by the appellant is justified and, even if it were innovative, was adequately justified by the Court of First Instance. 73. The appellant's third and last complaint relates to the Court's refusal to acknowledge the validity of its argument that the fixing of the fine in ecus on the basis of the turnover of the last complete year during which the cartel operated, converted into ecus by applying the average rate of exchange during that year, led to discrimination each time the exchange rates subsequently altered: undertakings whose national currencies appreciated saw the burden of the fine they had to pay lessen in real terms, while those whose currency depreciated saw the burden increase, sometimes, and particularly in the present case, considerably. 74. In Sarrió's view, the method implemented by the Commission, since it made it bear exchange risks, had iniquitous consequences and is therefore unacceptable. It was also unacceptable from a logical point of view, since it was impossible to invoke the need to avoid the repercussions of exchange rate fluctuations in order to justify calculating the fine on the basis of the turnover of the reference year converted into ecus, the currency of reference, not of payment, and at the same time to show no interest in the impact of the fluctuations in those rates on the amount which the penalised undertaking will actually have to pay in national currency. 75. To examine the validity of this complaint, it is necessary to keep in mind that the Commission has a degree of latitude, which is admittedly not unlimited - Article 15(2) of Regulation No 17 is a reminder of that fact - but which prevents the Court from criticising the method used by the Commission unless it is able to show that it is unlawful. 76. It is therefore pointless for Sarrió to put forward alternatives, more favourable to its own interests, to the method used to fine it, when the issue is not to determine which is the best possible method but to ascertain whether the one which has been implemented is lawful. 77. On this point, Sarrió does not adduce convincing evidence. It is true that it criticises the fixing of the fine in ecus, but Regulation No 17 nowhere prohibits the use of the ecu for fixing the amount of the fine, and the reasons which led the Court of Justice, in its judgment in Générale Sucrière and Béghin-Say v Commission and Others, to refuse to allow the fine to be fixed in the unit of account no longer apply, as the Court of First Instance points out, since the ecu has a very different status from that of a unit of account. 78. Sarrió also protests against the introduction, into the mechanism for putting an end to infringements, of uncertainty arising from the currency fluctuations, maintaining that such uncertainty is acceptable only in business relations, but it is silent on the fact that the perpetrator of an infringement is subject to many other uncertainties. There is no guarantee that, when the time comes for it to meet its obligations in respect of its past unlawful conduct, it will have the financial resources to prevent the payment causing it significant loss. 79. On a constant turnover, its profit margin may have fallen drastically; it may have borrowed so heavily from banks that it is refused further credit; or, as a consequence of a deterioration in the economic situation, its turnover may have fallen, bringing a drop in income, if its profit margin has remained constant. 80. However, this uncertainty may also bring pleasant surprises. The undertaking may have come though a difficult phase and be enjoying a prosperity which it could not even have envisaged a few years previously. 81. All this cannot alter the gravity of the infringement which the undertaking committed at a certain time, and it is that gravity which determines the extent of the penalty it must pay. 82. The currency uncertainty itself will not necessarily be to the disadvantage of an undertaking whose national currency has depreciated. 83. Consequently, if an undertaking exports a significant proportion of its products to countries with strong currencies, it will have had the opportunity both to increase its market shares, and therefore its turnover in national currency, and to improve its profit margin, since the profits it has made in the export markets will have been converted into the national currency at a more favourable rate. 84. Conversely, undertakings whose national currency has been revalued will have had to make sacrifices as regards profit margin in order to keep their export markets; accordingly, the revaluation of their national currency against the ecu, and the resulting decrease in the fine expressed in national currency, will only offset the increased burden of the fine in the light of the fall in profits. 85. To attempt to remove these uncertainties, which form an integral part of business life, by fixing the fines in national currency or using, only for undertakings whose currency has depreciated, a rate of conversion between the ecu and the national currency other than that of the last year in which the cartel operated, which was chosen in order to assess the gravity of the infringement, would risk introducing other distortions, without promoting equality between the members of the same cartel with regard to the method chosen by the Commission. 86. As the Commission rightly points out, whatever moment is chosen for the application of the ecu/national currency exchange rate, there is a risk of harming one undertaking or the other. Consequently, even the criterion suggested by the appellant, namely, the exchange rate on the date of the Decision, would only cause a wholly fortuitous element of disruption. 87. Furthermore, I agree with the Commission that the point made by the Court of First Instance in paragraph 399 of the contested judgment, concerning the appellant's presence in several markets, is also significant. The appellant thus, simultaneously, enjoyed the advantages and suffered the disadvantages of the exchange rate criterion which is in dispute. Moreover, as a result of selling its products it has received several European currencies, not only pesetas. 88. Finally, I should point out that the uncertainty connected with the fall of a national currency can, in any event, have only limited consequences, since Article 15(2) of Regulation No 17 precludes the amount which the undertaking has to pay from exceeding, at the time the fine is imposed, 10% of the turnover of its last financial year. 89. It cannot therefore but be found that neither the principle nor the impact of the uncertainty criticised by Sarrió is open to question. I therefore propose that the Court reject the appellant's fourth plea in its entirety. The fifth plea: the reduction in fine made by the Court of First Instance 90. In this plea Sarrió argues that the reduction of ECU 1 500 000 made in the fine by the Court of First Instance is not consistent with the findings it made concerning the appellant's involvement through its subsidiary Prat Carton in the anti-competitive activities attributable to the cartel in the cartonboard sector between 1986 and 1991. Let me begin by pointing out that these findings related both to the duration of that subsidiary's involvement, which the Commission had determined to be 60 months out of 60 and the Court reduced to 9 months, and to the anti-competitive practices in which it had taken part. The Court of First Instance held that Prat Carton could be held responsible for only a participation in the collusion on prices and in the collusion on supply control, whereas the Commission had considered that it was also actively involved in the collusion on freezing market shares. 91. Let us also remember that, in paragraphs 411 and 412 of the contested judgment, the Court of First Instance held: Because Prat Carton participated in some only of the constituent elements of the infringement and for a much lesser period than that found by the Commission, the amount of the fine imposed on the applicant must be reduced. In the present case, as none of the other pleas on which the applicant relies justifies reducing the fine, the Court, exercising its unlimited jurisdiction, sets the amount of that fine at ECU 14 million. 92. Sarrió infers from this - and I think we have to agree with it on this point- that the whole of the reduction it has received in the fine is linked to the errors of assessment made by the Commission in respect of its subsidiary. To demonstrate that the reduction is inadequate, it takes the turnovers of the parent company and of Prat Carton, ECU 224 200 000 and ECU 33 800 000 respectively, and calculates, by breaking down the total amount of the fine imposed by the Commission, ECU 15 500 000, the proportion payable by the parent company, which it assesses at ECU 13 500 000, and the proportion payable by Prat Carton, which it assesses at ECU 2 000 000. Comparing the amount of ECU 2 000 000 with the amount of the reduction, it then argues that, in view of the significance of the correction made by the Court of First Instance in respect of the part played by Prat Carton in the infringement, the reduction in the fine should have been much greater. 93. The Commission rebuts this argument by saying that the Court of First Instance exercised its unlimited jurisdiction, that the Court of Justice sitting in an appellate capacity cannot interfere in the exercise of that jurisdiction and that all Sarrió's calculations are without probative value, since the Commission, with which the Court of First Instance agrees on this point, had imposed an overall fine on Sarrió, not a fine which could be broken down into different amounts corresponding to the conduct of the various constituent parts of the undertaking. 94. However, I take the view, as does Sarrió, that the contested judgment is inconsistent or, to be more specific, contains an inadequate statement of grounds. Admittedly, it is indisputable that the Court of First Instance exercised its unlimited jurisdiction and it is also indisputable that the amount of a fine cannot be fixed by applying a mathematical formula. 95. However, the exercise of unlimited jurisdiction does not relieve the Court of its obligation to state grounds. In this case, if the Court thought that the reduction in the fine should not exceed ECU 1 500 000, on the supposition that the amount was based on the gravity of the infringement committed by Sarrió, it should have given an explanation for this, because the reduction received by Sarrió does not seem prima facie - in the light of the way in which the fines were calculated by the Commission, with which the Court of First Instance agreed in that respect - to be appropriate to the findings made concerning the extent of Prat Carton's involvement in the cartel. 96. I therefore consider that Sarrió's fifth plea is well founded and that the contested judgment should be set aside in so far as it fixed at ECU 14 000 000 the amount of the fine imposed on Sarrió. 97. This annulment should not, in my view, be accompanied by a referral of the case back to the Court of First Instance. The Court of Justice has the information required to draw the proper conclusions, since it is not necessary to discuss the validity of the findings of fact made by the Court of First Instance or to question the general level of the fines. The only issue is whether the Court of First Instance made an adequate reduction in the amount of the fine. 98. I, for my part, do not think so. The fine imposed on Sarrió was calculated by the Commission on the basis of its turnover for 1990 including, of course, that of Prat Carton. Now, the Court of First Instance found that Prat Carton participated in the collusion on prices and on supply control only from June 1990. It therefore has to be acknowledged that, as regards the subsidiary, the reference turnover, which in the Commission's calculation was based on Sarrió's overall turnover, relates to a period during which the undertaking participated in the collusion for only seven months, from June to December, which most certainly raises a problem of consistency. 99. I therefore consider that, in view of the connection between Sarrió's overall turnover and Prat Carton's turnover, the fact that Prat Carton did not participate in one of the elements of the infringement, and the brief duration of its participation, the amount of the fine imposed on Sarrió should be reduced to EUR 13 650 000. Costs 100. It is clear that the annulment of the contested judgment, even if only on one point, should be reflected in the costs. 101. In the contested judgment, the Court of First Instance ordered the appellant to pay its own costs and also half of the costs incurred by the Commission, and ordered the Commission to pay half of its own costs. 102. I propose that this distribution should be amended and that the appellant should pay its own costs and only two fifths of the costs incurred by the Commission. With regard to the costs relating to the appeal proceedings, I consider it appropriate for the appellant to pay its own costs and two thirds of the costs incurred by the Commission, given that, in my view, most of its pleas should be rejected. Conclusion 103. In the light of the foregoing arguments, I propose that the Court should: (1) Set aside the judgment of the Court of First Instance of 14 May 1998 in Case T-334/94 Sarrió v Commission in so far at it fixed the amount of the fine imposed on the appellant at ECU 14 000 000 and in so far as it ordered the appellant to bear its own costs and to pay half of the costs incurred by the Commission of the European Communities and ordered the Commission of the European Communities to bear half of its own costs; (2) Set the fine at EUR 13 650 000; (3) Order the appellant to bear, in respect of the proceedings before the Court of First Instance, its own costs and pay two fifths of the costs incurred by the Commission of the European Communities and, in respect of the proceedings before the Court of Justice, bear its own costs and pay two thirds of the costs incurred by the Commission of the European Communities; (4) Order the Commission of the European Communities to bear, in respect of the proceedings before the Court of First Instance, three fifths of its own costs and, in respect of the proceedings before the Court of Justice, one third of its own costs; (5) Dismiss the remainder of the appeal.

OPINION OF ADVOCATE GENERAL LENZ delivered on 17 February 1993 ( *1 ) Mr President, Members of the Court, A — Introduction 1. The background of this action for failure to fulfil obligations under the Treaty is the common system of value added tax regulated by the Sixth Directive ( ) in the version in which importation (meaning the physical entry of a product) from another Member State was a chargeable event. ( ) The Commission alleges that the French Republic has adopted and applied, in Article 414 of the French Customs Code, a system of penalties for offences against the legislation concerning value added tax on importation which, in certain respects, is incompatible with Article 95 of the EEC Treaty. Article 414 of the Customs Code is worded as follows: ‘Any act of smuggling and any act of importing or exporting without declaration where such offences relate to goods in the category of those which are ... heavily taxed within the meaning of this Code shall be punishable by a maximum of three years' imprisonment, confiscation of the undeclared goods, confiscation of the means of transport, confiscation of articles used to conceal the fraud and a fine equal to the value of the undeclared goods or up to twice that amount. Offences relating to goods ... the value of which does not exceed FF 5000 shall be punishable by a fine equal to the value of such goods.’ 2. The Commission's action was prompted by a particular case in which that provision was applied and in which the Cour d'Appel, Amiens on appeal imposed a fine of FF 20000 on a Belgian national, Mrs Yetta Patron, and ordered the confiscation of her car, which was registered in Belgium. According to that judgment, ( ) in 1983 Mrs Patron imported her car into France, where she resided at the time, without making the necessary declaration. Article 414 of the Customs Code was applied because the imported vehicle was liable to value added tax of 33% and was therefore ‘heavily taxed’ within the meaning of that provision. 3. In its application, the Commission raises two complaints on the basis of Article 95 of the EEC Treaty. 4. The first complaint relates to the fact that offences against the value added tax provisions for domestic transactions do not fall within Article 414 of the Customs Code, but are penalized under a special system of penalties. I refer to the Report for the Hearing ( ) for the features of this system, as set out by the provisions submitted by the defendant Member State. 5. In this connection the Commission considers that Article 414 is incompatible with Article 95 of the Treaty because it is contrary to the principle laid down in the Drexl judgment. ( ) In that judgment the Court ruled as follows: ‘National legislation which penalizes offences concerning the payment of value added tax on importation more severely than those concerning the payment of value added tax on domestic sales of goods is incompatible with Article 95 of the EEC Treaty in so far as that difference is disproportionate to the dissimilarity between the two categories of offences.’ 6. According to the Commission's second complaint, the said Article 414 contains no provision which ensures the application of the principles set out in the Gaston Schul judgment. ( ) In the particular case of Mrs Patron, the Commission states that, according to those principles, the value added tax paid in the Member State of exportation must be taken into account in fixing the fine on the basis of the value added tax payable. 7. In the reply, the Commission again claims that, in the particular case of Mrs Patron, the penalty imposed was disproportionate to the tax owed. Moreover, Mrs Patron denied that she was resident in France. On this point it should be observed that, where persons have dual residence, several factors have to be taken into account for determining the Member State in which a vehicle must be registered and taxed. In this connection the Commission refers to Article 7(1) of Directive 83/182 ( ) and the related judgment in the Ryborg case. ( ) 8. The Commission claims that the Court should: — declare that by introducing and applying the provisions of law, regulation or administrative action in force under Article 414 of the French Customs Code, which penalize offences concerning the payment of value added tax on importation from another Member State more severely than those concerning the payment of value added tax on domestic transactions, the French Republic has failed to fulfil its obligations under Article 95 of the EEC Treaty; and — order the French Republic to pay the costs. The French Government contends that the Court should: — declare the application unfounded, and — order the applicant to pay the costs. 9. The French Government regards the Commission's complaints as unjustified, and takes the view that certain arguments in the reply are out of time. B — Analysis I. Complaint that Article 414 of the Customs Code infringes the principle laid down in the Drexl judgment 10. To examine this complaint properly, first a few observations on the principle developed in the Drexl judgment are called for, and then it will be necessary to determine the precise scope of the Commission's complaint. 11. 1.In the Drexl case the Court examined two systems of penalties, one for offences on importation and the other for offences in relation to domestic transactions, which differed with regard to the nature and severity of the penalties. ( ) As in the present case in relation to ‘heavily taxed’ goods, the system applying to importation was laid down in the provisions on smuggling. 12. In view of that situation the Court had to reconcile two principles: the principle that the Member States are responsible for criminal penalties ( ) and the principle laid down by Article 95 of the Treaty that internal taxation must be neutral in relation to intra-Community trade. 13. In this connection the Court regarded certain differences in the penalties as permissible (paragraph 22 of the judgment): ‘The two categories of offences in question are distinguished by different circumstances concerning both the constituent elements of the offence and the greater or lesser extent of the difficulty of detecting it. Value added tax on importation is charged simply when the goods actually enter the territory of the Member State concerned, rather than on a transaction. These differences mean, in particular, that the Member States arc not required to have the same system of rules for the two categories of offences.’ 14. However, the Court did not consider there was any justification for the difference in the severity of the penalties for the two categories of offence, which was disproportionate to the dissimilarity between the two categories. ( ) 15. Therefore the discretion left to the Member States has two characteristics. First, with regard to the chargeable event for value added tax, the Member States may lay down a different system of penalties for offences on importation, that is, a system which links up with the provisions on smuggling (in the sense of evading import duties). Secondly, the Member States may provide for penalties of differing severity because offences against the value added tax provisions on importation are generally more difficult to detect than offences relating to domestic transactions. 16. The limits set by the Court to the Member States' discretion with regard to the framing of criminal legislation ( ) also relate to the severity of the respective penalties. In view of those limits the Member States are prohibited from infringing the requirement of equal treatment, for tax purposes, of domestic transactions and import operations by laying down for the latter such severe penalties that the difference in penalties no longer matches the difference between the two categories of offence. In this situation the greater severity of the penalties for offences on importation would appear not only as a response to the greater difficulty of detecting such offences, but also (at least in part) as an unacceptable obstacle to imports. 17. In the grounds of judgment, the Court clarified ( ) the prohibition thus imposed on the Member States by saying that it must amount to a manifest disproportion in the severity of the penalties. In my view, this clarification is not so much the result of weighing the Member States' interest in the framing of their criminal legislation against the Community's interest in safeguarding the fundamental freedoms and the smooth functioning of the common system of value added tax. ( ) It is explained rather by the fact that a ‘disproportion’ in the abovementioned sense cannot in general be established with mathematical precision. Let me demonstrate this with the following questions: — How great are we to regard the difference between the two categories of offence as far as the possibility of detection is concerned? — How much weight is to be attached to such difference when specifying the penalties? — Therefore, what should be the nature and degree of the differences between the penalties without their being disproportionate in relation to the differences between the two categories of offence? 18. The task of establishing the existence of a disproportion may be made more difficult if the systems of penalties are not structured in the same way, as is the case here and as was also the case in Drexl. 19. Finally, on the basis of these considerations it is also possible to determine how to compare the two systems of penalties in order to throw light on any disproportion as defined above. Such clarification also seems to me necessary to enable the Commission's specific complaint to be examined. 20. In this connection it should be observed that the systems in question here arc differently structured. In this case the comparison must take account of all the essential elements of both systems, so far as possible and necessary by contrasting comparable factors (normal penalty and severer penalties, penal-tics for attempted offences, rules for minor offences, incidental consequences [confiscation] and the like). Where the differences are particularly glaring, as in relation to the financial penalties or terms of imprisonment normally imposed, it may be sufficient to have regard to these. ( ) Otherwise all the said elements must be balanced against one another. ( ) 21. 2. Now that we have clarified the criterion which must, according to the Drexl judgment, be applied, we must define the complaint which the Commission bases on that judgment. 22. In this connection it should be observed that the only object of the Commission's criticism is the provision for confiscation laid down by Article 414 of the Customs Code, for which there is said to be no counterpart in the provisions concerning penalties for domestic transactions. The similar terms of the letter of formal notice, ( ) the reasoned opinion, ( ) and the application ( ) all lead to this interpretation of the complaint. The argument in the reply might have given rise to doubt concerning this interpretation. Some of the considerations put forward there might create the impression that the Commission objects to the entire system laid down by Article 414 of the Customs Code because it provides for more severe penalties than does the system for offences relating to domestic transactions. ( ) However, apart from the fact that in this connection the Commission has merely alleged a disproportion in that more comprehensive sense, without giving a detailed explanation, it replied as follows to a question from the Court: ‘In this case the Commission questions whether the defendant State has power, when checking the recovery of value added tax on the importation of goods from other Member States, to order penalties of confiscation of the imported goods if such penalties are not provided for in the system of penalties for offences relating to value added tax within the country.’ ( ) 23. As the threat of confiscation as a penalty bears no relation to the penalties in connection with domestic transactions, it is said, it creates a manifest disproportion between the penalties laid down for the two categories of offence. ( ) 24. The Commission adds that it did not ‘wish to complain generally of any difference in treatment, as regards penalties, which France may provide for, depending on whether the offences are committed on importation or within the country, although any such difference cannot be justified merely by the fact that the offence is connected with the importation of goods and not a domestic transaction’. ( ) 25. Finally, the Commission observes that, although the penalties may be on a sliding scale so as to take account of the different circumstances of offences and the difficulty of detecting some of them, there is no justification for the retention in an internal market of two provisions which are totally independent of each other and which lead to entirely different treatment according to whether the offence was committed on importation or within the country. ( ) 26. All in all, these parts of the reply to the Court's question confirm what is already clear from the Commission's application and the documents in the pre-litigation procedure, namely that the Commission wishes to complain (only) of the power of confiscation laid down by Article 414 of the Customs Code, although it is clear that the existence of two independent systems of penalties causes it some disquiet. 27. 3. The complaint, as clarified above, must now be examined in the light of the principles of the Drexl judgment which have already been set out. ( ) 28. In my view, the action with regard to this complaint should be dismissed. As follows from my observations ( ) concerning a comparison of different systems of penalties, in principle it is not sufficient to allege that there is a difference in one particular respect. On the contrary, a disproportionate difference within the meaning of the Drexl judgment can in general be found to exist only by means of a comprehensive comparison of the two systems. From this point of view, the Commission's complaint does not by its very nature meet the criterion laid down by the abovementioned judgment. 29. However, it would have been necessary to take a different approach if, in its complaint, the Commission had made a comparison of the other elements of the two systems of penalties with the object of showing that both systems are fundamentally equally severe, ( ) apart from the penalty of confiscation. On that basis it would then have been necessary to consider whether the Commission's comparison was correct in its method and its result and, if so, whether the penalty of confiscation creates a (manifest) disproportion as it is provided for only in the case of importation. 30. However, the application does not contain even a rudimentary argument concerning a comparison as described above. In this connection it is characteristic that the relevant provisions on the penalties for offences in relation to domestic transactions were received only with the defence, together with the reference to Article 350 of the Customs Code and the administrative practice in this area. 31. The only statement in the application which could be construed as an attempt at an argument in that sense is as follows: ‘To apply criminal legislation systematically, by the adoption of penalties for nonpayment of customs duties, to any evasion of value added tax on importation, when failure to pay value added tax on domestic transactions is less severely penalized, is tantamount to attaching particular significance to the crossing of a frontier within the Community, which is incompatible with the common market.’ ( ) 32. That statement by the Commission is however entirely in general terms and does not explain how the French legislation is to be assessed in this respect. This finding is hardly surprising either because, on closer examination, it emerges that the passage quoted above has been taken word for word from the Opinion delivered by Advocate General Darmon in the Drexl case and therefore relates to the Italian provisions at issue there. ( ) 33. In so far as the reply contains an attempt at a comparison of the two systems of penalties, ( ) I take this to be only a reaction to the defendant State's arguments in the defence. It should also be noted that, under Article 19 of the Protocol on the Statute of the Court of Justice of the EEC and Article 38(l)(c) of the Rules of Procedure, the Commission must indicate, in any application made under Article 169 of the EEC Treaty, the specific complaints on which the Court is asked to rule and, at the very least in summary form, the legal and factual particulars on which those complaints are based. ( ) Under Article 42(2) of the Rules of Procedure, a new plea in law may be introduced only on the conditions set out therein, which are not fulfilled here. Finally, the Commission's reply, particulars of which were given above, to the question from the Court indicates that the Commission does not intend to carry out a detailed comparison of the two systems. In these circumstances, consideration of this point would amount to examining the validity of the defence arguments of the defendant State, and not the validity of the Commission's complaint. 34. Consequently the Commission's first complaint, to the effect that Article 414 of the Customs Code breaches the principle laid down in the Drexl judgment, must be rejected. II. Complaint that Article 414 contains no provision which ensures the application of the principles put forward in the Schul judgment for determining the amount of the fine in the case of an offence on importation by a private individual 35. I consider this complaint unfounded, if it is admissible at all. ( ) The Commission proceeds on the assumption that the amount of the fine laid down by Article 414 of the Customs Code depends on the amount of the VAT not paid on importation. However, that assumption is incorrect, as the defendant State has rightly pointed out. The fine is in fact equal to the value of the goods on which tax was evaded or up to twice that amount, that is, it depends on the value of the imported goods and not on the amount of VAT due. III. Complaint that in the specific case of Mrs Patron the penalty was disproportionate to the amount of tax due 36. This complaint must be rejected as inadmissible as there was no mention of it in either the pre-litigation procedure or in the application and, furthermore, it has no connection with the claim in the application. 37. For form's sake I should like to point out that this complaint can in no way be regarded as a mere extension of the first complaint which (like the claim in the Commission's application) is based on a comparison between two cases of taxation and concerns essentially the principle of equal treatment (of which Article 95 is a specific instance). On the other hand, in this complaint the seriousness of a tax offence (expressed in terms of the unpaid tax) is compared with the severity of the penalty, which amounts to examining the matter by reference to the principle of proportionality. IV. Complaint concerning Mrs Patron's place of residence 38. This complaint was first raised in the reply ( ) and must therefore be rejected for the same reasons as the previous complaint. C — Conclusion 39. I therefore propose that the Court should: — dismiss the application; — order the Commission to pay the costs pursuant to Article 69 of the Rules of Procedure. ( *1 ) Original language: German. ( ) Sixth Council Directive of 17 May 1977 on the harmoniza lion of the laws of the Member States relating to turnover taxes — Common system of value added tax: uniform basis of assessment (OJ 1977 L 145, p. 1). ( ) Sec Article 2(2) in conjunction with Article 7 of the directive in the original version. Since 1 January 1993 a new system has been in force on the basis of the amending Directive 91/680 of 16 December 1991 (OJ 1991 L 376, p. 1). The new system is no longer based on importation within the Com muntty but on the purchase ot goods within the Community for consideration within the country (Sec Article 28a in the version of the said amending directive). ( ) Judgment of 14 January 1986; sec the annex to the rejoinder, the judgment was upheld by the Cour dc Cassation on 15 February 1988. ( ) See section I(a) of the Report. ( ) Case 299/86 Drexl [1988] ECR 1213. ( ) Case 15/81 Gaston Schul, Douane Expediteur BV ν Inspecteur der Invoerrechten en Accijnzen [1982] ECR 1409, last confirmed in the judgments in Cases C-120/88 Commission ν Italy [1991] ECR I-621; C-119/89 Commission ν Spain [1991] ECR I-641; and C-159/89 Commission ν Greece [1991] ECR I-691. ( ) Council Directive of 28 March 1983 on tax exemptions within the Community for certain means of transport temporarily imported into one Member State from another, OJ 1983 L 105, p. 59. ( ) Case C-297/89 Rigsadvokaten v Nicolai Christian Ryborg [1991] ECR I-1943. ( ) Sec section 11(b) of the Report for the I Icaring in this ease. ( ) Case 233/80 Gasati [1981] ECR 2595, paragraph 27; and the Drexl case, cited above, paragraph 17. ( ) See paragraphs 23 and 25 of the judgment and paragraph 2 of the operative part. ( ) Sec the quotation in paragraph 5 and paragraph 15 of this Opinion. ( ) Sec paragraph 23 of the judgment. ( ) The operative part of the judgment does not require the disproportion to be ‘manifest’. ( ) Thus the Court made the following observations in the Drexl case (paragraph 23): ‘Such a disproportion exists where the penalty provided for in the case of importation involves, as a general rule, a term of imprisonment and the confiscation of the goods pursuant to the rules laid down to combat smuggling whereas com parable penalties are not provided for, or are not generally imposed, in the case of offences concerning the payment of value added tax on domestic transactions.’ I lowever, it should be noted that the assumption that offences on importation normally lead to prison sentences under the Italian rules is incorrect: sec Article 292 of Decree No 43 (Report for the Hearing [1988] ECR 1214, at p. 1215) and the judgment of the Italian Corte Suprema di Cassazione of 21 February 1989, Cassazione Penale 1989, No 1345, p. 1547, at p. 1550. ( ) That is well illustrated by the judgment of the Corte Suprema di Cassazione of 21 February 1989 (previous foot note) and the judgment delivered (on 14 December 1988) by the Corte d'Appello, Genoa, as the court of reference in the Drexl case, following the judgment of the Court of Justice: Cassazione Penale 1989, No 1367, p. 1568. ( ) Page 2, first and second paragraphs. ( ) Page 2, first paragraph; p. 3, first paragraph; p. 4, second paragraph. ( ) Page 3, under 1., second paragraph; p. 5, last paragraph. ( ) Sec p. 4, penultimate paragraph; p. 7, penultimate para graph; p. 10, first paragraph at end. ( ) Page 2 of the answer of 9 December 1992, under 1., first paragraph; emphasis added. ( ) Sec p. 2 of the reply, last two paragraphs. ( ) Page 3 of the reply, first paragraph; emphasis added. ( ) Page 3 of the reply, last paragraph. ( ) Paragraph 12 et seq. above. ( ) Paragraph 20 et seq. above ( ) Or even that the system applying to the importation of goods is severer than the other. ( ) Application, p. 8. second paragraph, second sentence. ( ) Sec Opinion of Advocate General Darmon [1988] ECR 1222, at p. 1225, paragraph 15. ( ) Footnote 20 above. ( ) Settled case law: sec judgment in Case C-52/90 Commission ν Denmark [1992] ECR I-2187, paragraph 17. ( ) The Court has consistently held that the subject-matter of proceedings under Article 169 inter alia is defined by the heads of claim set out in the application (see for example the judgment in Case C-61/90 Commission ν Greece [1992] ECR I-2407, paragraph 9). On this point it should be observed that the wording of the claim in this case covers only the first complaint. ( ) The application states that Mrs Patron imported her car ‘temporarily’ (p. 4, third paragraph). However, the application contains no clear indication that the Commission seeks a declaration from the Court on this point also.

RAMASWAMY, J. Leave granted. Important twin questions of law, namely, whether the companyrt while exercising its power under Article 226, companyld give direction companytrary to the statutory mandate, if so whether such an order is liable to judicial review by an independent proceeding under Article 226 and if so under what circumstances and to what extent, arise for decision in this appeal. Shri Vithal Sakhar Sehakari Karkhana Ltd., Venu Nagar, Gurusale in Solapur Dist., the 4th respondent, for short the society is a specified Cooperative Society under the Maharashtra Cooperative Societies Act, 1960 Act 21 of 1961 for short the Act. Its term of office is 5 years. It was due to expire by December 3, 1991. The Dist. Collector, 2nd respondent is the companypetent authority under the Act to initiate election process in accordance with the Act and the Maharashtra Specified Cooperative Societies Elections to Committee Rules, 1971 for short, The Rules. The Dist. Collector accordingly initiated the process pursuant to which the society submitted to the Collector on October 18, 1991 the List of Voters as on June 30, 1991. Thereon the Collector issued the following programme to finalise the list of voters. November 12, 1991 was fixed as the date to display on the numberice board of the provisional voters list inviting claims or objections or suggestions for the inclusion or omission from the provisional list. November 20, 1991 was the last date to present such claims or objections to the Collector in terms of Rule 6 2 of the Rules. The Collector had to take a decision therein under Rule 6 4 on December 7,1991 and the final list of the voters should be published under Rule 7 on December 17, 1991. In terms of the programme the provisional list was published on November 12,1991 and after companysideration of the objection or claims the final list was published on December 17, 1991. The Government in exercise of its power under Section 77-IB of the Act postponed the companyduct of election to the companymittees of all Cooperative Societies except those companyered by orders of the companyrts till September 30, 1992. Two members by name Narayan Ganpat More and Mahadeo Bhanudas Mule, filed Writ Petition No. 2970 of 1992 in Bombay High Court on July 13, 1992 for a mandamus to the Dist. Collector and election officer to companyduct election to the Committee of the Society forthwith that is to say after the expiry of 30.9.1992 in accordance with Section 73-G and Chapter XI-A of the Act and the Rules and to companyplete the same within the minimum period as provided under the Act. By companysent of the Society, through its Chairman A.K. Patil, the 5th respondent herein, the division bench passed minutes order that since the Govt. postponed the election upto September 30, 1992, the process of election to the Society shall companymence from October 1, 1992 and the Collector shall accordingly take suitable steps for holding the election. Following its heels More and Mule again filed another writ petition No. 4107 of 1992 on September 15, 1992 for a direction to hold election on the basis of final voters list published on December 17, 1991. Again A.K. Patil, chairman took numberice put forth companysent minutes and the division bench accepted it and directed by order dated September 28, 1992 that respondent No. 4 Society shall submit provisional list of voters as on June 30, 1992 as per Rule 4 of the Rules on or before October 10, 1992. The Collector thereupon shall companyplete the finalisation of the said list under Rule 6 and then shall pronounce election programme under Rule 16 for holding the elections of the Committee of the Society and to companyplete the same within the prescribed time under the Rules. Thereafter on October 6, 1992 the election officer asked the Society to submit fresh provisional list as on June 30, 1992. On becoming aware of the above order, on October 16, 1992, the appellants filed Writ petition No. 4400 of 1992 to modify the order dated September 28, 1992 made in Writ Petition No. 4107 of 1992 and to direct the respondents 1 to 3 the State Govt. Dist. Collector and election officers to hold election to the Committee on the basis of the final voters list published on December 17, 1991 and to set aside the companysequential orders. The division bench by the impugned judgment dated October 19, 1992 dismissed the writ petition in limine. Thus this appeal by special leave. Notice was served on all the respondents in this appeal. A.K. Patil, Chairman, respondent No. 5 was served on December 23, 1992. More, 6th respondent was served on December 18, 1992 and Mule, 7th respondent was served on December 16, 1992. They did number appear either in person or through companynsel. The Society was represented by companynsel. Rule 4 1 of the Rules provides thus 4 1 A provisional list of voters shall be prepared by every society for the year in which general election is due to be held. Persons who are members as on the 30th June of the year immediately preceding the year in which such election is due shall be included in the provisional list. If different companystituencies are provided in the bye-laws, the names of voters shall be arranged companystituency wise as laid down in the bye-laws Provided that, if any case, the preparation of the provisional list of voters falls due after the expiry of a period of six months from the 30th June, the Collector may, in companysultation with the Registrar in respect of the societies, of the categories mentioned in Clauses i , v , vi and vii of Sub-section 1 of Section 73G, and in companysultation with the District Deputy Registrar in respect of the societies the other categories mentioned in Sub-section 1 of Section 73G, by order, change the date of the 30th June and subsequent dates and fix revised dates for the purpose of these rules Its reading adumbrates that the provisional list of voters of society shall be prepared by the society for the year in which general election is due to be held. Persons who are members as on 30th June of the year immediately preceding the year in which such election is due, shall alone be included in the provisional list. Thereby, it is clear that the society shall prepare a provisional list of voters, companyprising of all the members of that society for the year in which general election is due to he held. But the persons who are members of the society as on 30th June of the immediately preceding the year in which such election is due should alone be included in the provisional list and eligible to vote at the election. Under the proviso, if the preparation of the provisional list falls due after the expiry of the period of six months from 30th June, then the Collector is enjoined to companysult the Registrar or the Dist. Deputy Registrar as the case may be based, on the class of society envisaged under Section 73G he should pass an order changing the date of 30th June and prescribe a subsequent dale fix revised date for the purpose of preparing the provisional list and ensure the procedure for declaration of the final list. It is the case of the appellants that alter the final list was published by the Dist. Collector on December 17, 1991, A.K. Patil, the Chairman, got enrolled 2000 members and made them eligible to exercise franchise in his favour apprehending that he would be defeated in the general election, companyluded with More and Mule, i.e. Director and a member of the society respectively, got filed companylusive writ petitions, abused the process of the companyrt, played fraud on the companyrt and obtained companylusive orders to make the provisional list of voters to be as on June 30, 1992 and to companyduct elections on that basis. The Dist. Collector filed companynter-affidavit in this Court admitting that Rule 4 and the circular issued by the Govt. in this behalf envisage that the final list of voters in force before the postponement of the election by the State Govt. shall be valid but since the High Court issued the direction to treat June 30, 1992 to be the date for reckoning the provisional list of voters to be valid, he had numberoption but to abide by the direction and to companyduct the election in terms thereof. As staled earlier that though respondents 5 to 7 were served, they did number file any companynter denying the allegations of the appellants made against them. We have already numbered that under Rule 4 provisional list of voters shall be prepared by every society in the year in which general election is due to be held. It is number due under law as companytended for the Society. What is the meaning of the above quoted phrase is to be gathered from the statutory operation of the law. The term of the Managing Committee was to expire on December 3, 1991. Under the Act the election to the managing companymittee of the society shall be held under Section 73G before the expiry of the term in accordance with the provision in chapter 11A of the Act, the Rules and the bye-laws of the society. The year in which the general election due is, therefore, the year 1991. If the elections were number companyducted before its expiry, by operation of Sub-section 2B of Section 73G, the members of the existing companymittee should cease to hold office on its expiry of extended term as the case may be and should be deemed to have vacated their offices. By operation of Sub-section 3 of Section 73G, the general body of the members of the society should elect the members of the managing companymittee. Therefore, before the expiry of the term of the companymittee the general election to the Managing Committee is due. Blacks Law Dictionary, sixth edition at. p.500, meaning of the words due date has been stated thus In general, the particular day on or before which something must be done to companyply with law of companytractual obligation. When Section 73G, provisions in Chapter XIA and the bye-laws read with Rule 4 envisage that the election to the managing companymittee should be companyducted before the expiry of the term, the Society has been enjoined under Rule 4 1 to prepare the provisional voters list of the members as on June 30th of the year immediately preceding the year in which such general election is due to be held and submit the same to the Dist. Collector. The Legislature, thereby intended that despite the existence of the members on the admission register of the society, only those members who were admitted and valid as members on or before 30th June of the year immediately preceding the year in which such general election is due alone are eligible to exercise the franchise and to be included in the provisional list. Thereafter on publication in the Notice Board under Rule 6 1 and companysidering the objections, suggestions or improvements if any made, the Collector is enjoined to finalise the list under Rule 7 and have it published as final list of voters. The proviso would operate only in case the preparation of the provisional list of voters falls due after the expiry of the period of six months from the 30th June, then only, after companysultation with the designated officer, the Collector, by an order, may change the date of 30th June and fix a subsequent date as revised date to submit the provisional list of voters. In this case the proviso has numberapplication for the reason that the provisional list had already been approved and published by the Collector as per the law on December 17, 1991. It was number challenged. Therefore, the year in which the general election to the society is due is the date as per the operation of law i.e. 1991 but number due after the expiry of the period as postponed by the State Govt. Obviously, for that reason the Govt. also had issued instructions on September 28, 1992 that in case the provisional list was approved and the final list was published prior to the postponement of the election, the election should he companyducted in accordance with the final list published under Rule 7 of the Rules. It would be obvious that A.K. Patil, Ex-Chairman of the defunct companymittee with a view to gel over that impediment and to enable newly admitted 2000 members alter December 17, 1991, set up More, a companydirector and Mule, alleged to be his friend, got filed the first writ petition and obtained a direction to companyduct election following its heels got filed second writ petition with a format of legal process but immediately Patil intervened and appeared on the very date of admission put forth companysent order and obtained the order from the companyrt to companyduct election as per the provisional list existing as on June 30, 1992 and got issued the direction to the Collector with the mandate to companyduct election in accordance with that list. It was specifically alleged that Patil companyluded with More and Mule, abused the process of the companyrt, played fraud on the companyrt and obtained minutes order by companysent without knowledge to any member of the society. In the absence of any denial of the allegations and in the light of the background of the case the necessary inference to be unerringly deduced would be that the companysent order is a companylusive and fraudulent order made format of due process of law but obtained orders companytrary to the statutory mandate of Rule 4 1 of the Rule. It companyld thus be seen that numbere of the members of the society had any opportunity to know or to oppose the companysent order. Thereby the necessary companyclusion would be that a companylusive order obtained by abuse of the process of the companyrt by playing fraud on the companyrt, became foundation to companyduct elections to the Managing Committee of the society circumventing the mandate of Rules 4 1 of the Rules. In Nagubai Animal and Ors. v. B. Shamma Rao and Ors. 1956 SCR 451 at 463, this Court held that companylusion in judicial proceedings is a secret arrangement between two person that the one should institute a suit against the other in order to obtain the decision of a judicial tribunal for some sinister purpose. In such a proceedings, the claim put forward is fictitious, the companytest over it is unreal, and the decree passed therein is a mere mask having the similitude of a judicial determination and worn by the parties with the object of companyfounding third parties. This was reiterated in Roop Chand Gupta v. Raghuvanshi Pvt. Ltd. and Anr. 1964 7 SCR 761 at 763, in which this Court held that the companylusion is an improper act done by an improper refraining from doing an act, for a dishonest purpose. In these two cases this Court set aside the companylusive decree obtained by the parties. Collusion, thus, is a foundation to put forward a format of judicial process and a pretext of companytest which in effect is unreal and a force and the decree or order obtained on its basis is a mere mask having similitude of judicial determination with the object of companyfounding third parties. The offending order is vitiated by companylusion and formed foundation for election to the companymittee of the society. The question emerges whether the said order is liable to be interfered with and if so in what proceeding and to what extent? The order in the second writ petition cannot be reviewed because the appellants are number parties to the proceedings. Undoubtedly, the order passed by the High Court under Article 226 is by the exercise of plenary companystituent power and jurisdiction. It is neither a void number voidable order. As seen numberfault companyld be found in the format of legal process in the pleadings and the reliefs sought for. But when it came up for admission, by companysent, orders of minutes were drawn up which have become foundation for avoidance of mandate of Rule 4 1 of the Rules. It is number a case of irregularity in the exercise of the jurisdiction so as to set it right by a review. Since the petitioners therein, namely, More and Mule being henchmen of Patil cannot be expected to invoke the review jurisdiction of the companyrt. Third party has numberright to file an application for review. Obviously in this backdrop the order being vitiated by companylusion at the behest of Patil, More and Mule, the appellants, instead of filing an appeal under Article 136 with leave of the companyrt, appears to have sought the remedy by way of filing a fresh writ petition under Article 226 and sought modification of the order so that the order of the companyrt in the second writ petition would be in companyformity with Rule 4 1 of the Rules. Obviously finding the piquant situation in which Patil, More and Mule have been placed themselves, Sri Ashok Desai the learned Senior companynsel appearing for Society, sought to salvage their problem placing reliance on the ratio of this Court in Naresh Shridhar Mirajkar and Ors. v. State of Maharashtra and Anr. . Therein the facts were that the High Court of Bombay, while trying a suit for defamation against the editor of a weekly newspaper, exercised its inherent power under Section 151 C.P.C., companyducted the trial of the suit in camera and prohibited publication of the evidence and the proceeding so as to prevent business of the editor of the newspaper being affected. A writ petition was filed under Article 32 in this Court challenging the validity of the order of the High Court companytending inter alia that the High Court had numberjurisdiction to prohibit publication of the news it affected their rights under Article 19 1 a and it was resisted on the ground that the writ petition under Article 32 was number maintainable to review judicial order of the companyrt. This Court by seven Judges per majority held that the petitioners had numberfundamental right under Article 19 1 a . The Court had inherent power and jurisdiction under Section 151 CPC to companyduct in camera trial and to prohibit publication of its proceeding of evidence and that writ petition under Article 32 is number maintainable to quash the judicial order. It is seen that the companyrt, in order to protect the interest of one of the parties to the suit, exercised inherent power and jurisdiction under Section 151 CPC, passed a judicial order prohibiting publication of the proceeding in the suit or the evidence of the witness. It being a judicial order numberthird party has a right to intervene and challenge the same in the proceedings under Article 32 of the Constitution. The ratio therein has numberapplication to the facts of this case. Undoubtedly, the order passed by the High Court under Article 226 is a judicial order exercising its companystituent power but when its process is abused and an order of minutes obtained by companysent hedged with companylusion and fraud on the Court and obviously, though number pleaded, on general body of the members of the society, when the facts were brought to the numberice of the High Court, it is the High Court alone or on appeal this Court which is to companyrect such and order. Mr. Justice Arthur T. Venderbilt in his The Change of Law Reform 1955 at pages 4 and 5, stated that it is in the Courts and number in the legislature that our citizens primarily feel the keen, the cutting edge of the law. If they have respect for the work of their companyrts, their respect for law will survive the short companyings of every other branch of the Government but if they lost their respect for the work of the Courts, their respect for the law and order will vanish with it to the great detriment of society. vide the Judicial Process by H.J. Abraham, p.3 Respect for law is one of the cardinal principles for an effective operation of the companystitution, law and the popular Government. The faith of the people is the source and succour to invigorate justice intertwined with the efficacy of law. The principle of justice is ingrained in our companyscience and though ours is a nascent democracy which has number taken deep roots in our ethos of adjudication - be it judicial, quasi-judicial or administrative as hallmark, the faith of the people in the efficacy of judicial process would be disillusioned, if the parties are permitted to abuse its process and allowed to go scot free. It is but the primary duty and highest responsibility of the companyrt to companyrect such orders at the earliest and restore the companyfidence of the litigant public, in the purity of fountain of justice remove stains on the efficacy of judicial adjudication and respect for rule of law, lest people would lose faith in the companyrts and take recourse to extra-constitutional remedies which is a death-knell to the rule of law. In M. V. Venkatarumana Bhat v. The Returning Officer C.A. No. 3607 of 1993, this Court by judgment dated July 30, 1993, set aside the election. The facts were that one Jaiprakash Rai filed a writ petition in the High Court of Karnataka one day prior to the date of election of the Pardhan of the Samithi, obtained ad interim order and prevented two members to participate and exercise their franchise in the election of the Pradhan. His candidate was elected with a margin of one vote. The writ petition was, ultimately, dismissed. The writ petition under appeal was filed to declare the election as illegal, void, etc. The High Court dismissed it. On appeal, this Court taking numberice of the background of these facts and circumstances held that ad-interim order was obtained by abuse of the process of the companyrt to help the successful candidate. Even if the remedy by election petition was available, the tribunal had numberjurisdiction to sit over the companyrectness of the order passed by the High Court. Therefore, the High Court alone had to companyrect it by exercising its power under Article 226 to prevent such abuse of judicial process and should exercise its power of high responsibility to undo injustice done to the adversary undoing the effect of the order obtained by abusing the process of the companyrt. The ratio would apply with equal force to the facts of this case. Therefore, the High Court should have exercised its power under Article 226 and should have modified the order as prayed for. Since there is numberstay of election the 5th respondent was alleged to have prevailed upon respondent No. 3 to proceed with the companyduct of the election. Accordingly election process was initiated and election was to take place on April 27, 1993. This Court by order dated April 20, 1993 directed that the election may go on and every process may be companypleted but the result may number be declared till further orders and directed to post the special leave petition for final disposal on May 3, 1993 on which date this Court further clarified that the aforesaid order does number companye in the way of companypleting the process of companynting being undertaken provided the results are number. announced. S.L.P. was directed to be listed on July 30. 1993. Thus we have heard the S.L.P. Sri Ashok Desai companytended that Section 144T provides remedy of election petition. The specified officer is empowered to decide the election dispute expeditiously and his decision shall be final and companyclusive. The writ petition, therefore, is number maintainable. It is further companytended that every grower of sugarcane within the area of the operation of the society is entitled to become a member of the society. The State Govt. postponed the election due to drought etc. from time to time upto September 30, 1992. In the interregnum the growers that became members of the society become entitled to participate in the democratic process of exercising their franchise to elect the members to manage the affairs to the companymittee. The Court, therefore, with a view to enable them to participate in the election process and to elect members of their choice permitted to incorporate their names in the provisional voters list as on June 30, 1992, since elections were number held till September 30, 1992. The words general elections due should be companystrued to be due according to law as on the date when the elections are to be held. Since the results are number know in the companynting, the 5th respondent had secured more than 4 and 5 thousand votes while new members enrolled were only 2 thousand. This case does number warrant interference under Article 136. Shri Bhasme, the learned Senior companynsel resisted the companytentions. We have given our anxious companysideration to the companytentions of either side. In N.P. Ponnuswami v. Returning Officer and Ors. 1952 SCR 218, the legality and validity of rejection of the numberination of the intending candidate to the Parliamentary election was challenged by way of a writ petition under Article 226. The High Court held that the Writ Petition was number maintainable. On appeal, by leave under Article 132, this Court held that the wider meaning of the word election companynotes the entire process culminating in a candidate being elected. The election should be companycluded as early as possible according to time schedule and all companytroversial matters and all disputes arising out of elections should be postponed till after the elections are over, so that the election proceedings may number be unduly retarded or protected. No significance should be attached to anything which does number affect the election, and if any irregularities are companymitted while, it is in progress and they belong to the category or class which, under the law by which elections are governed, would have the effect of vitiating the election and enable the person affected to impugned in question, they should be brought up before a special tribunal means of an election petition and number being made the subject of a dispute before any companyrt while the election is in progress, emphasis supplied . Accordingly, this Court upheld the view of the Madras High Court. In S.T. Muthusami v. K. Natarajan and Ors., in Tamilnadu when elections to the Panchayat Union were being held, there was a dispute between two candidates as to who is the official candidate on behalf of the Indian National Congress 1 and entitled to the allotment of the symbol hand. Both the candidates, appellant and the respondent claimed as official candidate but the Returning Officer on companysent allotted different symbols as it was number cleared before acceptance of numberination. Later on clarification was issued by the Tamilnadu Congress I that the appellant was allotted symbol of hand. The Returning Officer issued errata accordingly. Calling in question the errata the respondent filed the writ petition which was dismissed by a Single Judge and on appeal the division bench allowed the writ petition and quash the Errata. When the matter was brought by special leave under Article 136, this Court held that T.N. Panchayats Act, 1958 and the Rules provided forum to decide election disputes though alternative forum does number have the effect of overriding the powers of the High Court under Article 226 emphasis supplied but it may be taken into companysideration in determining whether it would be appropriate for the High Court to exercise its powers under Article 226 in a particular case. Taking an overall view of the facts, this Court held that the exercise of the jurisdiction under Article 226 cannot be supported and the validity of the election should be decided in the alternative forum provided under that Act. Accordingly the appeal was allowed. Therefore, this Court held that there is numberconstitutional bar in the exercise of the jurisdiction in respect of election to local bodies. It is equally sound exercise of discretion to bear in mind the policy of the legislature to have the dispute decided speedily through the machinery of election petition and decline to exercise its writ jurisdiction in election dispute. Once the election process was set in motion according to law any illegality or irregularity companymitted while the election process is in progress or the companyduct of the election is vitiated by any illegality to irregularity in its process, the proper remedy is to lay the action before the tribunal companystituted under that Act by means of an election petition and have the dispute adjudicated without the election process being interdicted or retarded mid way. The High Court or this Court while exercising the companystituent plenary power under Article 226 or 32 or under 136, as the case may be, would decline to interfere with the election process and relegate the parties to take recourse to the alternative remedy of the election petition provided under the statute. When the order of the companyrt issued under Article 226 is the foundation for a preparation for electoral roll companytrary to or dehors the Act or Rules and bye-laws and the election process is founded thereon, it is number during the election process. If the order is vitiated by an error of law, the tribunal has numberpower or jurisdiction to go into its legality which is destructive of judicial discipline. Moreover, that cannot be impugned in an election petition number the tribunal has the power or jurisdiction to determine the companyrectness or otherwise of the orders passed by the High Court or this Court. The only appropriate forum would, therefore, be the High Court itself or on appeal this Court, to companyrect it, if need be and numberother forum. The appellants had approached the High Court, apprised it of the facts and sought modification of the order so as it be in companyformity with the Rule 4 1 of the Rules. The High Court should have companyrected the order but it failed to exercise that power. It is next companytended that this Court exercising the power under Article 136 would be loath to upset the order of the High Court placing reliance on Rashpal Malhotra v. Mrs. Satya Rajput and Anr. . Therein the order of ejectment was passed by the companyrt below against the tenant who was companynominee, number a party but known to the parties. The appellant to be ejected, was the numberinee of the companypany. In that background, this Court held that though the order was number legal but being for bona-fide self-occupation, this Court declined to exercise the power under Article 136 and dismissed the appeal. The ratio therein has numberapplication to the facts of this case. For an order obtained by abuse of the process of the companyrt or by playing fraud or companylusion, this Court should number companyntenance such an argument and should number allow such an order to remain operative for a moment. We are numberequally impressed with the argument that the respondent number became aware that Mr. Patil secured more than 4 to 5 thousand votes though the invalid votes are only of 2 thousand, being of the members admitted after December 17, 1991, and that should be a factor for our declining to exercise the power under Article 136 to set aside the order of the High Court or the elections companyducted pursuant to the permission granted by this Court. In our view, acceding to it would amount to putting a premium on fraud, companylusion or abuse of the process of the companyrt creating disbelief and disillusionment of the efficacy of judicial process and rule of law and a feeling would be generated that persons capable to manoeuvre and abuse the judicial process would reap the benefit thereof and get away with the orders. Every endeavour would be made to inculcate respect for fair judicial process and faith of the people in the efficacy of law. Though numbermally when a respondent is number companytesting its case, companyts would number be awarded. But an exception would be carved out and in a suitable case companyt should be awarded on persons that set the law in motion had benefit thereof and remained obviously ex-parte. This Court under Article 142 has plenary power to pass such order as is necessary for doing companyplete justice in any cause or matter companying before it. The facts of this case already established that the respondents Nos. 5 to 7, in particular A.K. Patil, must be lurking and loitering in the companyridors of this Court for the outcome, though they obviously remained ex-parte. It is a fit case for exercising our power under Article 142 to impose companyt on the number-contesting respondents, A.K. Patil, More and Mule, jointly or severally. Costs are quantified at Rs. 20,000 and the appellants are entitled to recover the companyts of this appeal against any one of them or all of them. It is hereby declared that election process companyducted by the third respondent, Dist. Deputy Registrar, Cooperative Society, Solapur to the Society is illegal. The final list of voters published by the Dist. Collector, Solapur, as on June 30, 1992 is declared illegal. The final voters list declared on December 17, 1991 relating to the society is the valid list. Accordingly the order of the High Court in Writ Petition No. 4107 of 1992 dated September 15, 1992 is modified. The direction to the Dist. Collector and the 3rd Respondent, Dist. Deputy Registrar, Coop. Society, Solapur to proceed as per Rules 4 to 7 and 16 to companyduct election to the companymittee of the society in accordance with the Rules is upheld with the above modification. The election held to the Managing Committee of the society on April 27, 1993 is declared illegal and invalid. Respondent Nos.

criminal appellate. jurisdiction criminal appeal number 135 of 1968. appeal by special leave from the judgment and order dated may 1 1968 of the madhya praesh high companyrt gwalior bench .in criminal appeal number 143 of 1966. l. kohli and j. c. talwar for the appellant. n. shroff for the respondent. the judgment of the companyrt was delivered by sikri j. this appeal by special leave is directed a aginst the judgment of the high companyrt of madhya pradesh gwalior bench allowing the appeal of the state and companyvicting the appellant for having companymitted an offence punishable under s. 435 indian penal companye and sentencing him to undergo imprisonment for one year. the only point involved in the present appeal is whether the appellant was a person of unsound mind within s. 84 of the indian penal companye at the time of the incident. the magistrate held that he was number liable to punishment as he was insane at that time and did number knumber that he was doing anything wrong or anything contrary to law. the high companyrt on the other hand came to the companyclusion that the case of the appellant did number fall within the exception created by s. 84 i.p.c. it is number well-settled that the crucial point of time at which unsoundness of mind should be established is the time when the .crime is actually companymitted and the burden of proving this lies of on the accused. see state of madhya pradesh v. ahmadullah 1 . in d. c. thakker v. state of gujarat 2 it was laid down that there is a rebuttable presu mption that the accused was number insane when he committed the crime in the sense laid down by s. 84 of the indian penal companye the accused may rebut it by placing before the companyrt all the relevant evidence al documentary or circumstantial but the burden of proof upon him is no higher than that which rests upon a party to civil pro- cedings. it was further observed the crucial point of time for ascertaining the state of mind of the accused is the time when the offence was circumstances which preceded attended and followed the mind as to be entitled to the benefit of s. 84 of the indian penal companye can only be established from the circumstances which preceded attended and followed the crime. the learned companynsel companytends that if regard is had to the circumstances which preceded attended and followed the crime it would be clear that the accused is entitled to the benefit of s. 84 of the indian penal companye. 1 1961 3s.c.r.583. 2 1964 7s.c.r.361. the prosecution case is that on january 22 1965 the appel- lant set fire to the grass lying in the khalyan of nemichand at the time of the setting of the sun. he was caught at the spot while setting fire. on being asked why he did it the accused said i burnt it and do whatever you want. the accused was arrested on january 23 1965 and he remained in police custody till february 2 1965 when it was found that the accused needed medical examination and accordingly the district magistrate ordered that he be medically examined. numberexplanation has been given why he was kept in police custody all that time. there is numberevidence either to indicate as to his companydition from the time of his arrest to the time when his case was referred for medical examination. these facts were within the knumberledge of the police and we should have expected that the prosecution would lead evidence regarding his companydition during this time. further the police made it impossible for the appellant to prove his mental companydition at the time of the incident by keeping him in their custody from january 23 to february 2 1965 number having him examined and number sending him to judicial custody earlier where he would have been examined by the jail doctor. on february 20 1965 v. s. vaidya assistant surgeon. civil hospital vidisha reported to the jailor sub jail vidisha as follows subject in ref. to your letter number 295 dated 8-2-1965. sir ratanlal prisoner was kept under observation as indoor patient during this time. he was keeping silent he never used to reply any question so in my opinion he should be refd. to some specialist for further investigation and needful. on february 22 1965 y. d. kamran civil surgeon vidisha. reported as follows shri ratanlal undertrial was examined by me. he does number appear to be deaf or dumb but is mentally retarded. he should be referred to stiperintendent mental hospital gwalior for expert opinion. on march 29 1965 dr. b. shah. psychiatrist and superintendentmental hospital gwalior reported as follows this is to certify that shri ratanlal s o kishanlal who has been kept under observation in this hospital from 18-3-1965 to 29-3-1965 is a person of unsound mind in terms of indian lunancy act 1912. he is number dangerous and or violents by reason of lunancy and thus unfit to be at large. the report is based on the following facts observed here - remains depressed. does number talk. he is a case of maniac depressive. psychosis and needs treatment. on april 28 1965 anumberher report was given that he was still a person of unsound mind in terms of indian lunancy act 1912 but was better though still companyfused and further that treatment was being companytinued and it may take 4 to 6 weeks more for recovery. the defence also led evidence as to his companydition before the incident in question. shyamlal d. w. 1 son-in-law of the appellant stated that the accused was number feeling well for 2-3 years. he was in such a companydition that if he is sitting will remain sitting. if he is to go then he will go and if he wishes to fall in the river then he will fall. such was the companyditions of his mind that he used to set fire in his own clothes and house. he further stated that on the day of the incident the appellant did number allow anybody to enter his house and had put a lock on the house and his children took their food outside and the accused did number talk to anybody. he further stated that prior to this incident the accused was being taken to bhopal after tying him for the treatment of mind. he was also taken to bhavera but the accused did number improve. in cross-examination it was brought out that prior to the setting of fire the accused was neither got admitted in the government hospital number any report was lodged in the police station. numbercross- examination was directed to ascertain the nature of his illness or to bring out that he was otherwise sane. anumberher witness than singh d.w. 2 the appellant is his maternal uncle stated that the appellant used to do whatever he thought. he used to run away wherever he liked. he used to jump in the river also. he used to enter the house of anybody. he used to lock his house. his children used to lie hungry outside. he used to set fire in his clothes also. on the day of occurrence the companydition of the accused was worst. he did number speak to anybody on that day. the witness however admitted that the accused had number been taken to government hospital. the trial companyrt also mentioned that moolchand p.w. 3 madora p.w. 4 and dhanna p.w. 6. admitted that the appellant remained in the khalyan throughout the period that the grass was burning till the chowkidar took him to thana and did number utter a word and did number try to run away. the trial companyrt relying on the evidence of shyamlal d.w. 1 than singh d.w. 2 and the behaviour of the accused on that day came to the companyclusion that the accused was insane. he also relied on the certificates issued by the doctors mentioned above .he further found support in the absence of motive for the crime. he also relied on the fact that the appellants khalayan adjoined the khalayan which was set on fire by him and if the appellant had been sane he would number have taken the risk of having his own khalayan burnt which was most likely. the high companyrt with respect erred in differing from the trial companyrt. the high companyrt observed that the appellant had number examined in defence any expert in mental diseases to substantiate his plea of legal insanity. it is expecting rather a great deal from a poor villager that he should produce experts in mental diseases specially in view of the certificates issued by the medical authorities after he was arrested. the high companyrt further erred in holding that the medical reports were of numberevidential value. it is true that the reports speak of the mental state of the accused at the time when the reports were issued but the high companyrt failed to numbere that the appellant was in police custody from january 23 1965 and the police companyld have produced evidence to show that he was absolutely sane till the day when they sent him for medical examination. the high companyrt thought that the evidence of the two defence witnesses only suggested an irrational behaviour on the part of the accused. the high companyrt failed to numbere that according to d.w. 2 the appellant used to set fire to his own clothes and house and this companyld hardly be called irrational it is more like verging on insanity. the high companyrt also felt it rather unsafe to rely on the testimony of the two defence witnesses because such evidence could always be procured. it was also impressed by the fact that there was numberindependent witness forthcoming number was there any evidence showing that the accused was taken to bhopal or gwalior for treatment. the high companyrt observed apart from this these witnesses merely suggest that there was irrational behaviour on the part of the accused. but it has number been proved that he entertained any homicidal tendencies. the evidence adduced is merely of conduct number companyfirming to the accepted pattern of human behaviour. such evidence is inadequate to establish that there was such an impairment of companynitive faculties of the accused as to render him legally insane. with respect it is number necessary that every insane person should have homicidal tendencies. in this case he is number charged for an offence involving homicide but arson. although the high companyrt discarded the medical evidence it took account of its own observations when it stated we had an opportunity to observe the accused who was produced before us by the learned counsel and he appeared to be a man of numbermal understanding. we also find that in answering questions which were put to him by the companyrt under s. 342 cr. p.c. the accused showed intelligence and care. with great respect these are irrelevant companysiderations. the appeal was heard on april 25 1968 and the incident occurred on january 22 1965. a person can surely improve within three years. we are inclined to agree with the companyclusion arrived at by the learned magistrate. we hold that the appellant has dis- charged the burden. there is numberreason why the evidence of shyam lal d.w. 1 and than singh d.w. 2 should number be believed. it is true that they are relations of the appellant but it is the relations who are likely to remain in intimate companytact. the behaviour of the appellant on the day of occurrence failure of the police to lead evidence as to his companydition when the appellant was in custody and the medical evidence indicate that the appellant was insane within the meaning of s. 84 i.p.c.

FIFTH SECTION CASE OF KISELEV v. RUSSIA (Application no. 75469/01) JUDGMENT STRASBOURG 29 January 2009 FINAL 06/07/2009 This judgment may be subject to editorial revision. In the case of Kiselev v. Russia, The European Court of Human Rights (Fifth Section), sitting as a Chamber composed of: Peer Lorenzen, President,Rait Maruste,Karel Jungwiert,Anatoly Kovler,Renate Jaeger,Mark Villiger,Zdravka Kalaydjieva, judges,and Claudia Westerdiek, Section Registrar, Having deliberated in private on 6 January 2009, Delivers the following judgment, which was adopted on that date: PROCEDURE 1. The case originated in an application (no. 75469/01) against the Russian Federation lodged with the Court under Article 34 of the Convention for the Protection of Human Rights and Fundamental Freedoms (“the Convention”) by a Russian national, Mr Bogdan Aleksandrovich Kiselev (“the applicant”), on 17 April 2001. 2. The Russian Government (“the Government”) were represented by Mr P. Laptev and Ms V. Milinchuk, former Representatives of the Russian Federation at the European Court of Human Rights. 3. The applicant alleged, in particular, that the supervisory review conducted in the present case had violated his rights under Article 6 of the Convention and Article 4 of Protocol No. 7 to the Convention. 4. By a decision of 5 February 2007, the Court declared the application partly admissible. 5. The Government, but not the applicant, filed further written observations (Rule 59 § 1). THE FACTS I. THE CIRCUMSTANCES OF THE CASE 6. The applicant was born in 1973 and lives in Vyatskiye Polyany, Kirov Region. 7. On 7 February 2000 the applicant was remanded in custody on suspicion of having committed gang rape. He remained in custody throughout the investigation. 8. On 3 May 2000 the Vyatsko-Polyanskiy District Court of the Kirov Region found the applicant guilty of aggravated rape and violent sexual assault and sentenced him to two years and two months’ imprisonment. In deciding on the sentence the court applied Article 64 of the Criminal Code, which allowed the imposition of a penalty below the statutory minimum (which was four years’ imprisonment) with regard to the voluntary compensation paid to the victim, her request to terminate the applicant’s prosecution, the absence of a previous criminal record and the fact that the applicant had a child. 9. On 10 May 2000 the Vyatsko-Polyanskaya District Prosecutor’s Office filed an appeal against the judgment on the ground that the sentence, resulting from an unjustified application of Article 64 of the Criminal Code, was too lenient. On an unknown date the applicant also filed an appeal, pleading not guilty and requesting the reduction of his sentence and release on parole. 10. On 26 May 2000 the Amnesty Act entered into force. 11. On 8 August 2000 the Kirov Regional Court dismissed the appeals of both parties and upheld the judgment of the District Court at final instance. It held, in particular, that the applicant’s participation in the rape had been “secondary” and that this in combination with other circumstances referred to by the first-instance court had justified application of a penalty below the statutory minimum. The court also stated that no grounds for applying the Amnesty Act had been made out. 12. On 18 August 2000 the Vyatsko-Polyanskiy District Court of the Kirov Region, in a separate decision, found that this was the applicant’s first conviction and that his prison sentence did not exceed three years. It absolved the applicant from serving the sentence by virtue of the Amnesty Act. 13. On 31 October 2000 the Kirov Regional Prosecutor lodged an application for supervisory review, seeking to have the judgment of 3 May 2000 and the appeal decision of 8 August 2000 quashed on the ground that the sentence imposed was too lenient and specifically challenging the application of Article 64 of the Criminal Code. 14. On 15 November 2000 the Presidium of the Kirov Regional Court granted the application and remitted the case for a new examination at first instance. The Presidium also quashed the decision of 18 August 2000. 15. On 27 December 2001 the Vyatsko-Polyanskiy District Court of the Kirov Region found the applicant guilty on the same counts and sentenced him to four years and six months’ imprisonment. It found that there had been no “exceptional circumstances” justifying the application of Article 64 of the Criminal Code. Pursuant to this judgment, the applicant was taken into custody following the court hearing. 16. The applicant lodged an appeal against this judgment claiming, inter alia, that he had been tried and punished twice for the same offence. 17. On 3 April 2001 the Kirov Regional Court dismissed the applicant’s appeal and upheld the judgment of the District Court in the final instance. 18. On 28 November 2002 the Kirovo-Chepetskiy District Court of the Kirov Region released the applicant on parole. II. RELEVANT DOMESTIC LAW A. Criminal liability 19. Article 131 § 2 (b) of the 1996 Criminal Code provides that a rape committed by a group of persons is punishable by a prison term of four to ten years. Article 132 § 2 (b) provides for the same penalty for a violent sexual assault committed by a group of persons. 20. Article 64 of the Code provides that the court may impose a penalty below the minimum punishment provided for in respect of a particular criminal offence if it finds exceptional circumstances mitigating the public danger of the crime committed. The following circumstances, or their combination, may be considered for the purposes of this provision: the aim or the cause of the crime; the extent of participation; the culprit’s behaviour during or after the commission of the crime; and other circumstances. 21. Section 1 of the Amnesty Act of 26 May 2000 absolved all persons convicted for the first time and whose sentence did not exceed three years from serving their sentence. B. Supervisory review in criminal proceedings 22. The relevant domestic law governing supervisory review in criminal proceedings has been summarised in the case Fadin v. Russia (no. 58079/00, 27 July 2006). THE LAW I. ALLEGED VIOLATION OF ARTICLE 6 OF THE CONVENTION AND OF ARTICLE 4 OF PROTOCOL No. 7 TO THE CONVENTION 23. The applicant complained under Article 6 § 1 of the Convention and Article 4 of Protocol No. 7 to the Convention that the supervisory review conducted in his case had been unfair and had resulted in an unfairly harsh penalty. These Articles read, in so far as relevant, as follows: Article 6 of the Convention “In the determination of ... any criminal charge against him, everyone is entitled to a fair ... hearing ... by [a] ... tribunal ...” Article 4 of Protocol No. 7 “1. No one shall be liable to be tried or punished again in criminal proceedings under the jurisdiction of the same State for an offence for which he has already been finally acquitted or convicted in accordance with the law and penal procedure of that State. 2. The provisions of the preceding paragraph shall not prevent the reopening of the case in accordance with the law and penal procedure of the State concerned, if there is evidence of new or newly discovered facts, or if there has been a fundamental defect in the previous proceedings, which could affect the outcome of the case.” A. The parties’ submissions 24. The applicant claimed that he had been tried and punished twice for the same criminal offence and invoked in particular the detrimental consequences entailed by his retrial following the supervisory review. He complained that the substantial increase in his prison term after his earlier release, when he had regarded it as executed, had deprived him of the benefit of the Amnesty Act and had been disproportionate and unfair. He pointed out that the grounds for quashing the final judgment by the supervisory instance, notably the excessively lenient sentence imposed in accordance with Article 64 of the Criminal Code, were the same as those that had been raised before, and examined by, the appellate court. The applicant therefore maintained that the proceedings as a whole had been unfair and had run counter to the principle of legal certainty. 25. The Government accepted the applicant’s version of events but denied that the criminal proceedings at issue had resulted in a violation of the domestic law or of the Convention principles. They relied on Article 4 § 2 of Protocol No. 7, which expressly permitted the reopening of a criminal case if there had been a fundamental defect in the previous proceedings that could affect the outcome of the case. They claimed that the supervisory review in the present case fell within the scope of that provision. They contended, further, that the retrial, as well as the increase in the sentence, had been absolutely necessary in circumstances where a serious violent crime, such as the one of which the applicant had been found guilty, had gone virtually unpunished. They relied on the Code of Criminal Procedure then in force and stated that the prosecutor’s request for supervisory review had been filed within the prescribed time-limit and the retrial by the courts of two instances had afforded all guarantees of a fair trial. B. The Court’s assessment 26. The Court has previously examined cases raising similar complaints under the Convention in relation to the quashing of a final judicial decision (see Nikitin v. Russia, no. 50178/99, ECHR 2004-VIII; Bratyakin v. Russia (dec.), no. 72776/01, 9 March 2006; Fadin, cited above; and Radchikov v. Russia, no. 65582/01, 24 May 2007). It reiterates that the mere possibility of reopening a criminal case is prima facie compatible with the Convention, including the guarantees of Article 6. However, the actual manner in which it is used must not impair the very essence of a fair trial. In other words, the power to reopen criminal proceedings must be exercised by the authorities so as to strike, to the maximum extent possible, a fair balance between the interests of the individual and the need to ensure the effectiveness of the system of criminal justice (see Nikitin, cited above, §§ 54-61). In the specific context of supervisory review, the Convention requires that the authorities respect the binding nature of a final judicial decision and allow the resumption of criminal proceedings only if serious legitimate considerations outweigh the principle of legal certainty (see Bratyakin, cited above). 27. Turning to the circumstances of the present case, the Court observes that the Amnesty Act was passed before the end of the first set of proceedings and the court could have taken it into account. However, the court considered it inapplicable and imposed an exceptionally short term of imprisonment intending that it be actually served in full. When an amnesty was eventually applied for, the prosecutor requested a full reassessment of the case calling for a sentence within the statutory limits. As a result of the rehearing granted, the applicant’s punishment was increased by two years and four months compared with his original sentence and he could no longer benefit from an amnesty. 28. The Court notes that the grounds for the prosecutor’s request for supervisory review and the courts’ reasoning was limited to the sole question as to whether there had been exceptional circumstances justifying the penalty below the statutory minimum. The application of the Amnesty Act to the applicant was not called into question. Accordingly the Court has to assess whether the reopening of the case could be justified solely on grounds of the allegedly wrongful application of the clause permitting a penalty “below the statutory minimum”. 29. The Court observes that the supervisory review court had to examine exactly the same argument that had already been put before the court of appeal and dismissed. The Court has previously held that a review of a final and binding judgment should not be granted merely for the purpose of obtaining a rehearing and a fresh determination of the case, but rather to correct judicial errors and miscarriages of justice (see, Radchikov, cited above, §§ 49-52). In the instant case, the supervisory instance allowed a rehearing of precisely the same legal point, which in the light of the above case-law cannot be considered sufficient to outweigh the binding force of a final judgment. 30. It follows that the criminal proceedings against the applicant, taken as a whole, did not satisfy the requirements of a “fair hearing”. 31. Therefore, the Court finds a violation of Article 6 § 1 of the Convention. It finds that the applicant’s complaints raise no separate issue under Article 4 of Protocol No. 7 to the Convention (see Nikitin, cited above, § 46, and Radchikov, cited above, § 55). II. APPLICATION OF ARTICLE 41 OF THE CONVENTION 32. Article 41 of the Convention provides: “If the Court finds that there has been a violation of the Convention or the Protocols thereto, and if the internal law of the High Contracting Party concerned allows only partial reparation to be made, the Court shall, if necessary, afford just satisfaction to the injured party.” A. Damage 33. The applicant requested the Court to award him 150,000 Russian roubles (RUB) for pecuniary damage and RUB 100,000 for non-pecuniary damage. 34. The Government contested the claim as unsubstantiated and considered that any finding by the Court of a violation would constitute sufficient just satisfaction in the present case. 35. The Court considers that the applicant must have suffered distress and frustration as a result of the reopening of his criminal case following the supervisory review. Making its assessment on an equitable basis, it awards the applicant 2,000 euros for non-pecuniary damage, plus any tax that may be chargeable on that amount. The court rejects the claim for pecuniary damage because the applicant provided no supporting documents for his claims. B. Costs and expenses 36. The applicant submitted that he had spent RUB 45,000 in legal fees in the domestic proceedings and requested a reimbursement of this sum. 37. The Government contended this claim on the grounds that the applicant had not submitted any supporting documents for his claims. 38. According to the Court’s case-law, an applicant is entitled to reimbursement of his costs and expenses only in so far as it has been shown that these have been actually and necessarily incurred and are reasonable as to quantum. The Court notes that the applicant was granted leave to represent himself before this Court. As regards the expenses incurred during the domestic proceedings, the Court has no grounds to establish that they were incurred in the supervisory review proceedings in order to prevent the violation of the applicant’s rights under Article 6. Having also noted that the claims contained no particulars and were not accompanied by any supporting documents, the Court dismisses them under this head. C. Default interest 39. The Court considers it appropriate that the default interest should be based on the marginal lending rate of the European Central Bank, to which should be added three percentage points. FOR THESE REASONS, THE COURT 1. Holds by six votes to one that there has been a violation of Article 6 of the Convention; 2. Holds by six votes to one that no separate issue arises under Article 4 of Protocol No. 7 to the Convention; 3. Holds unanimously (a) that the respondent State is to pay the applicant, within three months from the date on which the judgment becomes final in accordance with Article 44 § 2 of the Convention, EUR 2,000 (two thousand euros) in respect of non-pecuniary damage, to be converted into the national currency of the respondent State at the rate applicable at the date of settlement, plus any tax that may be chargeable on that amount; (b) that from the expiry of the above-mentioned three months until settlement simple interest shall be payable on the above amount at a rate equal to the marginal lending rate of the European Central Bank during the default period plus three percentage points; 4. Dismisses unanimously the remainder of the applicant’s claim for just satisfaction. Done in English, and notified in writing on 29 January 2009, pursuant to Rule 77 §§ 2 and 3 of the Rules of Court. Claudia WesterdiekPeer LorenzenRegistrarPresident In accordance with Article 45 § 2 of the Convention and Rule 74 § 2 of the Rules of Court, the dissenting opinion of Judge Kalaydjieva is annexed to this judgment. P.L.C.W. DISSENTING OPINION OF JUDGE KALAYDJIEVA In the present case the majority found a violation of Article 6 § 1 of the Convention and agreed that the applicant’s complaints under Article 4 of Protocol No. 7 raised no separate issue. I fail to subscribe to this opinion for the following reasons. In my view the facts of the case clearly disclose a duplication of finalised criminal proceedings which resulted in a new punishment contrary to the ne bis in idem principle. There is no dispute that the accusations against the applicant were determined by a final and enforceable decision of the courts and that the subsequent review of that decision and the resulting new set of proceedings were not a part of the regular appeal procedure. In such circumstances the Court should determine the compatibility of those proceedings with Article 4 of Protocol No. 7 before proceeding to consider their fairness or their compliance with the principle of legal certainty envisaged under Article 6 of the Convention. In my view this distinction is important because of the different effect of the two provisions on the situation of the person concerned. Where a retrial is prohibited per se, its outcome cannot be seen as compatible with the Convention. In the instant case both the request and the decision to perform a new trial were based exclusively on the dissatisfaction of the prosecution authorities and the supervising court with the leniency of the final penalty. No new facts or fundamental defects of the regular proceedings were adduced. This situation is clearly distinguishable from the one considered in the earlier cases of Nikitin[1], Bratyakin[2], and others. Before considering the supervisory review proceedings in those cases under Article 6 § 1 of the Convention, the Court first looked at their compatibility with the ne bis in idem principle enshrined in Article 4 of Protocol No. 7 and distinguished whether they amounted to a retrial – prohibited by the first paragraph – or to a reopening, justified in exceptional circumstances under the second paragraph. Based on the specific facts in those cases, the Court was satisfied that the review proceedings either did not lead to any rehearing, or were justified under Article 4 § 2 of Protocol No. 7 as necessary to correct a fundamental defect of the regular proceedings, or as solicited by the applicants and leading to no deterioration in their situation. I agree with the majority’s conclusion that the supervisory review in the present case “allowed a rehearing of precisely the same legal point, which in the light of the above case-law cannot be considered sufficient to outweigh the binding force of a final judgment” (§ 29). This conclusion should exclude any further consideration of the proceedings under Article 6. A retrial may not be justified by the fact that the applicant was not required to serve his penalty – an issue which was determined by the competent courts pursuant to a law on amnesty. A reopening on that ground would question the very aim of that law, which was to absolve certain categories of convicted persons from serving their penalties. I also fail to see anything extraordinary in the dissatisfaction of the accusatory party with the leniency of the penalty pronounced – a complaint which was raised and considered by the courts within the regular appeal proceedings. To see this dissatisfaction as justifying a rehearing would render the principle of legal certainty devoid of its substance. In the absence of any justification, the reopening of the criminal proceedings constituted a retrial within the meaning of the first paragraph of Article 4 of Protocol No. 7, which cannot be considered in the light of Article 6 of the Convention. While both these provisions promote finality in criminal proceedings, Article 4 § 1 of the Protocol should be interpreted as a lex specialis to the principle of legal certainty envisaged by Article 6. More importantly, the effect of a finding of a violation of Article 6 § 1 does not equate to that of a finding of a breach of the ne bis in idem principle.[3] Turning to the straightforward fact of the retrial in the present case, I realise that a separate finding of a violation of Article 4 § 1 of Protocol No. 7 would perhaps be of questionable theoretical contribution to its interpretation. Yet, this provision also protects individuals from being punished twice. Following an amnesty, the effect of which is comparable to an acquittal, the applicant’s retrial resulted in his effective imprisonment. In my view this detrimental outcome should be considered automatically contrary to the Convention. This conclusion involves different consequences and requires a different redress. The applicant’s effective imprisonment cannot be seen as warranted by Article 5 § 1 (a) and this conclusion should automatically require his immediate release. The Court has declared this complaint inadmissible and has limited the scope of the case to the proceedings per se, thus leaving their result outside the focus of its scrutiny. The majority’s finding that a prohibited retrial “did not satisfy the ‘fair balance’ required by Article 6” (§ 30) neither requires the applicant’s immediate release, nor calls for any additional compensation for the resulting deprivation of liberty prohibited by the Convention. In these circumstances one may only hope that the individual measures taken to correct the absence of “fair balance” found by the Court do not involve yet another reopening of the proceedings. The provision of Article 4 § 1 of Protocol No. 7 functions also to preserve the authority of the courts[4] by protecting their independence and impartiality from any pressure to change their final conclusions. Contrary to this legitimate aim, the very purpose of the retrial in the present case was to require the lower courts to impose a harsher penalty than the initial “final” one. This was the legal ground for the requested supervisory review, and the single issue discussed in the resulting decision to order a rehearing of the case. It must not be overlooked that the reasoning given for this decision was binding and served as a mandatory instruction for the lower courts. In Daktaras v. Lithuania[5] (§§ 35 et seq.) the Court considered that “[the binding] opinion cannot be regarded as neutral from the parties’ point of view. By recommending that a particular decision be adopted or quashed, the President necessarily becomes the defendant’s ally or opponent (see, mutatis mutandis, Borgers v. Belgium, 30 October 1991, § 26, Series A no. 214-B).” In Daktaras the Court found that “the applicant’s doubts as to the impartiality of the Supreme Court may be said to have been objectively justified. Consequently, there has been a breach of Article 6 § 1 of the Convention.” In the present case the similarly binding opinion had the effect of instructing the lower courts to come to certain conclusions and to a predefined result. Moreover, once the Presidium of the upper court agreed with the prosecutor’s view that the penalty was inappropriately lenient, the applicant’s case was destined to as many quashings, remittals and reviews as necessary to achieve the harsher penalty sought. Any different outcome was vulnerable to further supervisory review proceedings and there was nothing in the law to stop the subsequent quashing of decisions which failed to comply with the instructions given. Since the initiation of the supervisory review mechanism was a privilege of the prosecution with the consent of the upper courts, it allowed the perpetuation of the criminal proceedings until that party was satisfied with the result. [1]. Application no. 50178/99, judgment of 20 July 2004. [2]. Application no. 72776/01, decision of 9 March 2006. [3]. See Stefan Trechsel, “Human Rights in Criminal Proceedings”. [4]. Ibidem, p.383 – in regard of the French text of the provision. [5]. Application no. 42095/98, judgment of 10 October 2000.

Lord Justice Thomas: There is before the court a renewed application for permission to appeal from the judgments of Warren J, given in November 2006, March 2007 and July 2007. Warren J gave permission on certain grounds as will emerge in our judgment, but the applicant now wishes to pursue other grounds of appeal. The judgments of Warren J were given after a long trial. The facts are very complicated, but it is only necessary to summarise them briefly and in short order, simply for the purposes of understanding our decision. There may therefore be some inaccuracy in detail in what it is necessary to summarise. The essence of the case relates to the Dadourian family. They had a number of interests, including interests in a company called DGI, which had acquired the assets of a company that included tooling and various other items of a production line to make products, including hospital beds; DGI was a claimant in the action. The principal shareholders in that company were Alex and Haig Dadourian; they were the other claimants in the action before Warren J and are the respondents to the appeal. From about 1995 attempts were made to sell the tooling which was part of the  production line. The cousin of Alex and Haig Dadourian was Jack Dadourian, who was married to Helga Dadourian. We shall refer to all of these as Alex, Haig, Jack and Helga, we hope without disrespect, but it is easier to do so, following the way in which the learned judge dealt with their names. They had interests in the family business and, on the judge's findings, had other assets which they controlled through offshore entities including a Liechtenstein anstalt, Brinton, and a company called Ancon, a Panamanian company; the applicant seeks to challenge these findings. Relations between Jack and Helga on the one part and Alex and Haig had deteriorated and, on the judge's findings, Alex and Haig would not do business with Jack. In about 1997, through the applicant, a solicitor and partner in a London firm, Jack and Helga became involved in a business venture relating to China. In the course of preparing for that business venture, a shelf company, Charlton, was acquired. A Mr Rahman became the managing director and the applicant was appointed the other director. When the venture did not succeed, Jack introduced Mr Rahman to Alex, with the view that Charlton would acquire the tooling and other items relating to the production line of the business of DGI. On 1 and 8/9 August 1997 Jack sent two e-mails to Alex relating to the proposed sale to Charlton. These e-mails described the interest of Charlton in setting up a factory in Bangladesh which would use the production line. Those e-mails formed a central part of the case ultimately made against Jack and the other defendants, who include the applicant, Helga, Mr Rahman and various offshore entities. The judge found that Charlton was owned and effectively controlled by Helga and Jack through the anstalt and Ancon. After negotiations (which it is not necessary to set out but which were set out in detail in the judgment) an option agreement was entered into on 11 September 1997 between DGI and Charlton, under which Charlton could acquire the tooling and other property relating to the production line. In support of this a letter of credit was to be opened. There were a number events set out in detail in the judgment, to which it is not necessary to refer. In March 1998 Charlton purported to exercise the option. DGI did not accept it was validly exercised. There arose a dispute over the obligation to open the letter of credit. Again it is not necessary to set out the nature of that dispute. In July and August 1998 the shareholding in Charlton was transferred to a third party called Eastcastle. This was owned by two individuals; the judge found that they were not connected with Helga or Jack. Eventually on 18 September 1998 DGI invited its New York lawyers to terminate the option agreement on the basis there had been repudiation by Charlton. Charlton then commenced litigation in New York in late 1998. This was stayed in favour of an arbitration, which was to include claims to the effect that there had been fraudulent misrepresentations in relation to the making of the option agreement. The arbitration commenced in April 1999. It lasted a long time. Charlton's claim was dismissed for failure to comply with peremptory orders. In an award in June 2003, the arbitrator found that Charlton was in breach of the agreement, that DGI was entitled to treat the option agreement as repudiated, and that DGI had entered into the agreement as a result of fraudulent misrepresentation on the part of the applicant and Mr Rahman as its directors. Those representations were as to who had been shareholders in Charlton and as to the creditworthiness of Charlton and other matters relating to the ability of Charlton to perform the agreement. The award was of substantial damages against Charlton. Charlton had no assets and therefore Alex, Haig and DGI sought to recover the amounts from Jack and Helga as well as the applicant and Rahman, on the basis that Charlton was a facade for Jack and Helga and that the applicant and Rahman had conspired with them in that respect. Proceedings to that end were commenced in the Chancery Division and came on for trial before Warren J in March, April and May 2006. Prior to the commencement of those proceedings, there were interlocutory applications for Freezing Orders to which it will be necessary briefly to refer. It is clear, as the trial progressed, the bitterness of the family dispute became more evident. At the trial the applicant appeared in person; Mr Rahman, although he gave evidence, submitted to judgment. There were other parties that took no part in the trial, but Helga and Jack were represented by leading and junior counsel. The judge, in the judgement handed down on 24 November 2006, found in favour of DGI, Alex and Haig, essentially on one issue relating to the two e-mails that had been sent on 1 and 8/9 August 1997. It is that finding which is central to the appeal. It could be summarised broadly thus. Jack, in two e-mails on 1 and 8/9 August impliedly represented that his only status was that of an intermediary in relation to the sale of the tooling. The judge found that that was untrue because Jack and Helga between them controlled Charlton, as we have stated, through the Liechtenstein anstalt and the Panamanian company. He found that the representation made by Jack was fraudulent, that it was relied on and it induced DGI, Alex and Haig to enter into the option agreement. The judge went on to find that Helga and the applicant were responsible as joint tortfeasors on the basis that they had entered into a design with Jack and Mr Rahman to the effect that the involvement of Jack and Helga would be kept secret from DGI, Alex and Haig. The judge granted permission to appeal on the question of whether the e-mails gave rise to the implied representations. This became Ground 1 of the appeal. He also granted permission as to whether the applicant and Helga were liable as joint tortfeasors. That became Ground 5 of the appeal, and the appeal is proceeding before this court on that basis. The judge, however, refused permission on a number of other points, three of which the applicant wishes to pursue. The first of these is Ground 2; the applicant wishes to contend that DGI and the claimant were not induced by the representation. Secondly, that the judge was wrong to find that DGI and the other claimants would not have entered into the option agreement if they had known that Ancon was a shareholder in Charlton at the date of the option agreement or that Ancon was in the beneficial interest of Helga and Jack at that time. That is Ground 3 of the proposed Appeal. Ground 6 of the Appeal is that the judge was wrong to rely on legal presumptions on which the judge had relied in reaching his decision in relation to inducement. The contentions which the applicant wishes to make on these three grounds --. that is Ground 2, Ground 3 and Ground 6 – are all interrelated. It is his case that, given the background circumstances of the relationship between the two parts of the Dadourian family, it will be necessary for the court in any event to look to an extent to the background of the relationship when the court comes to consider the implied representation – Ground 1 of the appeal. Secondly, it is said that, as the judge found that the applicant was (1) unaware of the sending of the two e-mails and (2) that he did not know the extent of the bad relationship between Alex and Haig on the one part and Jack on the other, the court ought, when considering the overall issue of his liability as joint tortfeasor, to examine the issues of inducement. He also pointed to the fact that in the course of the judgment the judge relied upon the presumptions at paragraphs 542 -554 of the judgment, and wishes to challenge the correctness of the application of those presumptions to the findings of inducement. It seems to us that, although in one sense it could be argued with great force that the issue of the finding of inducement which the judge made must be ultimately a question of fact, we think that in circumstances where the applicant wishes to pursue the grounds on which he has been granted permission -- namely Ground 1, relating to the meaning of the two e-mails and Ground 5, relating to his liability as joint tortfeasor -- it would not be right to preclude him from arguing the points he seeks to argue in relation to inducement on Grounds 2, 3 and 6. In therefore granting him permission on these aspects, we do so on that basis. We would add that it seems to us that every effort must be made to confine the factual issues that this will raise to as narrow a circumstance as possible. It should be possible to produce within a short compass the relevant history of the relationship between the two parts of the Dadourian family and gather together the findings that the judge made. It also seems to us that when that is done, it should be incumbent upon the applicant to identify specifically any particular finding the judge has made which he wishes to challenge, so that this aspect of the appeal can be kept within a narrow ground. That is the first part of the application before us. The second part of the application relates to the judge's decision on the costs. The judge refused permission to appeal. There were two parts of the order which the applicant wishes to challenge. First, the judge disallowed 25% of the claimants' costs to reflect the fact that they not succeeded on a number of the grounds which they had originally brought and which they pursued at trial, and then only in essence succeeded on the basis of the implied representation set out in the two e-mails. The judge also made an order as to the indemnity costs which the applicant also seeks to challenge. We shall deal with each separately. As to Ground 9, the ground on which the applicant wishes to challenge the order as to the deduction of only 25% of the claimants' cost, the applicant contends that this did not properly reflect the reality of what had happened at the trial. He submits that if one looks at the numerous ways in which these claimants had put their claim, both in the application for Freezing Orders and subsequently, the judge should have made a much greater order in favour of disallowance against the claimants' costs. There is no dispute, it seems to us, as to the issue of principle. The judge is bound to look at, in deciding the issues on costs, the extent to which the parties have succeeded or failed, and to look at the time that each of the issues has taken and stand back and look at the matter overall. We see the force of the argument based on the fact that on a number of the claims put forward by the claimants they did not succeed. However, it seems to us that the judge was right in the view he took that the essence of the claimants' claim was that the real issue was as to the true ownership and control exercised over Charlton, the attempts that were made to keep that concealed as well as the interests of Helga and Jack in it. He was also right in saying that in relation to that broad issue, although it was put in a number of different ways, each of those ways really required a proper examination of the factual substrata. It seems to us that, as it is accepted that the judge applied the correct principles and secondly, as the judge was right in his basic approach, it is difficult to see how there is a realistic prospect of challenging the judge's exercise of his judgment in this respect. We therefore refuse permission. As regards the second issue in relation to the application for permission to appeal in respect of costs, it relates to the judge's decision that the applicant should pay the costs of the claims on an indemnity basis. The reasons for his decisions are given at paragraphs 19(b) and 79(b) of the judge's judgment dated 8 March 2007. The judge, in essence, found it difficult, as he says at paragraph 79(b), to reach the decision that the applicant should pay costs on an indemnity basis. He did so ultimately on account of the applicant's failure to provide proper disclosure of material, which in the end included documents which turned out to be of great importance, in particular the e-mails surrounding the "playing the game" e-mail. He made clear his reasoning at paragraph 79(b) where he stated that the fact that some of the most important documents emerged in the course of the trial was testimony as to how serious the non-disclosure of documents was and referred to what he described as the lamentable disclosure in the action as well as the arbitration. It seems to us that the decision to award indemnity costs, although it is a matter which lies within the discretion of the judge, does raise at least an arguable issue as to whether the judge had a sufficient basis for making the order he did on the narrow basis he set out in his judgment. We think this because it appears to us that there is what can be put no higher at this stage than something we think is just about arguable as having a real prospect of success; firstly because the documents in question in the case appear to have been voluminous and the documents in respect of which the judge made his remarks were very few; there does not seem to be a clear finding that anything was done deliberately; and there is an argument that the primary duty to disclose these documents in any event rested upon Helga, Jack and others. We would therefore propose to grant permission in respect of that ground of appeal. The next matter on which the applicant seeks permission to appeal relates to an application that there ought to be an enquiry as to damages in two circumstances: first, if the applicant was to succeed in his primary grounds of appeal, namely that he was not liable; and/or secondly, on the basis that Freezing Orders were not properly granted. There is an issue before the court, which we shall describe in more detail in a moment, as to whether the Freezing Orders were properly granted. If the applicant were to succeed on either of the grounds we have set out above, it seems to us that he must be entitled to argue that in those circumstances there should be an enquiry as to damages. If and insofar as that is a separate ground of appeal, we would grant permission. The more substantial issue that arises in relation to the Freezing Orders relates to the circumstances in which they were granted. The judge held that Freezing Orders granted prior to the trial were properly granted. He concluded that that was so notwithstanding that there had been material non-disclosure as to the position of Jack and Helga by the claimants. That non-disclosure related to the conduct of the arbitration by Charlton after it had been acquired by Eastcastle (prior to the arbitration) as we have set out. He concluded despite that non-disclosure the Freezing Orders were properly made. He also concluded that although the application for Freezing Orders were made on the basis of claims that failed at trial, they were nonetheless properly granted. On those two issues the judge gave permission to appeal. However, it emerged at the end of his judgment on that question that there may have been a misunderstanding as to the basis on which Jack and Helga advanced the case on non-disclosure. At paragraph 9 of the second judgment handed down on 11 July, the judge said: "I am troubled by one aspect, however, which is that Mr Cakebread [counsel for Jack and Helga] says that the inevitable inference from the material is that there was a deliberate non-disclosure which makes it, of course, a very strong case. It formed no part of his submissions before me on the discharge application that there had been a deliberate non-disclosure. This does seem to me to be a new point that if it is to be run, should only be run with the permission of the Court of Appeal itself. So, I am not giving permission to base any part of the appeal on that point." It has been contended before us today by the applicant that the way in which the argument on non-disclosure went before the judge was on the basis that it must have been deliberate. Whether that was in fact the case or whether the judge did not fully appreciate the way in which the matter was being put, it seems to us that, as the judge has given permission to appeal on the point as to whether the material non-disclosure that he accepted was made was insufficient to justify the discharge of the Freezing Orders, it would be necessary to enquire into the circumstances in which the non-disclosure was in fact made. It seems to us therefore that it is inevitable that part of that examination must include issues as to whether it was innocent or otherwise and we therefore think it right that this further point should be before this Court. That concludes the issues in relation to the applications for permission. One further issue has been raised before us orally today, and that relates to the interpretation of paragraph 15(i) of the order of the judge in relation to a stay in the events that have subsequently happened. It appears that a petition of bankruptcy has been presented against the applicant by a creditor wholly unconnected with DGI. In the course of those proceedings, the applicant is seeking to obtain the discharge of the petition by payment to that particular creditor, but DGI have intervened in the proceedings and wish to take it over and have found a debt owed by the applicant which is not covered by the terms of the staying order in paragraph 15(i) of the order. This is, it seems to us, not a matter that can possibly be dealt with on this ex parte application, and, as the issue primarily relates to the interpretation of the order of Warren J, it should, in the first instance, be referred to him. Of course, if there is any issue that arises as a result of any order he may make on which any of the parties wish to seek permission to appeal, they must pursue that in the ordinary way. The only question that therefore remains for us to consider is whether, between the hearing of that in the parties' application before Warren J and today, it is necessary for this court to make any interim order preserving the position pending that hearing. Sir Anthony Clarke MR: Thank you. Subject to that last point the order of the court will be: (1) permission to appeal granted on Grounds 2, 3, 6, 10 and 14. (2) Permission to appeal refused on Ground 9. (3) As to Ground 13, permission granted on the assumption that Grounds 11 and/or 12, upon which permission was granted by the judge, succeed. (4) The application to vary or clarify paragraph 15(i) of the order of the judge of 23 July 2007 be adjourned to be heard by Warren J on notice to the respondent. (5) Any further application to this court, including any application for permission to appeal from any order made by the judge on the application referred to in paragraph 4 of this order, to be determined by Thomas LJ. (6) Costs reserved to the appeal. Order: Application granted

Lady Justice Hallett : Introduction The Appellant was the general practitioner ("GP") responsible for the care of thirty year old Mr David Donohue. On 21 December 2002 Mr Donohue took an overdose of drugs prescribed by the Appellant and died. Nigel Meadows HM Coroner for the County of Greater Manchester (Manchester City District), sitting with a jury, held an inquest into his death in the summer of 2011. The jury returned a verdict of unlawful killing. This is an appeal from the Divisional Court which refused the Appellant permission to review judicially the conduct of that inquest. The original grounds for judicial review were eight fold: that the Coroner strayed beyond the legitimate scope of the inquest, displayed bias towards the Appellant and allowed a disproportionate focus on the Appellant's conduct and credibility. Further, it was argued he failed to carry out an adequate inquiry into the conduct of the emergency services who attended Mr Donohue, unlawfully left to the jury the verdict of unlawful killing, failed to leave a verdict of suicide and erred in his directions to the jury on the issues of causation and novus actus interveniens. By the time the application for Judicial Review reached the Divisional Court the issues had narrowed and the Divisional Court was led to believe that the only real ground being pursued was "scope". I gave permission to appeal the Divisional Court's judgment on that ground alone. It was not clear to me what had happened to the ground in relation to the failure to leave a suicide verdict and I directed that it could be renewed at the appeal hearing. Ms O'Rourke QC for the Appellant has renewed that ground plus others. Factual Background As Mr Donohue's GP the Appellant knew Mr Donohue well. He attended on him for years, often in the presence of his mother Edith Kowalski. Mr Donohue had a history of heroin abuse and mental health problems and the general prognosis for him was not good. By 1997 he had an established heroin dependency, and history of alcohol abuse. In February 1997, the Appellant first prescribed him the drug Heminevrin (chlormethiazole), a sedative with a range of uses, including countering the effects of withdrawal from alcohol abuse. It can be highly toxic taken in combination with alcohol. The prescriptions continued despite the fact Mr Donohue overdosed twice on Heminevrin and other drugs, taken with alcohol. He knew he should not combine the two. Mr Donohue attempted suicide (by hanging) in February 2001. There is then a gap in the prescription of Heminevrin until 2002. By 2002 the potentially lethal interaction between Heminevrin and alcohol was well recognised and it was licensed mainly for use in connection with detoxification, on a short term basis, in a hospital setting. From September 2002 the deceased received a number of repeat prescriptions of drugs including Dihydrocodeine and, on 21 November 2002, he took an overdose of Dihydrocodeine combined with alcohol. Thereafter his medical notes record advice to prescribe no more than two weeks' medication at a time because of the history of self harming. On 16 December 2002, police were called to Mr Donohue's home where he was behaving bizarrely. He had received some bad news about contact with his son who was in local authority care. He said he would see his son on Christmas Day and then kill himself. A doctor (not this Appellant), who examined him after his arrest, noted that he was still abusing alcohol on a daily basis. On 19 December 2002, Mrs Kowalski telephoned the Appellant and requested a prescription of Heminevrin for her son. She claimed in a written statement that she had told the Appellant that her son needed the drug because he 'wanted to come off alcohol'. The Appellant maintained that she put him under considerable pressure to prescribe something to help her son to sleep. He insisted she told him that Mr Donohue had ceased drinking and assured him she would supervise its use. Without checking his recent history and without seeing the patient, the Appellant prescribed sixty tablets of Heminevrin. Mr Donohue senior picked up the prescription and handed them to Mrs Kowalski to supervise their administration. On 21 December 2002, according to his parents, Mr Donohue was in good spirits and gave no indication of wanting to end his life. He spent a pleasant day with his father preparing for Christmas. At 16.30 he went to his mother's house and asked for some tablets. She told him where they were and to take just two. Unbeknown to her he took the bottle with him. He left but returned an hour or so later (the timings are not precise). He shouted upstairs "I have taken all the tablets Mum". She rushed downstairs and found him lying on the sofa. He was half conscious and "dopey". When she checked his pulse, he said: "Help me Mam will you?" He had taken all of the tablets remaining in the bottle which would have been approximately fifty two. Mrs Kowalski believed her son had made a serious attempt on his life. She called an ambulance at 17.56. It arrived at 18.03. What happened thereafter was a matter of dispute between the members of the emergency services who attended and the family. The family alleged mistreatment by the ambulance crew who in turn alleged unprovoked violence on the part of Mr Donohue. The family also alleged mistreatment on the part of the police officers who initially refused to take Mr Donohue to hospital. They claimed this was because of his aggressive behaviour. He was placed in a police van at 18.23 arriving at hospital at 18.29. Hospital staff reached the van at 18.36. Despite efforts to resuscitate him, Mr Donohue was declared dead at 19.00. Post mortem examinations gave the cause of death as chlormethiazole and alcohol toxicity. The experts agreed his chances of survival would have been good had he received hospital treatment before the onset of cardiac arrest. Substantial investigations took place but no criminal proceedings were brought. The first inquest was opened and evidence was called including from the Appellant. On the basis of what he had heard, the Coroner decided to adjourn and refer the Appellant's conduct to the Crown Prosecution Service ("CPS") for a decision on whether to prosecute the Appellant for manslaughter. They declined to prosecute and the inquest resumed. The Coroner set a timetable of 15 days to complete the proceedings starting on 13 June 2011. The jury returned 35 days later with their verdict of unlawful killing, having been allowed to consider verdicts of unlawful killing (in relation to the prescribing of Heminevrin), accidental death contributed to by neglect (by the ambulance staff), accidental death and an open verdict. They had not been allowed to consider the verdict of suicide. The inquiry was very thorough. There were several designated properly interested persons ("PIP") including the Appellant, all of whom were represented by counsel. The jury heard statements read from Mr Donohue's parents both of whom had died before the inquest, and evidence from eye witnesses, ambulance staff and police officers. The Coroner also received evidence from a member of staff and a colleague from the Appellant's surgery, a witness from the Community Alcohol Treatment programme and members of staff from the Primary Care Trust ("PCT") responsible for supervision of the Appellant's practice. Pathologists and forensic toxicologists gave evidence as to the cause of death and the properties of Heminevrin. Evidence on GP practice was given by Dr Grenville, and by a Dr Young instructed by the Appellant. Dr Grenville was highly critical of the Appellant's prescribing practices not only in relation to Heminevrin but also in relation to Dihydrocodeine. He opined that it was inappropriate to prescribe large quantities of a potentially lethal drug to any patient without seeing them and that, given his history, it was inappropriate to prescribe the drug to Mr Donohue at all. It was his view that the Appellant's conduct fell sufficiently far below the standard of a reasonably competent medical practitioner so as to amount to gross negligence. When pressed, Dr Young did not disagree with Dr Grenville on many important aspects of his evidence, including whether or not it was appropriate to prescribe Heminevrin to Mr Donohue in these circumstances. The Appellant himself was in the witness box on several days towards the beginning and end of proceedings. Ms O'Rourke claimed the Coroner called and recalled the Appellant at least three times. Those representing the Coroner and the deceased's family explained that, in truth, he was recalled only once. His evidence was interrupted at the beginning of the inquest by the ill health of his wife and had to be adjourned. Thereafter, he was recalled, at the conclusion of the inquest, to be asked further questions on specific evidential issues which had emerged. It was accepted, however, that his evidence was spread over several days. Given the criticisms made by Ms O'Rourke it is necessary to rehearse in a little more detail how the Appellant's account developed and why it became necessary to call for further evidence and to recall him. In 2004 he made a statement to the police in which he described his conversation with Mrs Kowalski on 19 December 2002 and asserted that he had prescribed what would amount to a detoxification regime of Heminevrin i.e. several tablets a day over several days. In that statement and at the first inquest in 2007 the Appellant did not mention that he had prescribed Heminevrin on the recommendation of a psychiatrist. However, he did recall prescribing Dihydrocodeine. Thereafter, his account of the dosage of Heminevrin prescribed to Mr Donohue changed extraordinarily and he added that he had only prescribed Heminevrin on the recommendation of a psychiatrist. There was no evidence of this in the medical records of Mr Donohue as supplied to the Coroner. The Appellant later changed his account again and claimed he had not prescribed Dihydrocodeine to Mr Donohue and that his previous testimony was mistaken. Further enquiries were made to establish where the records were at material times, whether they were complete, and whether the Appellant's locum might have been responsible for issuing prescriptions to the deceased. When the full GP record was produced, it revealed further possible discrepancies in the Appellant's accounts and the prescribing of Heminevrin to Patient X. Patient X's records were potentially relevant to the Appellant's knowledge and understanding of the requirements for prescribing Heminevrin. Further, the Appellant had made an entry in the record, dated 2003 indicating that, some months after the death, Mrs Kowalski had telephoned him and purported to exonerate him from responsibility in the death of her son. In the light of a number of inconsistencies and contradictions which had emerged, the Appellant was recalled and Mr Brown for the family robustly examined him. In effect, he accused the Appellant of lying to cover his grossly negligent behaviour. The Law The law in relation to inquests is well trodden ground and I do not intend to rehearse the statutory provisions and principles at any great length. I have extracted the following which I consider relevant to this appeal: i. The Coroners Court is a creature of statute. Inquests are governed by the Coroners Act 1988 ('the 1998 Act'), Coroners Rules 1984, and soon the Coroners and Justice Act 2009. Section 11 of the 1988 Act and Rules 36, 42 and 43 of the 1984 rules are particularly pertinent to this appeal. ii. Section 11 provides that the inquest shall determine who the deceased was and how, when, and where he died. Rule 36 provides that the evidence and the proceedings shall be directed solely at ascertaining the answers to those questions and forbids any expression of opinion on any other matter. Rule 42 prohibits the finding of any civil or criminal liability against a named individual. iii. It is the duty of the Coroner as the public official responsible for the conduct of inquests, whether he is sitting with a jury or without, to ensure that the relevant facts are fully, fairly and fearlessly investigated. He must ensure that the relevant facts are exposed to public scrutiny. He fails in his duty if his investigation is "superficial, slipshod or perfunctory". But the responsibility is his. He must set the bounds of the inquiry and rule on the procedure to be followed. (R v North Humberside Coroner, ex p. Jamieson [1995] QB 1) iv. The scope of inquiry at an inquest can extend wider than is strictly required for the production of the verdict. Rule 36 should not be interpreted so as to defeat the purpose of holding an inquest. The inquiry is not, therefore, restricted to the "last link in the chain of causation". (R v Inner West London Coroner, ex p. Dallaglio [1994] 4 All ER 139). v. The incorporation of Article 2 of the ECHR into domestic law brings with it the procedural obligation to carry out an effective investigation and to ensure, so far as possible, "that the full facts are brought to light; that culpable and discreditable conduct is exposed; that suspicion of deliberate wrongdoing (if unjustified) is allayed; that dangerous practices and procedures are rectified; and that those who have lost their relative may at least have the satisfaction of knowing that lessons from his death may save the lives of others." (R (Amin) v Secretary of State for the Home Department [2004] 1 AC 653,) vi. Where Article 2 is engaged the wording of rule 36 should be interpreted so that when considering 'how' the deceased came by his death the Coroner or jury must decide not simply 'by what means' but 'by what means and in what circumstances' he met his death. (R (Middleton) v West Somerset Coroner 2004 AC 182) vii. There is now in practice little difference between the Jamieson and Middleton type inquest as far as inquisitorial scope is concerned. The difference is likely to come only in the verdict and the findings. (R (Smith v Oxford Assistant Deputy Coroner 2011 1 AC) viii. Rule 43 enables a Coroner at the end of the inquest to make a report to relevant parties where the evidence gives rise to a concern that circumstances creating a risk of other deaths will occur or continue to exist in the future. This now forms part of the means by which the state discharges its Article 2 obligation. (R (Lewis) v HM Coroner for the Mid & North Division of Shropshire [2010] 1 WLR 1836). ix. An inquest is not a trial. It is an inquisitorial process designed to get at the truth. The limits on the questions that may be asked are that they must be relevant to the issues to be determined under Rule 36 and "proper". Coronial proceedings are not subject to the usual rules applicable to civil or criminal trials. An interested party may not, therefore, have the benefit of procedural safeguards which would apply to a trial, but will have the protection of Rule 42. General Discussion The law is easy to state but difficulties may arise in its application. The phrase "in what circumstances" appears very broad and to date the courts have avoided being overly prescriptive about precisely what comes within the ambit of 'other factors which are relevant to the circumstances of the death'. Ms Leek QC for the Coroner suggests this is for two good reasons: (i) because of the difficulty in attempting to fetter the discretion of coroners, given the widely differing factual scenarios which come before them and (ii) because of the importance of flexibility in the prevention of future deaths. Ms O'Rourke does not disagree but argues forcefully that here the Coroner has simply gone too far. She complains that the Coroner's introduction of evidence, some of it relating to events years after Mr Donohue's death, coupled with other evidence which at best could be described as of marginal relevance led to an inquiry which strayed far beyond its legitimate remit. It became, she insisted, in effect a criminal trial for manslaughter with the Appellant in the dock. Far too much time she insisted was spent examining the Appellant's general character and conduct when these are rarely issues for an inquest. She relied upon a short passage in Jervis on Coroners at 12-116 in which the editor states that "a person's character and evidence of his behaviour on other occasions, may be thought relevant to the question whether he did a particular thing, the subject of the present proceedings, but in general it is not permitted to give evidence of either of these matters". Ms O'Rourke interpreted this passage as authority for the proposition that character evidence is the exception rather than the rule in coronial proceedings. Yet, the Coroner and jury sat through 28 days of evidence, 18 days of which she described as irrelevant to the circumstances of the death because they were mostly directed at examining the Appellant's character. Ms Leek and Mr Brown for the deceased's family placed heavy emphasis on the Coroner's broad discretion to decide the extent of his or her inquiry. They accepted that the scope of the inquiry may have expanded during the hearings, but submitted that this is not unusual. The inquiry was led by the evidence, in part by the Appellant's evidence in which he unexpectedly made a number of assertions designed to shift responsibility for Mr Donohue's death. The Appellant and his advisers knew from the outset that gross negligence manslaughter on the part of the Appellant was always an issue which would require full investigation. The Coroner was under a duty to investigate how the deceased came by his death fully, fairly and fearlessly and, if necessary, report under Rule 43. They rejected (as would I) Ms O'Rourke's attempt to classify this inquest as what she called a "hybrid", namely an inquest in which the procedural duty under Article 2 is only triggered by the involvement of state agents (here the emergency services personnel) but other non state agents (the Appellant) are swept up in the inquiry. In my view, it cannot be right to suggest, as she appeared to do, that once a coroner has embarked upon an Article 2 compliant inquest there should be less intensive scrutiny of the conduct of the non state agent than of the conduct of the state agent. It is only by examining the roles of each fully and fairly that the role of the state agent can be put into its proper perspective and the truth ascertained. Here the role of the non state party was crucial to the investigation. The Appellant prescribed the drugs which killed the deceased. The circumstances in which he did so raised the real possibility there was an unlawful killing. The parties were agreed that to return a verdict of unlawful killing the jury had to be sure (i.e. to the criminal standard) of both the actus reus and mens rea of gross negligence manslaughter. The actus reus consists of a breach of a duty of care owed to David Donohue which made a material contribution to his death and was so serious a breach it should be characterised as gross negligence and a crime. The mens rea would be any one of the following: i) Indifference to an obvious risk of injury to health; ii) Actual foresight of the risk coupled with determination nevertheless to run it; iii) An appreciation of the risk coupled with an intention to avoid it but also coupled with such a high degree of negligence as the jury considered justifies the conviction or iv) Inattention or failure to advert to a serious risk which went beyond "mere inadvertence" in respect of an obvious and important matter which the Appellant's duty demanded that he address. Accordingly, Mr Brown argued any evidence which tended to show that the Appellant had a guilty mind was relevant. His account on important issues had varied significantly and his credibility was very much in issue. Specific complaints In order to assess the general complaint that the inquest, to all intents and purposes, turned into a criminal trial with the Appellant in the dock, it is necessary to consider the individual and cumulative effect of the specific complaints made by Ms O'Rourke. She claims the Coroner exceeded his jurisdiction and erred in law in admitting the following categories of evidence. Evidence from the PCT, the GMC and Dr Koh The most glaring example of evidence which Ms O'Rourke categorises as irrelevant is the evidence of witnesses in relation to the PCT and the GMC. This evidence fell into three main categories: 1) Mr Donohue's medical records; 2) the PCT review of the Appellant's performance as a GP from 2004 until his retirement in 2010 and 3) the Coroner's referral in 2007 to the GMC of allegations of gross negligence against the Appellant in relation to Mr Donohue's death. Medical records Enquiries having revealed that the Appellant may not have returned Mr Donohue's medical records to the PCT, as he was duty bound to do, and that the records may not have been complete, it was thought necessary to establish when the PCT had been notified of the death and what knowledge the PCT had of the whereabouts of the records. Dr Koh, the Appellant's successor at the surgery was called to assist on this issue. Ms O'Rourke suggested these inquiries were not only unnecessary but stretched the inquiry beyond legitimate limits. To my mind, the relevance of establishing whether the medical records were reliable, accurate and in the Appellant's possession at material times is obvious. Central to this part of the inquiry was the question of whether the Appellant was telling the truth about his dealings with the deceased and his mother and the circumstances in which he came to prescribe the fatal drug. A GP's records are meant to be a contemporaneous record of history, examination, and action taken. They are meant to provide an examining doctor with the information he requires to do his job properly. Mr Donohue's records, therefore, should have assisted on the question of what the Appellant knew or should have known of Mr Donohue's medical history at the material time, what he himself recorded in Mr Donohue's notes and what he did with them. Thus, the evidence of the records from the PCT and Dr Koh went directly to the circumstances of Mr Donohue's death. The evidence may have exonerated the Appellant, established that he was mistaken or, possibly, that he was lying to cover his tracks. They should have thrown light on the circumstances of Mr Donohue's death. The PCT performance review The PCT review was said to be relevant to the Appellant's credibility and character. After Mr Donohue's death, concerns were expressed about the way the Appellant ran his practice. The Coroner described it in this way in the summing up: "concerns were expressed concerning his performance and some of the aspects of the way his practice operated ….There was some involvement of a pharmacist in 2004 and it seems another practitioner raised concerns involving the diagnosis of a diabetic patient…." (Summing up 28 July 2011 page 97). The assessment led to a "remedial notice" and a requirement for improvement in "record keeping, patient reviews and medication reviews". The Appellant was given some computer training and satisfied the PCT that significant improvements had been made. By the time of the inquest, the PCT's concerns seem to have been substantially allayed. Mr Brown argued this evidence was clearly relevant to the inquiry because the Appellant was asked if he had won any awards and answered truthfully that he had. It was said that by asserting he had won awards and given the impression he was a reasonably competent doctor he had "put his character in". Knowing of the PCT's concerns about his clinical performance, Mr Brown insisted that the Appellant should not have put himself forward as an award winning doctor. Miss Leek was rather more cautious in her approach. She conceded this evidence was of "marginal relevance" at best. I found Mr Brown's argument less than persuasive. The question for the Coroner here was not whether the Appellant had "put his character in" (a concept better suited to criminal proceedings); the question was whether or not the Appellant had misled the jury as to a significant issue in the inquest. If the Appellant had done so, the Coroner was fully entitled to admit evidence which would put the record straight. However, it was not entirely obvious to me how evidence of a performance review, carried out years later which included unproven allegations as to the misdiagnosis of a diabetic patient in unrelated circumstances, could achieve that aim. In the result, the evidence of the PCT review seems to have been something of an anti climax. Nothing in the performance review detracted from the fact the Appellant had won awards and none of the complaints about his performance reached the critical level of calling his clinical competence into question. Once the evidence had been admitted, no focus whatsoever was placed on the treatment of the diabetic patient. The jury may have been left wondering why the evidence about the performance review was ever placed before them. Even if this evidence was irrelevant as opposed to marginally or tangentially relevant, therefore, I was not persuaded that the admission of this evidence came close to undermining the lawfulness of the proceedings. Referral to GMC The Coroner's referral to the GMC of allegations of gross negligence against the Appellant, arising from Mr Donohue's death, was said to be relevant to possible systemic failings. The Coroner had informed the GMC of what had happened in 2007 yet the PCT did not learn of the death of Mr Donohue and the alleged negligence of the Appellant until 2011. The Coroner was anxious to satisfy himself, therefore, that proper procedures were in place to ensure the supervision and regulation of practising doctors. Miss Leek concedes that this evidence was of marginal relevance to the circumstances of Mr Donohue's death. However, she argued, and I accept, it was relevant to the issue of preventing deaths in the future. It would be a matter of serious public concern if a PCT remained totally unaware of a complaint against a GP on their list that he or she had caused the death of a patient by negligent prescribing. Alternatively, it would be a matter of serious public concern in relation to preventing deaths in future, if the PCT had been made aware that such a complaint had been made and done nothing. If a doctor is accused of putting patients' lives at risk, systems must be in place to ensure an appropriate response by the supervising and regulatory bodies. To my mind, therefore, it was within the Coroner's discretion to decide this evidence was relevant to a possible rule 43 report. The Appellant's Previous Prescribing to David Donohue and Patient X, his Use of Locums and his Systems for Repeat Prescribing The next category to which Ms O'Rourke took exception was the prescription of drugs to the deceased and others. In essence Ms O'Rourke suggested that only evidence relating to the prescription of the fatal drug to the deceased was relevant and admissible. Accordingly, it was her contention that the Coroner should have excluded evidence of previous prescribing to the deceased, evidence from the locum doctor about his treatment of the deceased and the Appellant's system of prescribing generally. It was said that evidence of this kind strayed beyond the "in what circumstances" test. There are two answers to this complaint. First, evidence was called from the Appellant's locum to clear up the confusion in the evidence as to who had treated Mr Donohue on which occasion. This was clearly relevant and admissible evidence. Second, as I have already indicated, the Appellant's knowledge of Mr Donohue's medical history, the symptoms, the drugs prescribed, how Mr Donohue had coped in the past with them were all of central relevance to the inquiry and fell squarely within 'other factors relevant to the circumstances of the death'. I endorse the observations of the Divisional Court judgment at paragraph 18 "It was inevitable that the prescribing by the Clamant and the history of prescribing would play an important part in the inquiry. The deceased had died from a mixture of Heminevrin and alcohol. The circumstances of the deceased being prescribed Heminevrin were bound to become significant. Obvious questions come to mind. What was the history of prescription? What did the claimant know about the deceased and his past? What steps did the claimant take to protect his patient from himself, knowing about his past?..." The Appellant was or should have been fully aware of Mr Donohue's history of alcoholism, drug abuse and overdosing (with the same and other drugs), yet he repeatedly prescribed a highly toxic drug when taken in conjunction with alcohol. So toxic was the drug that at one stage he told the jury he thought two tablets with alcohol might suffice as a fatal dose. It is not surprising, therefore, that the Coroner authorised a full investigation of Mr Donohue's prescribing history and the Appellant's system of issuing repeat prescriptions to him. That brings me to Patient X. Patient X At the resumed inquest, the Appellant claimed not only that he started to prescribe Heminevrin to Mr Donohue following the advice of a psychiatrist, but also that he would not have started prescribing Heminevrin to any patient unless he had been advised to do so by a specialist. If this was correct, it was highly relevant to the jury's consideration of whether any causative breach of duty on the part of the Appellant was so bad in all the circumstances as to amount to a criminal act or omission. The Appellant's claim came after Dr Young had mistakenly suggested in his report dated October 2010 that he understood the Appellant had first prescribed Heminevrin for Mr Donohue on the advice of a psychiatrist, but before the doctor acknowledged this was a mistake. There was nothing in David Donohue's medical records to suggest this was true. Similarly, there was nothing in the repeat prescription records for Patient X, to whom he was also prescribing Heminevrin in the autumn of 2002, to suggest that this was on the advice of a specialist. On the contrary, Patient X's records revealed that, in 1998 and 1999, the Appellant was twice advised by psychiatrists to stop prescribing Heminevrin to Patient X because he was continuing to drink alcohol. Thus, the absence of any record of specialist advice in favour of prescribing the drug to Mr Donohue and Patient X and the presence of advice not to prescribe the drug contradicted the Appellant's assertions. Further, the Appellant consistently stated in his evidence that, by February 1997, he was aware that Heminevrin should not be prescribed to a patient who was drinking alcohol and that he did not prescribe Heminevrin to David Donohue or any patient, if the patient was drinking alcohol. Patient X's medical records demonstrated this was untrue. This was an area where initially I had my doubts as to the propriety of the inquiry's stretching into another patient's records and repeat prescription history. However, I do now understand the relevance. The same drug was involved and Patient X's history directly contradicted statements made by the Appellant about Mr Donohue's death. The Appellant's general attitude to prescribing potentially lethal drugs of this kind, his knowledge of the contra-indications and, therefore, his state of mind were important issues in the inquest. Computer records Evidence as to the way in which computer records were kept at the Appellant's surgery was given and he was examined on his knowledge of them. Ms O'Rourke submitted this was another step too far. I can see some force in her argument that the relevance of some of aspects of this evidence was at best marginal: for example the Appellant's ignorance of the meaning of the words "EMIS ANON". The Appellant thought Emis Anon was a member of staff; in fact the phrase was simply a means for an unregistered user to gain access to the computer files. However, it was undoubtedly necessary to establish how the Appellant made entries on Mr Donohue's records, whether they were complete and how accessible they would have been to a prescribing doctor. Thus, if in some small measure, the computer evidence strayed a little from the main focus of the inquiry, in the overall context, it would have had little or no impact upon the fairness or lawfulness of the proceedings. Evidence of Ms. Rodriguez from the Community Alcohol Team Alison Rodriguez, Head of Services at Manchester Community Alcohol Team, gave evidence that the Community Drug and Alcohol Teams never prescribed Heminevrin "because of the fatal interactions in some cases between Heminevrin and alcohol." She said that "it should not be used according to the Committee on the Safety of Medicines for any purposes in an outpatient setting". This was said to be relevant to the Appellant's knowledge of the use of Heminevrin and when and whether it was appropriate to prescribe it. Ms O'Rourke claims it was yet another step too far, adding to a disproportionate focus on the Appellant. Given the agreed evidence on the effects of Heminevrin from the medical experts it may have been unnecessary to call the evidence, but it was not prejudicial or inadmissible. It merely confirmed that expert advice was followed in practice and undermined the Appellant's assertion he prescribed the drug on the advice of a psychiatrist. Conclusions on scope. On proper analysis, therefore, most of the evidence to which Ms O'Rourke took exception was undoubtedly within the legitimate scope of the inquiry and did relate directly or indirectly, to the circumstances of Mr Donohue's death. It is true that there were several pieces of evidence which Miss Leek properly and fairly conceded were of marginal or peripheral relevance to the death. Had they been fewer in number, the inquest may not have exceeded the original timetable to such an extent. However, it comes as no surprise to anyone familiar with the trial/inquiry process to discover that issues diminish in significance when subject to close scrutiny. It does not follow that the judge/coroner was wrong to admit the evidence in the first place and it most certainly does not follow that the integrity of the process has been undermined, especially where, as here, the Coroner has a broad discretion as to the nature and extent of the inquiry . Ms O'Rourke faced a very high hurdle in persuading this court a) that the Coroner was wrong to admit the evidence and b) that the effect of his doing so has rendered the process unlawful. She would require far more than a series of complaints about relatively minor matters, which arose during the course of a lengthy and extremely thorough investigation, to surmount that hurdle. Taken individually or taken together, her complaints do not amount to a proper ground for challenging the lawfulness of the process. For those reasons, I would reject the ground based on scope and turn to Ms O'Rourke's other grounds for which she seeks permission to appeal. Reading of statements Ms O'Rourke contended that several of the witnesses whose statements were read (for example medical staff at the hospital where resuscitation attempts were made) should have been called to give oral evidence. The failure to do so left a "significant lacuna" in answering the question of how the deceased died. With respect, this complaint is baseless. The evidence the Coroner allowed to be read was uncontroversial, the parties agreed to its being read and it was well within his discretion so to order. Refusal to hear from Dr Langford. A report was obtained on the Appellant's conduct from a Dr Langford whom those representing the Appellant hoped the Coroner would call. However, the Coroner was not satisfied as to his credentials as an expert. Dr Langford originally qualified as a pharmacist and then became an Acute Medical Unit Consultant dealing with adverse drug reactions. The Coroner accepted the doctor could give evidence as to toxicology and pharmaceutical issues but held Dr Langford was not in a position to give expert opinion evidence about what a reasonably competent general practitioner should or should not have done or known between 1997 and 2002 and, therefore, did not call him. The Coroner referred Dr Langford's conduct in holding himself out as an expert in this field to the GMC and referred to the instruction of properly qualified experts in his Rule 43 report. Although the Coroner was wise to be alert to the question of expertise, I see force in the argument that it may not have been necessary to have been quite so critical of Dr Langford. He may not have been an expert in GP practice but he was an expert on the effect of drugs on the human body and presumably could give evidence as to recommendations on prescribing in the British National Formulary. Further, I question whether the fact he had been instructed by the Greater Manchester Police to advise on this case justified a Rule 43 recommendation to all police forces around the country to introduce a protocol on the instruction of experts. Rule 43 recommendations are designed to prevent death and have implications for those who must monitor, respond to and or implement them. The expertise of an expert is an important issue but to me seems a little far removed from the kind of issue at which Rule 43 is aimed. However, this advances the Appellant's case no further. The contents of the Rule 43 report did not impact at all upon the jury's consideration and the evidence Dr Langford could have given was fully and properly covered by Dr Robert Forrest, Honorary Professor of Forensic Toxicology. Dr Langford did not demur in any significant way from Dr Forrest's opinion. It was for the Coroner to decide whom he wanted and needed to call. It was entirely reasonable, given the limited amount of disagreement between the experts, for him to call just the one expert on this particular issue. Bias Ms O'Rourke went through several aspects of the history of the proceedings and the evidence called in her attempt to establish that the Coroner was biased against the Appellant or gave the perception of bias. She began with his obtaining an advice from Queen's Counsel as to the possibility of a verdict of unlawful killing and his referring the Appellant's conduct to the CPS and the GMC. She took us through what the informed observer might consider the relevant issues and submitted that the Coroner's disproportionate focus on the Appellant would have appeared biased against the Appellant. When analysed carefully this ground seemed to be, in truth, a compilation of all Ms O'Rourke's other complaints. She claims the Coroner revealed or gave the appearance of bias because he allowed the inquiry to focus too much upon the Appellant's conduct, character and alleged "cover up", admitted irrelevant or marginally relevant evidence which undermined the Appellant in the jury's eyes, allowed what she contended was excessively aggressive questioning of the Appellant and joined in that questioning. This is a ground one can only assess by reading as much of the material as possible. Having done so, I do not detect the bias of which Ms O'Rourke complains nor any appearance of bias. The fact that rulings went against the Appellant does not indicate bias; nor does the fact that the focus of the inquiry shifted to the Appellant. The inquiry was led by the evidence. On investigation, the role of the emergency services personnel diminished in importance at the same time as the Appellant's role in Mr Donohue's death grew. The Appellant has only himself to blame for that fact. It was his conduct in prescribing the lethal drug to a patient in these circumstances and his prevarication before the jury which put him in the spotlight. There was ample evidence, much of it agreed, to justify the assertions that the Appellant's conduct fell far below the standards to be expected of a reasonably competent doctor and that he had been less than truthful with the jury to cover up that fact. The Coroner was duty bound to ensure as thorough an investigation of his conduct as possible and to follow where the evidence led. Directions on causation of death and intervening acts It is said that the Coroner misdirected the Jury on causation and intervening acts. His summing up is described as "very brief" and likely to cause confusion for the Jury. However, the Coroner's "directions" overall, in the sense Ms O'Rourke meant them, were far from brief. They consisted of a summing up running to hundreds of pages. The directions on the law were far from brief; they were repeated orally and in writing. No complaint could be properly made about their content. They summarised the law accurately. When this was pointed out in argument, Ms O'Rourke shifted her ground somewhat and criticised the Coroner for failing to relate his directions on the law to the facts, namely the intervention of others (including the deceased himself and his mother). Without an analysis of this kind, she maintained the jury would have been left confused. This is another complaint which one can only consider in the context of the summing up as a whole. It is true that in an inquest an interested party is not entitled to make closing submissions on the facts to the fact finding body and that it is incumbent upon a coroner to direct the jury as to the issues and the evidence fully and fairly. However, the way in which he or she structures the summing up is matter for them. There is no set formula they are obliged to follow. Having read the relevant passages of the summing up I am satisfied the Coroner did explain the issues to the jury fully and fairly and reminded them of the evidence in such a way they can have been in no doubt as to what they had to decide. He cannot be criticised for any omissions. Failure to tell the jury of settlement of the civil claim of against the ambulance services Ms O'Rourke could not understand why the Coroner did not inform the jury of the settlement of the claim brought by Mr Donohue's family against the ambulance service. The explanation is straightforward: it would have told the jury nothing. The claim was settled with no admission of liability. Failure to invite the jury to consider the effect of an overdose of over the counter medicine with the same quantity of whisky. Ms O'Rourke felt that the Coroner should have directed the jury to consider the possibility of what would have happened had Mr Donohue obtained over the counter drugs from the local chemist and taken an overdose of them. The answer is straightforward: the Coroner was not obliged to invite the jury to speculate on the basis of hypothetical scenarios. Failure to read Professor Henry's statement and other relevant evidence Ms O'Rourke complained that relevant evidence including a report from a Professor Henry was not called. There was a good explanation for this. None of those involved in the inquest, attuned to the real issues in the case, namely the Coroner and the PIPs, thought it necessary for further evidence to be called. They believed a full and rigorous investigation had been conducted of the roles of the emergency services personnel and of the Appellant– as indeed it had. Further, there were problems with the late Professor Henry's report. He had arguably expressed an opinion upon matters beyond his expertise and the factual matrix upon which he had opined had changed during the course of the hearings. In any event, Dr Forrest and Dr Evans, a Consultant in Accident and Emergency Medicine, were called and extensively examined on the same issues. It was in these circumstances the Coroner decided not to admit the late Professor Henry's report. Thus, the issues upon which his report may have been able to assist were fully explored. The Coroner had done his duty: no further evidence was required. Narrative verdict The argument on the narrative verdict is twofold namely: the short form of narrative verdict put to the jury would not have provided answers to all the necessary questions and, in any event, the short form provided to them foreclosed their consideration by providing the answers. This argument is misconceived. First, the Coroner had a broad discretion as to how to leave the verdicts to the jury and what questions to ask, which he did not exceed. Second, the Coroner expressly directed the jury they could adopt or reject his form of words. It was entirely a matter for them. They did, in fact, change one significant word. The question of verdicts brings me to the final specific complaint. Suicide This ground caused me concern because, at first sight, it appeared to be an arguable ground which the Divisional Court understood had been abandoned. Paragraph 12 of their judgment states that Ms. O'Rourke accepted it was not unreasonable in the "Wednesbury" sense for the Coroner to remove the possibility of a verdict of suicide from the jury. Yet, Ms O'Rourke insists this is not true. She claims she merely ran out of time to develop the ground orally. If so, that is a very different thing from abandoning a ground. It was not possible for us to resolve the situation and I shall therefore proceed on the basis that Ms O'Rourke may have inadvertently misled the court. I was initially attracted by the force of her arguments as to the weight of the evidence justifying a verdict of suicide. The deceased had a history of self harm and suicide attempts. Only days before his death Mr Donohue had threatened to kill himself. He had received some bad news about seeing his son at Christmas. In case he should take another overdose, his access to drugs was controlled by his mother. He must have been well aware of the risks of mixing Heminevrin and alcohol. On the day of his death when Mr Donohue asked his mother for some tablets she told him in clear terms to take 2 pills only. Yet he took the whole bottle. When Mrs Kowalski next saw him (not that long afterwards) she thought he had made a serious attempt on his life. However, the evidence was far from all one way. There was no direct evidence that Mr Donohue intended to end his life. He left no note and he made no mention of killing or even harming himself to his family. On the contrary, he spent a happy day with his father and appeared to be planning for Christmas. He asked his mother for some tablets openly. We do not know exactly what happened thereafter and how he came to take the whole bottle. He could have taken the tablets at the same time with the alcohol, or in stages as his judgment gradually became impaired. However, we do know that despite his condition, Mr Donohue made a determined effort to get help. He sought his mother out and the way in which he informed her that he had taken the tablets carried with it the implication that he had not intended to commit suicide. Thus, his chaotic approach to drugs and alcohol raised the real possibility that he simply kept drinking and taking the tablets without any specific intent. On that basis, the Coroner decided the jury could not safely conclude, to the criminal standard of proof, that Mr Donohue had intended the consequences of his actions. The question of whether or not a judge or coroner should leave an issue to a jury may sometimes be a difficult one to answer; not all cases are clear cut. It then becomes very much a matter for the judgement of the judge or coroner who has seen and heard the evidence tested to decide. An appellate court will rarely intervene. In my judgment, this is such a case. The Coroner having seen and heard the evidence concluded that a properly directed jury could not exclude the possibility that this was not a suicide. That was a reasonable approach to take and not one with which I would interfere. There was no error of law. In any event, it cannot be said that a failure to leave suicide has undermined the integrity of the verdict which was returned. The Coroner left to the jury the possibility of accident and an open verdict. They were directed to start with consideration of unlawful killing and work their way down the list if necessary. Had they not been satisfied as to unlawful killing they had other options. The jury system in this country depends on our trusting a jury to follow directions. Thus, their verdict indicates they had no doubt that the prescription of a dangerous drug to a volatile and vulnerable patient was a material cause of Mr Donohue's death and that whatever roles the emergency services, Mr Donohue, and his mother played, they were not sufficiently potent to break the chain of causation. For those reasons, I would refuse permission to appeal on all the additional grounds including the failure to leave a suicide verdict to the jury and I would dismiss the appeal on the ground of scope. Lord Justice Maurice Kay I agree Lord Dyson, The Master of the Rolls. I also agree.

LORD JUSTICE MANCE: The claimant claims against solicitors who acted, and counsel who drafted his claim, in previous proceedings against another driver, Miss Hardacre, with whom he was involved in a road traffic accident. He claims that those previous solicitors and counsel who drafted the claim were negligent. The former proceedings against Miss Hardacre were settled for £85,000. Trial counsel was not the counsel who drafted the claim but was a Mr. Timothy Hirst. He conducted the settlement. He is not presently sued in these proceedings. There is some reason to think that that is because his initials happen to be the same as the initials of the second defendant, a Mr. Timothy Hartley, and it was not appreciated from the somewhat illegible scrawl on the brief that they were different people. The solicitor for the claimant presenting the matter before the judge below, His Honour Judge Hawkesworth QC on 21st November 2000, said: "Had we known Mr Hirst was in at the beginning, there may well have been three defendants here today..." It is said that the settlement of £85,000 undervalued the claimant's loss. The reason alleged is that no claim for loss of future earnings was pleaded by Mr Timothy Hartley. Both Mr. Hartley and the first defendants, Shaw & Ashton, the solicitors, say that, although that was and is the case (there was no such pleading), it was and is irrelevant. They say that such a claim was obvious on the facts put before the court in the witness statements and the pleading and was in fact taken into account on both sides in the settlement reached, although there was no pleaded claim. The claimant now wishes to take the evidence of Mr Hirst on deposition. This is not because of any doubt or problem about Mr Hirst's availability at the trial. It is because Mr Hirst has been, on the face of it, reluctant to become engaged in any sort of dialogue about the case. The claimant does not know what he would say. The claimant says, however, that it is urgent that he should know, that it may shed much light on the strength of his case against the present defendants. As counsel before us has said, this is a way of seeing whether the trial should take place. Counsel seemed to disclaim any alternative motive but it seems to me that one underlying purpose (it may only be a subsidiary one) must be that it may also shed light on whether there is any need to involve Mr Hirst. If one looks at the grounds on which this matter has been put before us by the appellants' notice dated 5th December 2000, it contains this statement: "If his evidence will be that he (Mr Hirst) was unfettered by the deficiencies in the preparation, that might defeat the claimant's present case and raise a prima facie case against Mr Hirst himself." Similarly, the statement which I read from the transcript made by the solicitors presenting the matter to the judge below points in that same direction. The basis of the application in these circumstances is CPR 34.8, which provides: "A party may apply for an order for a person to be examined before the hearing takes place." Then by paragraph (3): "An order under this rule shall be for a deponent to be examined on oath before - (a) a judge; (b) an examiner of the court; or (c) such other person as the court appoints. (4) The order may require the production of any document which the court considers is necessary for the purposes of the examination." Examination, by CPR 34.9, is conducted in the same way as if the witness was giving evidence at a trial. The evidence is recorded in full and distributed to the court and the parties. By CPR 34.11: "(1) A deposition ordered under rule 34.8 may be given in evidence at a hearing unless the court orders otherwise. (2) A party intending to put in evidence a deposition at a hearing must serve notice of his intention to do so on every other party. (3) He must serve the notice at least 21 days before the day fixed for the hearing. (4) The court may require a deponent to attend the hearing and give evidence orally. (5) Where a deposition is given in evidence at trial, it shall be treated as if it were a witness statement for the purposes of rule 32.13 (availability of witness statements for inspection.)" We have also been referred to statements in procedural guides as to the scope of this rule and as to the likelihood that the procedure of taking depositions in advance of the trial will have an increased application following the introduction of the CPR. In Butterworths Civil Court Practice it is said that: "Generally the court will make such an order where (1) it will be inconvenient to the deponent for him to attend to give evidence on the date fixed for the hearing and/or (2) the interests of justice require that the evidence to be given by the deponent be available prior to the hearing taking place; for example, the witness in question has refused to give any witness statement and without such statement the party who wishes him to be examined is unable either to make or to resist an application by or against him." Then in Jordans Civil Court Practice it is said: "In the past such orders were usually made where the witness is too ill or otherwise unable to travel or attend the trial. As stated above, it is anticipated that use of the deposition procedure will increase and should be permitted or indeed ordered by the court under its case management powers whenever such an order would further the overriding objectives." What is urged upon us today by Mr. Butler is in essence that it would further the overriding objectives to know whether this action has good prospects or should be further pursued, and that Mr. Hirst should be deposed accordingly. The judge did not accede to that. He dismissed the application. His judgment is short. It reads: " . . . I am going to refuse that application. The reason is simply this, that it seems to me that Mr Hirst must be the central character in the whole settlement of this claim at the court, being the barrister who represented the claimant. It is inconceivable, it seems to me, that Mr Hirst is going to give such answers were he to be examined beforehand, which would place the claimant in really no better position than he is at present, and therefore it is not in the interests of justice it seems to me to require that he be examined beforehand. The claimant is perfectly able to make a case that the settlement viewed objectively, whether or not it is correctly pleaded, was one which was inadequate for someone who had suffered his injuries and suffered his loss of employability. Whether Mr Hirst will agree with the way it was pleaded or whether he will not, it does not seem to me to make any material difference in the way that the claim should be advanced, or can be advanced by the claimant. It seems to me that if Mr Hirst's position is to be examined during the course of this trial, it will either have to be in the context of him being called on behalf of Mr Hartley, if he so wishes, or in the context of him being made a defendant, but that is not a matter upon which I can speculate, it is for the parties to take the appropriate steps." The transcript of the preceding argument and interchanges helps, I think, understand more fully the way in which the judge was thinking. He identified a number of factors: (a) the claimant's acknowledged ability to pursue his former advisers on the basis on which they have always been pursued, namely that £85,000 objectively undervalued the claimant's loss; (b) the unreality that Mr Hirst would say anything other than that he was able to settle at the right figure despite the pleading without seeking an adjournment to re-amend. One might add that that is particularly so, it seems to me, in the light of the fact that it is the common case made by the present defendants. One might also further add that it would not be open to the claimant, on calling him on deposition, to cross-examine Mr Hirst, and if, somewhat inexplicably to my mind, Mr Hirst admitted, directly or indirectly, something which might be viewed as negligent, the effect would be to leave, as has been acknowledged, a prima facie case against him, and one which one would have thought was likely to be pursued. In other words, one result which might be regarded as rather remarkable, is that the claimant would be able to discover whether there may be grounds for suing Mr. Hirst. The third factor which the judge identified in the course of the argument was this: the absence of any suggestion on the claimant's side that any advice was received from Mr Hirst on the subject. Mr. Hirst was obviously with the claimant at the trial. One would have thought that there might have been some evidence from the claimant as to what took place by way of interchange between them. The fourth factor is the purpose of examining Mr Hirst, namely to see whether there was a case against the first defendant and Mr Hirst, and the final factor was the nature of any evidence which could be obtained from Mr Hirst on deposition, namely evidence in transcript form, with the result that, unless Mr Hirst was recalled and re-examined at the trial, the trial judge would not even have the opportunity of seeing him, and if he was recalled and re-examined, then he would end up giving evidence twice, or at least be in the unusual position where he had already given a prior deposition which could be used to examine or cross-examine him when he came to give evidence at the trial. In response to that final point Mr Butler referred us to the rule which I have read, CPR 34.11(4), whereby the court may require the deponent to attend the hearing to give evidence orally. However, it seems to me that that is not a primary procedure. It is a fallback procedure when evidence is obtained on deposition before a trial because it is thought that it must be obtained in that way or can appropriately be obtained in that way in order to be adduced at the trial, but later it seems preferable that the trial judge should hear at least some of the evidence orally. It seems to me that all of the considerations identified by the judge were relevant. I do not consider that the primary purpose of CPR 34.8 was in any way to enable the sort of procedural course now suggested. The primary purpose is and remains the taking of evidence on deposition and introducing it in that form at the trial from a witness whom it would be impossible to bring to court for trial. I am prepared to accept the alternative suggested in Butterworths Civil Court Practice; that is, of enabling a party who could not pursue his case without a particular witness's support to obtain evidence from that witness in advance. I gave an example in the course of argument which seems to me to illustrate that situation. If a party wishes to pursue an application for summary judgment under CPR 24 or to resist it, and he could not adduce the necessary evidence for that purpose without having the evidence taken on deposition of some witness, then that would be a classic example. However, in the present case the claimant not only can pursue his claim, but has pursued his claim, against the present defendants. What he wants is to obtain the evidence of a witness in advance simply in order to enable him to re-evaluate the strength of his claim against the present defendants to see whether a trial should now take place. Further, if he concludes that he has only a poor prospect against them alone, there is the subsidiary purpose of wanting to know whether he has a prima facie case against Mr Hirst. It does not seem to me that CPR 34.8 is there to enable a potential claimant to have a potential defendant examined in advance to see what he has to say. The suggested procedure would, as the defendants submitted below, lead to an odd position. The evidence would have been given on deposition and then, if it went a certain way, either it would never be used at the trial at all, so that the deposition would not have served its primary purpose, or, if there was a trial, it would be one where Mr. Hirst would be a witness in the peculiar position of being called again, (because counsel has avowed that that is the primary intention), in which case his entire deposition would be there to enable him to be cross-examined. That peculiarity is heightened by the consideration that by that stage he might well have been joined as a third defendant. It seems to me right to add this to the considerations which the judge identified. Although, as the judge said, it may be viewed as unfortunate that Mr Hirst was not collaborating with the claimant, the remedy is not to seek to adapt the deposition procedure to cater for that problem. The reason why it is unfortunate is that he is a former attorney or agent for the claimant, and in ordinary circumstances one would regard such a person who has conducted proceedings for a claimant as under some obligation, if only a professional obligation, to explain what happened. That, in relation to a barrister, is an obligation which one can readily conceive could be drawn to the attention of other professional authorities who might feel minded to remind the barrister of it, and one can have little doubt that that could well have led to the claimant achieving his aim of gathering further information but in a more conventional manner. It does not appear that that procedure has ever occurred to the claimant or his advisers. I say no more about it or whether it would be one which could be pursued. It seems to me that, on the face of it, it is one which one would have expected to have been attempted. I consider that the judge was entirely right in the exercise of his discretion. It was not only an exercise which lay within the bounds of his discretion but was an exercise of discretion to which I would have come. This was an unusual application. It was one which does not seem to me to fall within what one might regard as the general purposes of CPR 34, and I consider that this renewed application should therefore be dismissed. I add only in relation to the written reasons that I gave, when considering this matter on paper, most of which I have reflected here, that there is no general right in a party to obtain documentation or information from a third party, either pre-claim or pre-trial. Even against a person likely to be sued, the only right is to seek disclosure of relevant documents under section 33 of the Supreme Court Act 1981. It seems to me that that is a consideration which reinforces the judge's exercise of discretion. LORD JUSTICE JUDGE: I agree with the reasons that my Lord has given for dismissing this application. I shall add these short comments of my own. Like him, I very much doubt whether the provisions of CPR 34.8 are normally intended to extend to a claimant seeking an order against a potential defendant before proceedings have been started against that potential defendant. In any event, however, this decision was a matter for the discretion of the judge. I agree with the way in which the judge exercised his discretion and certainly can find no basis for interfering with it. In view of Mr. Butler's clear submissions, I should add that, in my judgment, the criticisms of the exercise of the judge's discretion, based on his omission to make express reference to the overriding objectives of the civil justice reform, or his failure to recite the possible consequences of his order in the course of his judgment, are misplaced. In my view, it is normally to be assumed that these considerations would have informed any judge's decision in a matter of this kind. The fact that no express reference was made in the judgment to them provides no basis for inferring that he overlooked or failed to give them proper attention and weight in the overall analysis of the issues which arose for decision. Finally, I should add that, if the claimant decides to take up with the Professional Conduct Committee of the Bar the absence of any response from former counsel, it is for that Committee to make whatever decision is right in the light of the Profession's Standing Rules and after having made whatever investigation seems appropriate to them. It therefore follows that, because of potential difficulties with limitation periods, the claimant's present legal advisers should be alert to the possibility that more time may elapse by taking the issue up with the Bar Council than is available to them. Order: Application refused.

CIVIL APPELLATE JURISDICTION Civil Appeal No. 2383 of 1977. Appeal by special leave from the judgment and order dated 18th November, 1976 of the Bombay High Court in Civil Appln. No. 1741 of 1976. Gobind Ram Bhatia, R. C. Bhatia and P. C. Kapoor for the Appellant. Nemo for the Respondent. The Judgment of the Court was delivered by FAZAL ALI, J. This appeal by special leave is directed against the judgment of the High Court of Bombay dated December 24, 1975. The short point of law involved in this case is whether the lease in question granted by the landlord to the appellant-tenant was a lease for manufacturing purposes. In case the lease was for a purpose of manufacture then it is manifest that under section 106 of the Transfer of Property Act the lease companyld be terminated only by giving six months numberice. The suit was companytested by the defendant-tenant. The plaintiffs case was that the tenancy was from month to month and, therefore, a months numberice to terminate the tenancy was sufficient and the provision under section 106 of the Transfer of Property Act was number attracted. The plaintiff also denied that the lease was for a manufacturing purpose. The High Court upheld the judgment of the District Judge holding that the lease was number for a manufacturing 1199 purpose and held that the tenancy was rightly terminated as the numberice was valid. Mr. Gobind Ram Bhatia, learned companynsel for the appellant tenant, has submitted a short point of law before us. He submits that having regard to the process of manufacturing carried on by the defendant, there can be numberdoubt that the lease was for a manufacturing purpose and companyld be terminated only by six months numberice under Section 106 of the Transfer of Property Act. Notice was issued to the respondents. That numberice was duly served on them. There is a certificate given by the High Court of Bombay itself that the numberice on the respondents was served. Nobody has appeared for the respondents to companytest this appeal. In the present case, the admitted facts are as under That to begin with the lease was given to the defendant in respect of an open piece of land That on the open piece of land the appellant installed a flour mill and that the defendant was number using the land for any other purpose except running a flour mill. That the receipts filed by the tenant clearly show that the lease was doubtless a yearly one. Reliance was placed by the District Judge on the companynter-foils where the plaintiff-landlord tried to make out a case of monthly tenancy but the entry in the companynter-foil being an admission in his own favour was number admissible against the appellant. On the other hand, the trial companyrt has pointed out at page of its judgment that the receipts produced by the tenant clearly show that the rent used to be paid from year to year. Exhibits 24 to 26 pertained to the rent paid on an yearly basis right from 1959 to May 31, 1961. On point of fact, therefore, we are satisfied that in the instant case the lease was from year to year and, therefore, a months numberice was number legal if the lease was for a manufacturing purpose. The second point which arises for decision is as to the purpose of the lease. This point is numberlonger res integra and is companycluded by a clear authority of this Court in Allenburry Engineers Private Ltd. v. Ramakrishna Dalmia and Ors. where this Court has laid 1200 down that the expression manufacturing purposes in Section 106 of the Transfer of Property Act must be used in its popular and dictionary meaning as the statute has number defined the word manufacturing purposes. We might state that in the present set up of our socialistic pattern of society when our companyntry has made strong strides in various spheres of industrial activities an industrial venture must be given the most liberal interpretation so as to subserve the object of the statute. Of companyrse the burden of proof whether the purpose of the lease was a manufacturing purpose would be on the defendant but we are satisfied that the defendant in this case has amply discharged its onus. In the aforesaid case this Court observed as follows The word manufacture, according to its dictionary meaning, is the making of articles or material number on large scale by physical labour or mechanical power. Shorter Oxford English Dictionary, Vol. I 1203 . According to the Permanent Edition of Words and Phrases Vol. 26, manufacture implies a change but every change is number manufacture and yet every change in an article is the result of treatment, labour and manipulation. But something more is necessary and there must be transformation a new and different article must emerge having a distinctive name, character or use. In companying to this companyclusion this Court relied on two of its earlier decisions in South Bihar Sugar Mills v. Union of India and Union of India v. Delhi Cloth and General Mills. Even before the decision of this Court, B.K. Mukherjea, J. as he then was who was later elevated to the Bench of this Court and retired as Chief Justice of India observed in Joyanti Hosiery Mills v. Upendra Chandra Das as follows To manufacture, according to its Dictionary meaning means to work up materials into forms suitable for use. The word material does number necessarily mean the original raw material for a finished article may have to go through several manufacturing processes before it is fit and made ready for the market. What is itself a manufactured companymodity may 1201 companystitute a material for working it up into a different product. Thus, for example for the tanner, the material would be the raw hide, but the leather itself a manufactured article would companystitute the material for the shoemakers business, and we cannot say that the shoe-makers are number manufacturers because they do number work on raw hides. In the case of John Augustine Peter Mirande and anr. v. Datha Naik the Mysore High Court following the Calcutta decision held that the lease in that case, which was a case of saw mill, was for manufacturing purposes. We might observe that so far as the present case, where the mill is a flour mill, stands higher than the facts of the case in Mysore case supra . Coming number to the tests laid down by this Court the position may be summarised as follows That it must be proved that a certain companymodity was produced That the process of production must involve either labour or machinery That the end product which companyes into existence after the manufacturing process is companyplete, should have a different name and should be put to a different use. In other words, the companymodity should be so transformed so as to lose its original character. In the instant case what happened was that wheat was transformed, by the manufacturing process which involved both labour and machinery, into flour. The companymodity before manufacture was wheat which companyld number be companysumed by any human being but would be used only for cattles or medicine or other similar purposes. The end product would be flour which was fit for human companysumption and is used by all persons and its companyplexion has been companypletely changed. The name of the companymodity after the product came into existence is Atta and number Gehun wheat . Thus in the instant case all the three tests have been fully satisfied. This being the position the irresistible inference and the inescapable companyclusion would be that the present lease was one for manufacturing purposes. In this view of the matter, the numberice of one month must be held to be invalid and suit for ejectment should have failed on that ground. 1202 We, therefore, allow this appeal, set aside the judgment of the High Court and dismiss the plaintiffs suit. Before companycluding we would like to add that with due respect, that the judgment of the High Court is number very satisfactory as it has number made any real attempt to apply its mind to the substantial question of law that was involved in the case and seems to have rushed to its companyclusions even without companysidering the authorities on the subject particularly the one referred to in the judgment as also the authoritative decision of this Court referred to above which was pronounced five years before the judgment of the High Court was given. From such a prestigious High Court as Bombay we do expect a more careful and cautious approach in a matter like this. As the respondents have number appeared before us, we make numberorder as to companyts in this Court. The appellant will certainly be entitled to companyts in the Courts below.

Master Simons: This judgment is in respect of a preliminary issue raised by the Defendant in the Detailed Assessment proceedings and relates to the enforceability of a conditional fee agreement ("CFA") entered into between the Claimant and his solicitors, Davies & Company. The Claimant had sought compensation for personal injury and loss arising from an accident at work which occurred on 28 November 2004. Shortly afterwards the Claimant instructed Davies & Company who sent him a letter on 4 January 2005. Thereafter the Claimant entered into a CFA with Davies & Company dated 30 March 2005. A formal letter of claim was sent to the Defendant on 12 September 2005 and an admission of liability was received on 4 January 2006. Following negotiations between the parties the claim was settled on 13 August 2006 whereby the Defendant agreed to pay the Claimant the sum of £16,000 and to pay the Claimant's costs and disbursements, including additional liabilities, to be assessed if not agreed. The parties were unable to agree costs, and the Claimant issued Costs Only proceedings in the Manchester County Court on 15 November 2006 and on 19 December 2006 the Manchester County Court made a formal order, Ordering the Defendant to pay the Claimant's costs, such costs to be determined by detailed assessment proceedings. On 26 February 2007 at the request of the Claimant the detailed assessment proceedings were transferred to the Supreme Court Costs Office. Notice of Commencement of Detailed Assessment together with the Claimant's bill seeking costs of £7087.26 was served on the Defendants on 2 January 2007. The Defendant's Points of Dispute raise the preliminary point that the CFA was unenforceable in that the Claimant solicitors had failed to comply with Regulation 4(2)(e) of the Conditional Fee Agreements Regulations 2000. "Conditional Fee Agreements Regulations 2000 ("the regulations") 4. Information to be given before Conditional Fee Agreements made (1) Before a conditional fee agreement is made the legal representative must – (a) inform the client about the following matters, and (b) if the client requires any further explanation, advice or other information about any of those matters, provide such further explanation, advice or other information about them as the client may reasonably require. (2) Those matters are – … (e) whether the legal representative considers that any particular method or methods of financing any or all of those costs is appropriate and, if he considers that a contract of insurance is appropriate or recommends a particular such contract – (i) his reasons for doing so, and (ii) whether he has an interest in doing so." This judgement will also refer to Regulation 3A of the regulations: 3A (1) This regulation applies to a conditional fee agreement under which………….the client is liable to pay his legal representative's fees and expenses only to the extent that sums are recovered in respect of the relevant proceedings, whether by way of costs or otherwise. (3) Regulations 2, 3 and 4 do not apply to a conditional fee agreement to which this regulation applies. THE EVIDENCE The CFA, dated 30 March 2005, contained the following clauses which are relevant to the issues. In the second paragraph on page 2: "If you lose, you pay your opponent's charges and disbursements. You may have taken out an insurance policy against this risk. Please also see conditions 3(j) and 5. If you lose, you do not pay our basic charges but we may require you to pay our disbursements. You may have also taken out an insurance policy against this risk." Under the heading "Other Points" at the top of page 3 the CFA stated: "Immediately before you signed this agreement, we verbally explain to you the effect of this Agreement and in particular the following: (e) (iii) We confirm that we do not have any financial interest in recommending this particular insurance agreement, save that we are an approved member of the Lawcall Direct Ltd's Solicitors Panel." The CFA contained what are described as "Law Society Conditions". One of these conditions stated, under the heading: "What happens if you win?: If you win: You are then liable to pay all our basic charges, our disbursements and success fees – please see condition 3(n). Normally you will be entitled to recover part or all of our basic charges, our disbursements and success fee from your opponent. If you and your opponent cannot agree the amount, the Court will decide how much you can recover. If the amount agreed or allowed by the Court does not cover all our basic charges and our disbursements, then you are not required to pay the difference." The Claimant filed a witness statement of Philip Hulme Davies, the principal of the Claimants' solicitors. Mr Davies confirmed the contents of the CFA and the fact that his firm had declared that they had a financial interest in Lawcall by stating that they were an approved member of Lawcall Direct Ltd's Solicitors Panel. Mr Davies also referred to the letter which his firm sent to the Claimant on 4 January 2005 in which his firm informed the Claimant that they were members of the Lawcall Direct Panel of Solicitors and that they had referred Davies & Company to the Claimant. In paragraph 20 of the witness statement Mr Davies referred to a specific paragraph in the client letter detailing the relationship his firm had with Lawcall Direct and quoted the wording from the letter which read: "By the Solicitors Introduction and Referral Code, a full copy of which can be provided on written request, we are obliged to make disclosure of our referral arrangements. This is a regulation which we are happy to embrace. As you are aware, your case has been referred to us by Lawcall Direct Ltd. We have a commercial arrangement with Lawcall, where in return for a payment up to a maximum of £300, they refer a case to us. This fee relates to marketing and valuable vetting services provided by Lawcall. We are satisfied that our arrangements with Lawcall do not impact on our duties to you. Please rest assured that you will not be required to pay anything towards this fee." Mr Davies' witness statement also set out details of his relationship with Lawcall. In paragraph 29 of his witness statement Mr Davies stated: "29. Lawcall usually operates on a fairly typical claims management business model, providing funding through a loan and marketing its own branded policy of ATE insurance. However, when we were asked to join the panel, we advised Lawcall we were unable to conduct work on this basis. In particular, we were not and are not prepared to sign our clients up to loans. We do not recommend insurance in every case. The view we take as a practice is that clients with relatively strong cases, where admission of liability is likely, do not need to take out ATE insurance as a matter of course. In such cases we often advise clients to wait to see whether ATE insurance is necessary (for example, on the subsequent issuing of proceedings)." Mr Davies stated that his firm had carried out an audit of cases referred to his firm by Lawcall and that the greatest number at one time was 87. Of those cases in 26 the client was advised that ATE insurance was unnecessary or his firm had recommended a policy other than Lawcall's branded product. Mr Davies had stated that the total number of active files within his firm was in the region of 1,100, of which 87 were recommendations from Lawcall. In his witness statement Mr Davies also made clear that he felt no inhibition in recommending a Lawcall policy if he felt it appropriate. The premium in this particular case was £850 plus IPT which was well within the market norm and which provided a level of indemnity of £25,000. Mr Davies further stated that at its peak the 87 cases referred to his firm by Law Call amounted to less than 7½% of his practice as a percentage of cases and consequently there was no dependency upon Lawcall as a source of work. Mr Davies confirmed that his firm had complied with the appropriate regulation concerning the disclosure of any interest. He also suggested that it was not strictly necessary for him to have done so, owing to the fact that as his firm had promised both in his firm's letter of 4 January 2005 and in the CFA not to look to the Claimant for any unrecovered costs, the CFA was governed by Regulation 3A of the regulations which disapplied regulation 4 of the Conditional Fee Agreements Regulations 2000 from this particular CFA and that this was a CFA Lite. Mr Davies gave oral evidence before me. He said that he had carried out a further audit of cases and that the total number of cases from Lawcall was 91 and that of the additional four, his firm had recommended the Lawcall insurance policy in one case. THE DEFENDANT'S SUBMISSIONS Mr Patel's primary submission was that membership of a panel in the context of a claims management company referring cases on its panel to solicitors amounts to a fiduciary relationship. When that relationship involves the recommendation of insurance products of the claims management company that interest must be disclosed in order to comply with CFA Regulation 4(2)(e). The disclosure of panel membership of itself is insufficient as it fails to inform the client that Davies & Company had an ongoing commercial venture with Lawcall. Mr Patel submitted that the statement in the client care letter did not express to the client that Davies & Company have an ongoing commercial venture with Lawcall and that it gave the impression that this was a single transaction and that the quid pro quo was a fee for £300. He submitted that no mention is made in the letter of Lawcall's involvement with the insurance contract. Mr Patel referred me to Garrett v Halton Borough Council [2006] EWCA Civ 1017 which provides general guidance in relation to the interpretation of what interest should be disclosed and he submitted that that guidance should be broadly construed. Mr Patel further submitted that it was not necessary for the court to establish that there was an obligation on the part of Davies & Company to recommend Lawcall insurance for there to be a finding of a financial interest. He submitted that by recommending Lawcall's product Davies & Company entered into a collaborative venture where they received work and recommended the insurance product in some cases. It did not matter that the insurance product was not recommended in every case to show that there was a relationship that existed to enable Lawcall to continue to send work. Mr Patel also rejected any suggestion that there must be a finding of dependency as a condition precedent for the principles in Garrett to apply as to do so would introduce an entirely artificial quantative test into the application of Garrett. Davies & Company's financial interest in Lawcall is not extinguished simply because they are not dependent on Lawcall for referrals. The fact is that they obtained referrals and they have a financial interest to be disclosed. Mr Patel submitted that the disclosure to the client in the letter of 4 January 2005 that Davies & Company received £300 per case from Lawcall was only in the context of the solicitors complying with the Solicitors Information and Care Code and not for the purpose of complying with the CFA Regulations. He also referred to the fact that this disclosure only referred to "marketing and valuable vetting services provided by Lawcall" but made no reference to the insurance product. Mr Patel also dismissed the suggestion that Regulation 4(2)(e) could be disapplied in accordance with Regulation 3A of the CFA Regulations 2000. He submitted that the relevant condition in the CFA made clear that whilst the Claimant was not going to be liable to pay Davies & Company's basic charges, Davies & Company could require the Claimant to pay their disbursements. For as long as there was such a liability, this CFA could not be regarded as a CFA Lite, and consequently Regulation 4(2)(e) must apply. Fees and expenses must include disbursements, he submitted. Mr Patel also addressed me on the question of materiality. He submitted that the disclosure had simply been that the Solicitors were on Lawcall's panel and this was insufficient disclosure. There accordingly had been a material departure from the Regulations. In summarising his submissions Mr Patel said that there was sufficient material before the court to conclude that there was a financial interest in Davies & Company recommending the Lawcall policy in that the policy was routinely recommended to the clients who had been introduced to Davies & Company, and that it was open for the court to infer that Davies & Company as panel solicitor had a vested interest in ensuring that the Lawcall policy was adopted so as to sustain the profitable joint venture. Mr Patel also referred me to a number of similar cases dealing with the points in issue, including Willoughby v Sempra Energy Trading (UK) Ltd which was a decision of District Judge Smedley sitting as a Regional Costs Judge which was handed down on 5 April 2007, Shirali v London Central Bus Co Ltd, which was a decision of Deputy District Judge Lateef handed down in the Altrincham County Court, the decision of the Senior Costs Judge in the case of Andrews v Harrison Taylor Scaffolding, handed down on 9 February 2007 and also a note of the appeal judgment in the case of King v Halton Borough Council, which was a decision of Judge Halbert the Designated Civil Judge in Chester which was handed down on 14 November 2006. I have read and have considered Mr Patel's references and submissions with regard to these cases. Mr Patel's submissions were supported by a detailed skeleton argument which although filed late has been read and considered by me. THE CLAIMANT'S SUBMISSIONS Mr Williams' primary submission was that Davies & Company had complied fully with the regulations and that this case was distinguishable from Garrett. In Garrett the solicitor had a hidden obligation under the rules of the claims management scheme to recommend the claims management's company's insurance policy in every case. Not only did the solicitor fail to identify this interest, but he actually stated that he had no interest. This is entirely different to this particular case where the solicitors declared that they were an approved member of the solicitors panel and identified their arrangement with Lawcall to their client in an earlier document. Furthermore it was Mr Davies' unchallenged evidence that even if the Lawcall scheme required him to recommend particular insurance, he had made clear to Lawcall that he would not necessarily do so. Mr Williams submitted that the fact that Davies & Company had no dependency on Lawcall for referral of work was in complete contrast with the facts in Andrews and there was never any threat to Mr Davies that if he failed to recommend Lawcall's insurance policy or to take out a policy with them that he would be removed from their panel and would not receive any more cases. Mr Williams then submitted that even if there had not been sufficient compliance with the regulations this CFA was a CFA Lite as the CFA provides that the client was liable to pay his legal representative's fees and expenses only to the extent that sums were recovered in respect of the relevant proceedings whether by way of costs or otherwise. He submitted that the words "fees and expenses" must exclude disbursements as there is a difference between disbursements which are liabilities to third parties which are incurred by the client through the agency of his solicitor and expenses which are incurred by the solicitor himself in the course of providing his professional services. This distinction is recognised by the CPR. Furthermore the CFA makes clear in its conditions that if the amount agreed or allowed by the court in respect of costs does not cover basic charges and disbursements, then the client is not required to pay the difference. In addition the letter of 4 January 2005 makes clear that the client was promised that in the event of a win he would be paid his damages without deduction and that the solicitor promised not to look to the client for any shortfall in costs. Mr Williams submitted that the reason the word "disbursements" had not specifically been mentioned in regulation 3A was because disbursements are usually covered by insurance. Mr Williams submitted that even if there had been a breach of the Regulations the CFA would only be unenforceable if there had been a materially adverse effect on the protection afforded to the client or to the administration of justice. Mr Williams referred me to the fact that in this case an insurance policy had been taken out prior to the entering into of the CFA, that the solicitors had paid the premium and had made it clear to the client that, to the extent that it was not recovered, the solicitor absorbed the shortfall. There had been no suggestion that the product itself was bad and Mr Davies had stated in his evidence that he had never felt any inhibition in recommending that particular policy. In this particular case there had been disclosure of financial interest and even if the court was going to find that the disclosure was insufficient there could be little doubt that the regulation had been substantially complied with. Consequently if there had been any breach, any breach was immaterial. MY CONCLUSIONS I am satisfied that there has been no breach of Regulation 4(2)(e). The Regulations require the solicitors to inform the client if he considers that a contract of insurance is appropriate, his reasons for doing so and whether he has an interest in doing so. The unchallenged evidence of Mr Davies is that he recommended the insurance, that it was an appropriate policy in this case, that it was a policy with which he was familiar with and which he considered sufficient and that he had disclosed an interest that his firm was on the panel of solicitors operated by Lawcall. He had gone further and also informed the client that his firm had a commercial arrangement with Lawcall and that for payment of a fee they referred cases to them. I cannot see what other disclosure the solicitors could have made. They certainly had no financial interest in recommending the particular insurance with Lawcall and it is the unchallenged evidence of Mr Davies that there was no obligation upon him to recommend the policy. It seems to me that the financial arrangement between Davies & Company and Lawcall was that Davies & Company paid £300 to receive the case. Thereafter, according to Mr Davies' unchallenged evidence, Mr Davies could run the case how he wished and was under no obligation to recommend the Lawcall insurance product. The fact that he did recommend the product in a number of cases seems to me a question of judgment on the solicitor's part rather than an obligation. If Davies & Company decided not to take out insurance policies with Lawcall but took them out with another company, there is no evidence to suggest that this would affect their commercial arrangement with Lawcall. For this commercial arrangement to continue all that the solicitors had to do was to pay their £300 and receive the referral. Consequently all elements of the solicitors' financial interest with Lawcall were disclosed to the client either in the CFA itself or in the letter of 4 January 2005. Mr Patel has made references to a number of cases, but whilst Garrett clearly established basic principles, it seems to me that all these cases depend on their own particular facts. The principle set out in Garrett was that financial interests had to be disclosed. Not every firm of solicitors has the same financial arrangement with every claims management company and therefore each of these cases must be decided on their own particular facts and I have found little help from these cases other than the general guidance given in the case of Garrett. I am also satisfied that this CFA was a CFA Lite to which regulation 4(2)(e) of the CFA Regulations 2000 is disapplied. There is no doubt in my mind that in the conditions of the CFA and in the correspondence from the solicitors to the client it is made clear that "the client is liable to pay his legal representative's fees and expenses only to the extent that sums are recovered in respect of relevant proceedings …" The documents state that the client would receive his damages without deduction. I accept Mr Williams' submission that expenses and disbursements are separate but in any event the CFA contains a provision that "if the amount agreed or allowed by the Court does not cover all our basic charges and our disbursements then you are not required to pay the difference" which confirms my judgment in that respect. Accordingly the Claimant succeeds on the preliminary point

FIRST SECTION CASE OF VIKTOR PETROV v. RUSSIA (Application no. 15890/04) JUDGMENT STRASBOURG 24 July 2008 FINAL 24/10/2008 This judgment may be subject to editorial revision. In the case of Viktor Petrov v. Russia, The European Court of Human Rights (First Section), sitting as a Chamber composed of: Christos Rozakis, President,Nina Vajić,Anatoly Kovler,Khanlar Hajiyev,Dean Spielmann,Sverre Erik Jebens,George Nicolaou, judges,and Søren Nielsen, Section Registrar, Having deliberated in private on 3 July 2008, Delivers the following judgment, which was adopted on that date: PROCEDURE 1. The case originated in an application (no. 15890/04) against the Russian Federation lodged with the Court under Article 34 of the Convention for the Protection of Human Rights and Fundamental Freedoms (“the Convention”) by a Russian national, Mr Viktor Mikhailovich Petrov (“the applicant”), on 15 March 2004. 2. The Russian Government (“the Government”) were represented by Mrs V. Milinchuk, the Representative of the Russian Federation at the European Court of Human Rights. 3. On 26 March 2007 the Court decided to give notice of the application to the Government. Under the provisions of Article 29 § 3 of the Convention, it decided to examine the merits of the application at the same time as its admissibility. THE FACTS I. THE CIRCUMSTANCES OF THE CASE 4. The applicant was born in 1952 and lives in Pskov, a town in the Pskov Region. 5. As a victim of Chernobyl, the applicant is entitled to social benefits. Considering himself underpaid, he brought six successful actions against local authorities responsible for welfare. 6. On 13 August 2002 the Pskov Town Court fixed a new amount of periodic benefits. This judgment became binding on 24 September 2002. According to the Government, this judgment was fully enforced by 31 December 2006. According to the applicant, this judgment has still not been enforced, because from 1 January 2007 the periodic benefits were reduced again. 7. On 11 June 2003 the Town Court awarded 15,000 Russian roubles (“RUB”) as interest for delayed payment. This judgment became binding on 15 July 2003. On the welfare authority’s request, on 20 February 2004 the Presidium of the Pskov Regional Court quashed the judgment on supervisory review, on the ground of misapplication of material law. 8. On 21 July 2003 the Justice of the Peace of Court District 31 of Pskov awarded RUB 3,000 as interest for delayed payment. This judgment became binding on 9 October 2003. On the welfare authority’s request, on 14 May 2004 the Presidium of the Pskov Regional Court quashed the judgment on supervisory review, on the ground of misapplication of material law. 9. On 28 October 2003 the Town Court awarded arrears and fixed a new amount of periodic payments. This judgment became binding on 10 November 2003. According to the Government, this judgment was fully enforced by 31 December 2005. According to the applicant, this judgment has still not been enforced, because the periodic payments continue to be miscalculated. 10. On 29 December 2003 the Town Court awarded compensation of inflationary loss caused by the delayed enforcement of an earlier judgment. This judgment became binding on 9 January 2004 and was enforced on 8 July 2005. 11. On 1 June 2005 the Town Court ordered the applicant to be provided in 2005 with a decent flat of at least 65 m². This judgment became final on 15 June 2005 and was enforced on 29 December 2006. II. RELEVANT DOMESTIC LAW 12. Under section 9 of the Federal Law on Enforcement Proceedings of 21 July 1997, a bailiff must enforce a judgment within two months. Under section 242.2.6 of the Budget Code of 31 July 1998, the Ministry of Finance must enforce a judgment within three months. THE LAW I. ALLEGED VIOLATION OF ARTICLE 6 § 1 OF THE CONVENTION AND ARTICLE 1 OF PROTOCOL No. 1 ON ACCOUNT OF NON-ENFORCEMENT 13. The applicant complained under Article 6 of the Convention and Article 1 of Protocol No. 1 about the lengthy non-enforcement of the judgments of 13 August 2002, 28 October 2003, 29 December 2003, and 1 June 2005. Insofar as relevant, these Articles read as follows: Article 6 § 1 “In the determination of his civil rights and obligations ..., everyone is entitled to a fair ... hearing ... by [a] ... tribunal...” Article 1 of Protocol No. 1 “Every natural or legal person is entitled to the peaceful enjoyment of his possessions. No one shall be deprived of his possessions except in the public interest and subject to the conditions provided for by law and by the general principles of international law. The preceding provisions shall not, however, in any way impair the right of a State to enforce such laws as it deems necessary to control the use of property in accordance with the general interest or to secure the payment of taxes or other contributions or penalties.” A. Admissibility 14. The Government argued that this complaint was inadmissible. Any delay in the enforcement of the judgment of 13 August 2002 had been caused by the workings of the federal budget. The authorities had not idled; they had paid the award as soon as funds had become available. The other three judgments had been enforced within a reasonable time. The applicant had abused his right of petition, because he had impertinently accused the authorities of falsity. 15. The applicant argued that this complaint was admissible. The judgments of 13 August 2002 and 28 October 2003 had not been fully enforced. The other judgments had not been enforced within a reasonable time. 16. The Court notes that this complaint is not manifestly ill-founded within the meaning of Article 35 § 3 of the Convention. It further notes that it is not inadmissible on any other grounds. It must therefore be declared admissible. B. Merits 17. The Court reiterates that an unreasonably long delay in the enforcement of a binding judgment may breach the Convention (see Burdov v. Russia, no. 59498/00, ECHR 2002‑III). To decide if the delay was reasonable, the Court will look at how complex the enforcement proceedings were, how the applicant and the authorities behaved, and what the nature of the award was (see Raylyan v. Russia, no. 22000/03, § 31, 15 February 2007). 18. The enforcement of the judgment of 13 August 2002 lasted four years and three months (or longer, given the applicant’s allegation that his periodic payments continue to be miscalculated). The enforcement of the judgment of 28 October 2003 lasted two years and one month (or longer, given the applicant’s allegation that his periodic payments continue to be miscalculated). The enforcement of the judgment of 29 December 2003 lasted one year and five months. The enforcement of the judgment of 1 June 2005 lasted one year and six months. 19. In the circumstances of the present case, and given the nature of the awards (benefits to a victim of Chernobyl), these periods were incompatible with the requirements of the Convention. 20. There has, accordingly, been a violation of Article 6 § 1 of the Convention and Article 1 of Protocol No. 1. II. ALLEGED VIOLATION OF ARTICLE 13 OF THE CONVENTION ON ACCOUNT OF NON-ENFORCEMENT 21. The applicant complained under Article 13 of the Convention that he had no effective domestic remedy against the non-enforcement of the judgments. Article 13 reads as follows: “Everyone whose rights and freedoms as set forth in [the] Convention are violated shall have an effective remedy before a national authority notwithstanding that the violation has been committed by persons acting in an official capacity.” A. Admissibility 22. The Government argued that this complaint was inadmissible. The applicant had had an opportunity to complain about the welfare authority’s failure to enforce the judgments to a court, a prosecutor, or other competent agencies. 23. The applicant maintained his complaint. He indicated that the Court had many times before found a violation of Article 13 in similar circumstances. 24. The Court notes that this complaint is not manifestly ill-founded within the meaning of Article 35 § 3 of the Convention. It further notes that it is not inadmissible on any other grounds. It must therefore be declared admissible. B. Merits 25. The Court reiterates that Article 13 guarantees an effective remedy before a national authority for a prolonged non-enforcement of a binding judgment (see, mutatis mutandis, Kudła v. Poland [GC], no. 30210/96, § 156, ECHR 2000-XI). 20. The Government have not, however, specified how recourse to a court, a prosecutor, or other competent agencies would have provided preventive or compensatory relief against the non-enforcement. Nor have the Government given an example from domestic practice of a successful application of those remedies (see Kudła, cited above, § 159). 21. It follows that there has been a violation of Article 13. III. ALLEGED VIOLATION OF ARTICLE 6 § 1 OF THE CONVENTION AND OF ARTICLE 1 OF PROTOCOL No. 1 ON ACCOUNT OF SUPERVISORY REVIEW 26. The applicant further complained under Article 6 of the Convention and Article 1 of Protocol No. 1 about the supervisory review of the judgments of 11 June 2003 and 21 July 2003. A. Admissibility 27. The Government argued that this complaint was inadmissible. The supervisory-review procedure had been an integral part of the Russian legal system. According to the Constitutional Court, the elimination of the supervisory-review procedure could have produced a procedural vacuum, disrupted civil adjudication, and threatened the basic function of the judiciary – the restoration of breached rights. In the present case, the courts had reached a fair balance between the requirements of legal certainty and justice. In particular, the supervisory review had come after an ordinary appeal; only one supervisory-review court had been engaged; the supervisory review had happened promptly (less than a year after the judgments had become binding); the supervisory review had been initiated by a party to the proceedings; the judgments had been quashed in order to correct a misapplication of material law. Annulment of binding judgments was legitimate in a democratic society and known, for example, to such countries as Germany, Austria, and Switzerland. Besides, the Committee of Ministers of the Council of Europe had been satisfied that Russia’s supervisory-review procedure had been improved (ResDH(2006)1, 8 February 2006; CM/Inf/DH(2005)20, 23 March 2005). 28. The applicant insisted that his complaint was admissible. He cited a number of the Court’s cases, arguing that a misapplication of material law had not justified supervisory review. 29. The Court notes that this complaint is not manifestly ill-founded within the meaning of Article 35 § 3 of the Convention. It further notes that it is not inadmissible on any other grounds. It must therefore be declared admissible. B. Merits 30. The Court has earlier found a violation of Article 6 § 1 and Article 1 of Protocol No. 1 where, like in the present case, supervisory review was used to quash a binding judgment on the ground of an alleged misinterpretation of material law (see, for example, Kot v. Russia, no. 20887/03, § 29, 18 January 2007). There is no reason to depart from that finding in the present case. 31. There has accordingly been a violation of Article 6 of the Convention and Article 1 of Protocol No. 1. IV. ALLEGED VIOLATION OF ARTICLE 13 OF THE CONVENTION ON ACCOUNT OF SUPERVISORY REVIEW 32. The applicant complained under Article 13 of the Convention that he had no effective domestic remedy against the supervisory review of the judgments. 33. The Court notes that this complaint is not manifestly ill-founded within the meaning of Article 35 § 3 of the Convention. It further notes that it is not inadmissible on any other grounds. It must therefore be declared admissible. 34. However, having found above that the supervisory review breached the applicant’s substantive rights under Article 6 § 1 of the Convention and Article 1 of Protocol No. 1, the Court considers that it is not necessary to examine separately the complaint about the absence of effective remedies with regard to the proceedings begot by that supervisory review (see Sitkov v. Russia, no. 55531/00, § 39, 18 January 2007). V. APPLICATION OF ARTICLE 41 OF THE CONVENTION 35. Article 41 of the Convention provides: “If the Court finds that there has been a violation of the Convention or the Protocols thereto, and if the internal law of the High Contracting Party concerned allows only partial reparation to be made, the Court shall, if necessary, afford just satisfaction to the injured party.” A. Damage 36. The applicant claimed 1,800 euros (“EUR”) in respect of pecuniary damage and EUR 20,500 in respect of non-pecuniary damage. He also asked the Court to oblige the Government to enforce the judgment of 13 August 2002. 37. The Government argued that no award should be made, because the judgments in the applicant’s favour had been fully enforced, and because the applicant had failed to substantiate his non-pecuniary damage. 38. As to pecuniary damage caused by the non-enforcement, the Court reiterates that the violation found is best redressed by putting the applicant in the position he would have been if the Convention had been respected. The Government shall therefore secure, by appropriate means, the enforcement of any outstanding awards (see, with further references, Poznakhirina v. Russia, no. 25964/02, § 33, 24 February 2005). 39. As to pecuniary damage caused by the supervisory review, the Court considers that the violation found with regard to supervisory review is best redressed by putting the applicant in the position he would have been if the Convention had been respected. It is therefore appropriate to award the applicant the equivalent in euros of the sums that he would have received if the judgments of 11 June 2003 and 21 July 2003 had not been quashed (see Bolyukh v. Russia, no. 19134/05, § 39, 31 July 2007). The Court awards EUR 500 in this respect. 40. As to non-pecuniary damage, the Court accepts that the applicant may have been distressed by the non-enforcement and supervisory review of the binding judgments. Making its assessment on an equitable basis, the Court awards EUR 5,500 under this head. B. Costs and expenses 41. The applicant also claimed RUB 1,815.69 for the costs and expenses incurred before the Court. 42. The Government argued that this claim was unsubstantiated. 43. According to the Court’s case-law, an applicant is entitled to the reimbursement of costs and expenses only in so far as it has been shown that these have been actually and necessarily incurred and were reasonable as to quantum. In the present case, regard being had to the information in its possession and the above criteria, the Court considers it reasonable to award the sum of EUR 50 for the proceedings before the Court. C. Default interest 44. The Court considers it appropriate that the default interest should be based on the marginal lending rate of the European Central Bank, to which should be added three percentage points. FOR THESE REASONS, THE COURT UNANIMOUSLY 1. Declares the application admissible; 2. Holds that there has been a violation of Article 6 § 1 of the Convention and Article 1 of Protocol No. 1 on account of non-enforcement; 3. Holds that there has been a violation of Article 13 of the Convention on account of non-enforcement; 4. Holds that there has been a violation of Article 6 § 1 of the Convention and Article 1 of Protocol No. 1 on account of the supervisory-review quashing of a final judgment; 5. Holds that there is no need to examine the complaint under Article 13 of the Convention on account of the supervisory-review quashing of a final judgment; 6. Holds (a) that the respondent State, within three months from the date on which the judgment becomes final according to Article 44 § 2 of the Convention, shall secure, by appropriate means, the enforcement of any outstanding awards made by the domestic court, and in addition pay the following amounts, to be converted into Russian roubles at the rate applicable at the date of settlement: (i) EUR 500 (five hundred euros), plus any tax that may be chargeable, in respect of pecuniary damage; (ii) EUR 5,500 (five thousand five hundred euros), plus any tax that may be chargeable, in respect of non-pecuniary damage; (iii) EUR 50 (fifty euros), plus any tax that may be chargeable to the applicant, in respect of costs and expenses; (b) that from the expiry of the above-mentioned three months until settlement simple interest shall be payable on the above amounts at a rate equal to the marginal lending rate of the European Central Bank during the default period plus three percentage points; 7. Dismisses the remainder of the applicant’s claim for just satisfaction. Done in English, and notified in writing on 24 July 2008, pursuant to Rule 77 §§ 2 and 3 of the Rules of Court. Søren NielsenChristos RozakisRegistrarPresident

Syed Shah Mohammad Quadri and S.N. Variava, JJ. These two appeals, by special leave, arise from the judgment and order of the High Court of Judicature at Allahabad passed in C.M.W.P. No. 24673 of 1991 on December 14, 1998. Respondent No. 3 in that writ petition is the appellant in Civil Appeal No. 5058 of 1999, he also claims to be a legal representative of one Sheela Devi, the 4th respondent therein-being one of her sons. Among the other sons and daughters, the appellants in Civil Appeal No. 5018 of 1999, have chosen to file the appeal. The dispute arises under U. P. Urban Buildings Regulation of Letting. Rent and Eviction Act, 1972 for short the Act . The facts giving rise to these appeals are so twined as to form a maze. We shall companyfine reference to bare facts so as to appreciate the companytroversy. It appears, one Seva Ram was having a Dal Mill in property bearing No. 9/49 old 7/3, Mohalla Ahata Nidhan Singh, Aligarh . The said Sheela Devi was the widow of his grandson late Ram Kishore Gupta. One Pratibha Rani filed Suit No. 876 of 1972 in the Court of Judge, Small Causes, Aligarh. This suit was against the husband of Sheela Devi and her brother-in-law Narendra Kumar for possession. In this suit, the property was described by specifying its boundaries but without giving any number, Appellants claim that this suit is in respect of an adjacent house bearing No. 9/75. In the said suit, the appellant in C.A. No. 5058 of 1999 was later impleaded as the 3rd defendant. Claiming to be in possession of premises No. 9/75, the appellant filed Application No. 80 of 1973 under Section 14 of the Act for regularisation of her tenancy in 1973. By order dated September 23, 1973, her alleged tenancy was regularised by the Rent Control and Eviction Officer hereinafter called R.C. . The dispute number projected before us relates to premises bearing No. 9/49, referred to above, which was numbered from 1952 to 1962 as 7/3 and as 14/36 from 1962 to 1975. It is only after 1975, the number of the premises is referred to as No. 9/49. Appellants claim that premises No. 9/49 is separate and distinct from property No. 9/75. This is denied by respondent Nos. 1 to 3 who claim that there was and is numberproperty bearing No. 9/75. One Rajendra Kumar Varshney filed Application No. 118 of 1983 under Section 12 of the Act praying that premises No. 9/49 be declared as vacant and be allotted to him. On January 11, 1985, that application was allowed by the R. C. declaring the vacancy but making numberorder of allotment in his favour. The appellant claims to have filed an application to recall that order and it is stated that pursuant to an order made thereon, an inspection of the premises was made and report submitted. However, the application for recall is resting at that stage. Sheela Devi also filed an application under Section 16 of the Act for release of premises No. 9/49 to which respondent Nos. 1 to 3 are parties. But the learned R. C. rejected the same on September 27, 1985 however, the application of respondent Nos. 1 to 3 filed under Section 16 of the Act for release of the said premises in their favour was ordered on December 6, 1985. Sheela Devi filed U. P. U. B. Revision No. 69 of 1985 against the order dated September 27, 1985 and U. P. U. B. Revision No. 7 of 1986 against the order of the Rent Controller dated December 6, 1985. The appellant also challenged the said orders in U. P. U. B. Revision No. 82 of 1985. All the three revisions came to be disposed of by a companymon order dated May 15, 1991 by the learned District Judge, Aligarh. The orders under challenge in revision were set aside and the case was directed to be remitted to the Rent Controller for fresh disposal. Dissatisfied with the said order of the District Judge, respondent Nos. 1 to 3 filed the afore-mentioned writ petition. The High Court set aside the order of the learned District Judge and restored the order of the Rent Controller and thus allowed the writ petition by the impugned order on December 14, 1998. It is from that order that these appeals arise. Various companytentions are urged before us by the learned companynsel for the parties but in the view we have taken, we do number companysider it necessary to refer to them. Inasmuch as the essence of the companytroversy between the parties is declaration of vacancy and allotment and releasing of premises number 9/49 and indeed the parties initiated action claiming the said reliefs, it will be necessary to advert to the relevant provisions of the Act. Section 12 which deals with deemed vacancy of the building in certain cases is in the following terms Section 12. Deemed vacancy of building in certain cases.-- I A landlord or tenant of a building shall be deemed to have ceased to occupy the building or a part thereof if a he has substantially removed his effects therefrom, or b he has allowed it to be occupied by any person who is number a member of his family, or c in the case of a residential building, he as well as members of his family have taken up residence, number being temporary residence, elsewhere. In the case of number-residential building, where a tenant carrying on business tn the building admits a person who is number a member of his family as a partner or a new partner, as the case may be, the tenant shall be deemed to have ceased to occupy the building. In the case of a residential building, if the tenant or any member of his family builds or otherwise acquired in a vacant A tenant or, as the case may be, a member of his family, referred to in Sub-section 3 shall, have a right, as landlord of any residential building referred to in the said sub-section which may have been let out by him before the companymencement of Uttar Pradesh Urban Buildings Regulation of Letting, Rent and Eviction Amendment Act, 1976, to apply under Clause a of Sub-section 1 of Section 21 for the eviction of his tenant from such building, numberwithstanding that such building is one to which the remaining provisions of this Act do number apply. Sub-section 1 of Section 12 says that a landlord or a tenant of a building shall be deemed to have ceased to occupy the building if a he has substantially removed his effects therefrom or b he has allowed it to be occupied by any person who is number a member of his family or c in the case of a residential building, he as well as members of his family have taken up residence, number being temporary residence, elsewhere. It is thus clear that before an order under Section 12 is made, it is necessary for the R.C. to reach companyclusion as to who the landlord is and who the tenant is and whether in the circumstances, they have companymitted anyone of the acts mentioned above so as to attract the deeming provision of Sub-section 1 of Section 12. Section 16 which provides for allotment and release of vacant building, after declaring the vacancy, in the following terms Section 16. Allotment and release of vacant building.-- 1 Subject to the provisions of the Act, the District Magistrate may by order a require the landlord to let any building which is or has fallen vacant or is about to fall vacant, or a part of such building but number appurtenant land alone, to any person specified in the order or b release the whole or any part of such building, or any land appurtenant thereto, in favour of the landlord. Nothing in Sub-section 9 shall be companystrued to require the District Magistrate to take any evidence or hold any formal inquiry before fixing the presumptive rent of, the building allotted, and the amount mentioned in the allotment order as presumptive rent shall be subject to any agreement in writing between the parties or to any subsequent determination of standard rent after formal inquiry under Section 9 Provided that until the presumptive rent is so revised by agreement or by an order under Section 9, the tenant shall companytinue to be liable to pay rent according to the presumptive rent specified in the allotment order, so however, that any subsequent order under Section 9 shall relate back to the date of companymencement of the tenancy. A plain reading of Section 16 discloses that the District Magistrate, number the Rent Controller, is empowered to pass an order requiring the landlord to let any building which has fallen vacant and is about to fall vacant or a part of such building but number appurtenant land alone to any person specified in the order. Clause b of Sub-section 1 which is important for purposes of this case would indicate that an order of release of the whole or any part of the building of the land appurtenant thereto is in favour of the landlord. It is thus clear that both for purposes of declaring a vacancy or for allotment and or release of a building, it is necessary to determine, unless it is admitted, as to who among the companypeting claimants-the parties-the landlord is. Section 3 j of the Act defines landlord to mean in relation to a building a person to whom its rent is or, if the building were let, would be paid and includes, except in Clause g , the agent or attorney or such person. We have gone through the orders of the learned Rent Controller, the District Judge and the High Court. It appears that in the maze of the companyplicated facts, the authorities did number address themselves to this germane question of determining as to who the landlord of premises No. 9/49 is. Without such determination, numbercorrect decision can be reached under Sections 12 and 16 of the Act. We would like to clarify that under the Act the word landlord is number used, synonymous with the owner. It is employed in a sense which includes a landlord but it does number necessarily mean an owner. Every owner of a building may be a landlord but every landlord need number be an owner. The learned District Judge did allude to this point but he did number appreciate the distinction between an owner and a landlord. On the facts and in the circumstances of the case, we think it would be just and proper to set aside the order of the Rent Controller, the learned District Judge and the High Court and remit the matter to the Rent Controller to decide afresh, after giving opportunity to the parties, the questions as to who falls within the meaning of the expression landlord and whether the premises can be deemed vacant and be released in favour of anyone of the parties. In determining that question, the learned Rent Controller shall also decide for purposes of those cases as to whether 9/75 and 9/49 are two different properties or two different numbers of the same property.

Judgment of the Court of 5 July 1977. - Bela-Mühle Josef Bergmann KG v Grows-Farm GmbH & CO. KG. - Reference for a preliminary ruling: Landgericht Oldenburg - Germany. - Skimmed-milk powder. - Case 114-76. European Court reports 1977 Page 01211 Greek special edition Page 00385 Portuguese special edition Page 00451 Summary Parties Subject of the case Grounds Decision on costs Operative part Keywords 1 . AGRICULTURE - COMMON ORGANIZATION OF THE MARKETS - COMMUNITY ARRANGEMENTS - BURDEN OF COSTS - DISCRIMINATORY DISTRIBUTION BETWEEN THE VARIOUS AGRICULTURAL SECTORS - NOT PERMISSIBLE ( EEC TREATY , ARTICLE 39 AND SECOND SUBPARAGRAPH OF ARTICLE 40 ( 3 )) 2 . AGRICULTURE - COMMON ORGANIZATION OF THE MARKETS - SKIMMED-MILK POWDER HELD BY INTERVENTION AGENCIES - COMPULSORY PURCHASE - COUNCIL REGULATION ( EEC ) NO 563/76 - INVALIDITY Summary 1 . COMMUNITY ARRANGEMENTS WHICH IMPOSE A DISCRIMINATORY DISTRIBUTION OF THE BURDEN OF COSTS BETWEEN THE VARIOUS SECTORS OF AGRICULTURAL PRODUCTION CANNOT BE JUSTIFIED FOR THE PURPOSE OF ATTAINING THE OBJECTIVES OF THE COMMON AGRICULTURAL POLICY . 2 . COUNCIL REGULATION NO 563/76 OF 15 MARCH 1976 ON THE COMPULSORY PURCHASE OF SKIMMED-MILK POWDER HELD BY INTERVENTION AGENCIES FOR USE IN FEEDING-STUFFS IS NULL AND VOID . Parties IN CASE 114/76 REFERENCE TO THE COURT UNDER ARTICLE 177 OF THE EEC TREATY BY THE LANDGERICHT OLDENBURG FOR A PRELIMINARY RULING IN THE ACTION PENDING BEFORE IT BETWEEN BELA-MUHLE JOSEF BERGMANN KG , LANGFORDEN ( GERMANY ), AND GROWS-FARM GMBH & CO . KG , LANGFORDEN ( GERMANY ), Subject of the case ON THE VALIDITY OF COUNCIL REGULATION ( EEC ) NO 563/76 OF 15 MARCH 1976 ON THE COMPULSORY PURCHASE OF SKIMMED-MILK POWDER HELD BY INTERVENTION AGENCIES FOR USE IN FEEDING-STUFFS ( OJ L 67 , P . 18 ), Grounds 1 BY ORDER OF 8 SEPTEMBER 1976 , WHICH REACHED THE COURT ON 2 DECEMBER 1976 , THE LANDGERICHT OLDENBURG ASKED THE COURT UNDER ARTICLE 177 OF THE EEC TREATY FOR A RULING ON THE VALIDITY OF COUNCIL REGULATION ( EEC ) NO 563/76 OF 15 MARCH 1976 ON THE COMPULSORY PURCHASE OF SKIMMED-MILK POWDER HELD BY INTERVENTION AGENCIES FOR USE IN FEEDING-STUFFS ( OJ L 67 , P . 18 ). THE REFERENCE WAS MADE IN CONNEXION WITH CIVIL PROCEEDINGS CONCERNING THE PERFORMANCE OF A CONTRACT FOR DELIVERY OF FEEDING-STUFFS CONCLUDED BETWEEN A PRODUCER OF CONCENTRATED FEEDING-STUFFS , THE PLAINTIFF IN THE MAIN ACTION , AND THE PROPRIETOR OF A BATTERY HEN UNIT , THE DEFENDANT IN THE MAIN ACTION . IN ADDITION TO THE PRICE AGREED UNDER THE CONTRACT THE PLAINTIFF IN THE MAIN ACTION ASKED FOR PAYMENT OF A SUM EQUIVALENT TO THE CHARGE ARISING UNDER REGULATION ( EEC ) NO 563/76 THE VALIDITY OF WHICH IS , HOWEVER , CONTESTED BY THE DEFENDANT IN THE MAIN ACTION . 2 REGULATION ( EEC ) NO 563/76 WAS PROMULGATED AT A TIME WHEN THE STOCKS OF SKIMMED-MILK POWDER BOUGHT IN BY THE INTERVENTION AGENCIES PURSUANT TO REGULATION ( EEC ) NO 804/68 OF THE COUNCIL OF 27 JUNE 1968 ON THE COMMON ORGANIZATION OF THE MARKET IN MILK AND MILK PRODUCTS ( OJ ENGLISH SPECIAL EDITION 1968 , P . 176 ) HAD REACHED CONSIDERABLE PROPORTIONS AND WERE CONTINUING TO INCREASE DESPITE THE MEASURES ADOPTED BY THE COMMUNITY INSTITUTIONS TO CURB THE TENDENCY TOWARDS OVER-PRODUCTION OF MILK AND TO INCREASE THE SALE OF SKIMMED-MILK POWDER . THE SYSTEM ESTABLISHED BY REGULATION ( EEC ) NO 563/76 THE APPLICATION OF WHICH WAS NOT EXTENDED BEYOND THE END OF THE ORIGINAL PERIOD OF APPLICATION , WHICH EXPIRED ON 31 OCTOBER 1976 , WAS DESIGNED TO REDUCE STOCKS THROUGH THE INCREASED USE IN FEEDING-STUFFS OF THE PROTEIN CONTAINED IN SKIMMED-MILK POWDER . TO THIS END THE REGULATION MADE THE GRANT OF THE AIDS PROVIDED FOR CERTAIN VEGETABLE PROTEIN PRODUCTS AS WELL AS THE FREE CIRCULATION IN THE COMMUNITY OF CERTAIN IMPORTED ANIMAL FEED PRODUCTS SUBJECT TO THE OBLIGATION TO PURCHASE SPECIFIED QUANTITIES OF SKIMMED-MILK POWDER . IN ORDER TO ENSURE THAT THIS OBLIGATION WAS FULFILLED THE GRANT OF AID AND FREE CIRCULATION WERE SUBJECT TO THE PROVISION OF A SECURITY OR THE PRODUCTION , ON THE PRESCRIBED FORM , OF EVIDENCE OF THE PURCHASE AND OF THE DENATURING OF THE PRESCRIBED QUANTITIES OF SKIMMED-MILK POWDER . 3 UNDER ARTICLE 1 OF COMMISSION REGULATION ( EEC ) NO 753/76 OF 31 MARCH 1976 LAYING DOWN DETAILED RULES FOR THE SALE OF SKIMMED-MILK POWDER FOR USE IN ANIMAL FEED ( OJ L 88 , P . 1 ), SKIMMED-MILK POWDER HELD BY THE INTERVENTION AGENCIES WAS RESOLD BY THEM IN FULFILMENT OF THE OBLIGATION TO PURCHASE AT A PRICE OF 52.16 U.A . PER 100 KG MULTIPLIED BY A COEFFICIENT WHICH , IN THE CASE OF THE FEDERAL REPUBLIC OF GERMANY , AMOUNTED TO 0.8325 . THE DENATURING COSTS TO BE BORNE BY THE PURCHASER WERE BETWEEN 1 AND 3 U.A . PER 100 KG . DURING THE PERIOD WHEN REGULATION ( EEC ) NO 563/76 APPLIED , THE MARKET PRICE OF SOYA OIL CAKE , A VEGETABLE PRODUCT WITH A NUTRITIONAL VALUE COMPARABLE TO THAT OF SKIMMED-MILK POWDER FOR USE IN ANIMAL FEED OTHER THAN THAT FOR YOUNG CALVES , VARIED BETWEEN 13.30 AND 20.40 U.A . PER 100 KG , THE AVERAGE BEING ABOUT 18 U.A . PER 100 KG . THE COMPULSORY PURCHASE OF SKIMMED-MILK POWDER WAS , THEREFORE , IMPOSED AT A PRICE EQUAL TO ABOUT THREE TIMES ITS VALUE AS ANIMAL FEED . THE SECURITY , WHICH WAS RELEASED ONLY ON PRODUCTION OF PROOF OF THE PURCHASE OF A SPECIFIED QUANTITY OF POWDERED SKIMMED MILK , WAS FIXED AT SUCH AN AMOUNT THAT , IF IT WAS FORFEITED , ITS EFFECT ON THE PRICES OF FEEDING-STUFFS WAS SLIGHTLY MORE THAN THE INCREASE DUE TO THE PURCHASE OF POWDERED SKIMMED MILK . 4 ARTICLE 5 OF THE REGULATION LAID DOWN THAT , IN THE CASE OF CONTRACTS CONCLUDED BEFORE THE DATE OF ENTRY INTO FORCE OF THE REGULATION , THE BURDEN OF THE COSTS ARISING UNDER THE ARRANGEMENTS WAS TO BE BORNE BY THE SUCCESSIVE BUYERS OF THE PRODUCTS IN QUESTION . THE REGULATION DID NOT CONTAIN ANY SIMILAR PROVISION MAKING IT POSSIBLE FOR CONSUMERS OF FEEDING-STUFFS , SUCH AS BREEDERS OF POULTRY AND PIGS , TO INCORPORATE THE INCREASE IN THE PRICE OF THEIR PRODUCTS . 5 THE VALIDITY OF THESE ARRANGEMENTS HAS BEEN CONTESTED ON GROUNDS OF CONFLICT IN PARTICULAR WITH THE OBJECTIVES OF THE COMMON AGRICULTURAL POLICY AS DEFINED IN ARTICLE 39 OF THE TREATY , THE PROHIBITION OF DISCRIMINATION LAID DOWN IN THE SECOND SUBPARAGRAPH OF ARTICLE 40 ( 3 ) AND THE PRINCIPLE OF PROPORTIONALITY BETWEEN THE MEANS EMPLOYED AND THE END IN VIEW . BECAUSE OF THE CLOSE CONNEXION BETWEEN THESE GROUNDS OF COMPLAINT , IT WILL BE APPROPRIATE TO CONSIDER THEM TOGETHER . 6 UNDER ARTICLE 39 , THE OBJECTIVES OF THE COMMON AGRICULTURAL POLICY ARE TO BE THE RATIONAL DEVELOPMENT OF AGRICULTURAL PRODUCTION , THE ASSURANCE OF A FAIR STANDARD OF LIVING FOR THE WHOLE OF THE AGRICULTURAL COMMUNITY , THE STABILIZATION OF MARKETS AND THE AVAILABILITY OF SUPPLIES TO CONSUMERS AT REASONABLE PRICES . ALTHOUGH ARTICLE 39 THUS ENABLES THE COMMON AGRICULTURAL POLICY TO BE DEFINED IN TERMS OF A WIDE CHOICE OF MEASURES INVOLVING GUIDANCE OR INTERVENTION , THE FACT NEVERTHELESS REMAINS THAT THE SECOND SUBPARAGRAPH OF ARTICLE 40 ( 3 ) PROVIDES THAT THE COMMON ORGANIZATION OF THE AGRICULTURAL MARKETS SHALL BE LIMITED TO PURSUIT OF THE OBJECTIVES SET OUT IN ARTICLE 39 . FURTHERMORE , THE SAME SUBPARAGRAPH LAYS DOWN THAT THE COMMON ORGANIZATION OF THE MARKETS ' SHALL EXCLUDE ANY DISCRIMINATION BETWEEN PRODUCERS OR CONSUMERS WITHIN THE COMMUNITY ' . THUS THE STATEMENT OF THE OBJECTIVES CONTAINED IN ARTICLE 39 , TAKEN TOGETHER WITH THE RULES IN THE SECOND SUBPARAGRAPH OF ARTICLE 40 ( 3 ), SUPPLIES BOTH POSITIVE AND NEGATIVE CRITERIA BY WHICH THE LEGALITY OF THE MEASURES ADOPTED IN THIS MATTER MAY BE AP- PRAISED . 7 THE ARRANGEMENTS MADE BY REGULATION ( EEC ) NO 563/76 CONSTITUTED A TEMPORARY MEASURE INTENDED TO COUNTERACT THE CONSEQUENCES OF A CHRONIC IMBALANCE IN THE COMMON ORGANIZATION OF THE MARKET IN MILK AND MILK PRODUCTS . A FEATURE OF THESE ARRANGEMENTS WAS THE IMPOSITION NOT ONLY ON PRODUCERS OF MILK AND MILK PRODUCTS BUT ALSO , AND MORE ESPECIALLY , ON PRODUCERS IN OTHER AGRICULTURAL SECTORS OF A FINANCIAL BURDEN WHICH TOOK THE FORM , FIRST , OF THE COMPULSORY PURCHASE OF CERTAIN QUANTITIES OF AN ANIMAL FEED PRODUCT AND , SECONDLY , OF THE FIXING OF A PURCHASE PRICE FOR THAT PRODUCT AT A LEVEL THREE TIMES HIGHER THAN THAT OF THE SUBSTANCES WHICH IT REPLACED . THE OBLIGATION TO PURCHASE AT SUCH A DISPROPORTIONATE PRICE CONSTITUTED A DISCRIMINATORY DISTRIBUTION OF THE BURDEN OF COSTS BETWEEN THE VARIOUS AGRICULTURAL SECTORS . NOR , MOREOVER , WAS SUCH AN OBLIGATION NECESSARY IN ORDER TO ATTAIN THE OBJECTIVE IN VIEW , NAMELY , THE DISPOSAL OF STOCKS OF SKIMMED-MILK POWDER . IT COULD NOT THEREFORE BE JUSTIFIED FOR THE PURPOSES OF ATTAINING THE OBJECTIVES OF THE COMMON AGRICULTURAL POLICY . 8 IN CONSEQUENCE , THE ANSWER MUST BE THAT COUNCIL REGULATION ( EEC ) NO 563/76 OF 15 MARCH 1976 IS NULL AND VOID . Decision on costs COSTS 9 THE COSTS INCURRED BY THE COUNCIL AND THE COMMISSION OF THE EUROPEAN COMMUNITIES , WHICH HAVE SUBMITTED OBSERVATIONS TO THE COURT , ARE NOT RECOVERABLE AND AS THESE PROCEEDINGS ARE , IN SO FAR AS THE PARTIES TO THE MAIN ACTION ARE CONCERNED , A STEP IN THE ACTION PENDING BEFORE THE NATIONAL COURT , THE COSTS ARE A MATTER FOR THAT COURT . Operative part ON THOSE GROUNDS , THE COURT , IN ANSWER TO THE QUESTION REFERRED TO IT BY THE LANDGERICHT OLDENBURG BY ORDER OF 8 SEPTEMBER 1976 , HEREBY RULES : COUNCIL REGULATION ( EEC ) NO 563/76 OF 15 MARCH 1976 ON THE COMPULSORY PURCHASE OF SKIMMED-MILK POWDER HELD BY INTERVENTION AGENCIES FOR USE IN FEEDING-STUFFS IS NULL AND VOID .

Judgment of the Court (Second Chamber) of 15 December 1965. - Werner Klaer v High Authority of the ECSC. - Case 15-65. European Court reports French edition Page 01295 Dutch edition Page 01350 German edition Page 01376 Italian edition Page 01256 English special edition Page 01045 Danish special edition Page 00161 Greek special edition Page 00233 Portuguese special edition Page 00289 Summary Parties Subject of the case Grounds Decision on costs Operative part Keywords ++++ OFFICIALS - DUTIES PERFORMED, GRADE AND POST - CORRESPONDENCE - DUTIES OF THE ADMINISTRATION ( STAFF REGULATIONS OF OFFICIALS OF THE ECSC, ARTICLES 5 AND 7 AND ANNEX I ) Summary IT FOLLOWS FROM THE PROVISIONS OF ARTICLES 5 AND 7 OF THE STAFF REGULATIONS OF OFFICIALS OF THE ECSC THAT AN OFFICIAL IS ENTITLED NOT ONLY TO REMAIN IN THE SAME GRADE AND TO RECEIVE THE CORRESPONDING REMUNERATION, BUT ALSO TO BE ENTRUSTED WITH DUTIES AND POWERS WHICH ARE IN ACCORDANCE WITH THE POST CORRESPONDING TO THE GRADE WHICH HE HOLDS IN THE ADMINISTRATION . CF . PARAGRAPH 4, SUMMARY, CASE 102/63 ( 1964 ) ECR 1351 . Parties IN CASE 15/65 WERNER KLAER, AN UNCLASSIFIED ADVISER TO THE HIGH AUTHORITY, RESIDING AT LUXEMBOURG, ASSISTED BY ALEX BONN, ADVOCATE OF THE COUR SUPERIEURE DE JUSTICE OF THE GRAND-DUCHY OF LUXEMBOURG, WITH AN ADDRESS FOR SERVICE IN LUXEMBOURG AT THE CHAMBERS OF HIS SAID COUNSEL, 22 RUE DE LA COTE-D' EICH, APPLICANT, V HIGH AUTHORITY OF THE EUROPEAN COAL AND STEEL COMMUNITY, REPRESENTED BY ITS LEGAL ADVISER, GUY SAUTTER, ACTING AS AGENT, WITH AN ADDRESS FOR SERVICE IN LUXEMBOURG AT ITS OFFICES, 2 PLACE DE METZ, DEFENDANT, Subject of the case APPLICATION FOR THE ANNULMENT OF THE DECISION OF 2-16 DECEMBER 1964 ASSIGNING THE APPLICANT TO THE DIRECTORATE-GENERAL FOR ECONOMY AND ENERGY, OR, ALTERNATIVELY, FOR A DECLARATION THAT THIS DECISION IS ILLEGAL; Grounds P.1053 A - ADMISSIBILITY THE DEFENDANT MAINTAINS THAT THE APPLICATION IS INADMISSIBLE IN THAT IT IS DIRECTED AGAINST AN ACT WHICH DOES NOT ADVERSELY AFFECT THE APPLICANT . THE CONTESTED DECISION LED TO NO INJURY TO THE MATERIAL INTERESTS OF THE APPLICANT AND NO REDUCTION IN HIS RANK AS COMPARED WITH THE DIRECTOR-GENERAL WITH WHOM HE WAS REQUIRED TO CO-OPERATE . THE NEW DEFINITION OF HIS DUTIES MADE BY THE ADMINISTRATIVE AUTHORITY DID NOT ADVERSELY AFFECT HIS STATUS AND THUS, IT IS NOT ADMISSIBLE FOR THE APPLICANT TO CONTEST THE DECISION OF THE HIGH AUTHORITY . P.1054 THE APPLICANT RIGHTLY REPLIES THAT IN THIS CASE THE ADMISSIBILITY OF THE APPLICATION IS CLOSELY CONNECTED TO THE SUBSTANCE OF THE CASE AND THAT IT IS ONLY AFTER THE CONSIDERATION OF THE SUBSTANCE BY COMPARING THE CONTENT OF THE CONTESTED DECISION WITH THOSE PROVISIONS OF THE STAFF REGULATIONS WHICH HAVE ALLEGEDLY BEEN INFRINGED THAT IT WILL BE POSSIBLE TO STATE WHETHER OR NOT THIS DECISION CONSTITUTES AN ACT ADVERSELY AFFECTING THE APPLICANT . B - THE SUBSTANCE OF THE CASE THE APPLICANT MAINTAINS THAT, BY ASSIGNING TO HIM DUTIES WHICH ARE NOT OF THE LEVEL OF THOSE USUALLY ASSIGNED TO AN UNCLASSIFIED ADVISER IN GRADE A1, THE DECISION IN QUESTION INFRINGED THE STAFF REGULATIONS OF OFFICIALS, IN PARTICULAR ARTICLES 5 AND 7 . THE DEFINITIONS OF DUTIES AND POWERS, ADOPTED BY THE HIGH AUTHORITY ON 18 DECEMBER 1962 IN ACCORDANCE WITH ARTICLE 5(4 ) OF THE STAFF REGULATIONS DEFINES AN UNCLASSIFIED ADVISER AS A ' VERY HIGHLY-QUALIFIED OFFICIAL WITH THE TASK OF ADVISING THE INSTITUTION OR ENGAGED IN TOP - LEVEL STUDIES '. THUS, AN UNCLASSIFIED ADVISER CANNOT BE REQUIRED TO ADVISE A DIRECTORATE-GENERAL . FURTHERMORE, UNDER ARTICLE 7 OF THE STAFF REGULATIONS THE DEFENDANT IS BOUND TO ASSIGN EACH OFFICIAL TO A POST IN HIS CATEGORY WHICH CORRESPONDS TO HIS GRADE . THE ABOVEMENTIONED PROVISIONS SHOW THAT AN OFFICIAL IS ENTITLED NOT ONLY TO REMAIN IN THE SAME GRADE AND RECEIVE THE CORRESPONDING REMUNERATION, BUT ALSO TO BE ENTRUSTED WITH DUTIES AND POWERS WHICH ARE AS A WHOLE IN ACCORDANCE WITH THE POST CORRESPONDING TO THE GRADE WHICH HE HOLDS IN THE ADMINISTRATION . THE FIRST QUESTION IS, THEREFORE, WHETHER THE EFFECT OF THE DECISION APPOINTING THE APPLICANT TO A POST AS ASSISTANT TO THE DIRECTOR-GENERAL FOR ECONOMY AND ENERGY, WHO ALSO HELD GRADE A1, WAS NOT TO PLACE HIM IN A LOWER ADMINISTRATIVE POSITION THAN ANOTHER OFFICIAL IN THE SAME GRADE . IT IS IN THE VERY NATURE OF THE DUTIES OF AN ASSISTANT TO THE DIRECTOR-GENERAL THAT THE PERSON TO WHOM SUCH DUTIES ARE ASSIGNED IS IN A SUBORDINATE POSITION AS COMPARED WITH THE DIRECTOR-GENERAL HIMSELF . THE POSITION OF THE DIRECTOR-GENERAL IN RELATION TO THE APPLICANT IS CONFIRMED BY THE DEFINITIONS OF DUTIES AND POWERS ANNEXED TO THE DECISION IN QUESTION . IN PARTICULAR THE STATEMENT THAT IN THE ABSENCE OF THE DIRECTOR-GENERAL AT EXTERNAL MEETINGS MR KLAER SHALL EXPRESS THE POINT OF VIEW OF THE DIRECTORATE-GENERAL MEANS THAT THIS POINT OF VIEW WILL NOT BE PREPARED ON THE BASIS OF THE OPINION OF THE APPLICANT BUT RATHER ON THAT OF THE DIRECTOR-GENERAL . P.1055 SECONDLY, IT IS CLEAR FROM THE DEFINITIONS OF DUTIES AND POWERS ADOPTED BY THE HIGH AUTHORITY ON 18 DECEMBER 1962 THAT AN OFFICIAL PERFORMING DUTIES IN GRADE A1 CAN ONLY BE RESPONSIBLE TO THE HIGH AUTHORITY ITSELF OR TO ITS WORKING PARTIES . MOREOVER THE DEFINITIONS OF THE DUTIES IN CAREER BRACKET A2 SHOW THE DIRECTOR TO BE UNDER THE DIRECT AUTHORITY OF THE DIRECTOR-GENERAL AND, IN CERTAIN CASES, OF THE INSTITUTION AND THAT AN UNCLASSIFIED ADVISER IS REQUIRED TO ADVISE THE INSTITUTION OR A DIRECTORATE - GENERAL . THIS SAME CONCEPT APPEARS THROUGHOUT THE DEFINITIONS OF DUTIES AND PLACES THE HOLDER OF A POST UNDER THE AUTHORITY OF THE OFFICIAL WHOSE BRACKET IS IMMEDIATELY SUPERIOR TO HIS OWN . HOWEVER, THE EFFECT OF THIS SYSTEM CANNOT BE - AS IN THIS CASE - TO SUBORDINATE ONE OFFICIAL IN GRADE A1 TO THE AUTHORITY OF ANOTHER OFFICIAL IN THE SAME GRADE, AT LEAST WITHOUT HAVING OBTAINED THE AGREEMENT OF THE FORMER . IT IS TRUE THAT UNDER THE TERMS OF ARTICLE 2 OF THE DECISION IN QUESTION THE APPLICANT REMAINS RESPONSIBLE FOR THE DUTIES DERIVING FROM THE AUTHORITY OF 12 MARCH 1963, IN THE PERFORMANCE OF WHICH HE IS DIRECTLY RESPONSIBLE TO THE HIGH AUTHORITY . ALTHOUGH THESE DUTIES INVOLVE A WORKING RELATIONSHIP WITH THE DIRECTORATE-GENERAL FOR ECONOMY AND ENERGY, THEY DO NOT INCORPORATE THE APPLICANT INTO THIS DIRECTORATE-GENERAL OR SUBORDINATE HIM TO ITS DIRECTOR-GENERAL . IT MATTERS LITTLE IN THIS CASE THAT, AS REGARDS THE DUTIES WHICH THE APPLICANT CONTINUES TO PERFORM BY VIRTUE OF THE AUTHORITY OF 1963, HE IS ONLY RESPONSIBLE TO THE INSTITUTION . IN FACT, THE NEW DUTIES ASSIGNED TO HIM BY THE DECISION IN QUESTION CANNOT MERELY BE AN EXTENSION OF HIS EARLIER DUTIES IN GRADE A1, AS THEY ARE QUITE DISTINCT AND MUST, AS A RESULT OF THEIR IMPORTANCE, BE ASSESSED SEPARATELY . THE SUBORDINATION OF THE APPLICANT TO ANOTHER OFFICIAL REPRESENTS A SUBSTANTIAL DIMINUTION OF HIS EARLIER STATUS . BEFORE THE DECISION IN QUESTION WAS MADE THE APPLICANT WAS ONLY RESPONSIBLE TO THE HIGH AUTHORITY, WHILE AS A RESULT OF THIS DECISION HE HAS BECOME SUBORDINATE TO AN OFFICIAL IN HIS OWN GRADE . FINALLY, THE DUTIES OF ASSISTANT TO THE DIRECTOR - GENERAL FOR ECONOMY AND ENERGY WERE AT THE SAME TIME ENTRUSTED TO MR CROS, AN OFFICIAL IN GRADE A2 . THIS JOINT APPOINTMENT IS CONFIRMATION THAT IT WAS INTENDED TO DIMINISH THE AUTHORITY OF THE APPLICANT BY ASSIGNING TO HIM DUTIES CORRESPONDING TO GRADE A2, IN SPITE OF A CERTAIN IMPORTANCE ACCORDED TO HIM IN RELATION TO HIS COLLEAGUE IN GRADE A2, IN THAT THE APPLICANT IS ALONE EMPOWERED TO DEPUTIZE FOR THE DIRECTOR - GENERAL IN HIS ABSENCE . THE ABOVE CONSIDERATIONS SHOW THAT THE DECISION IN QUESTION IS NOT MERELY AN INTERNAL MEASURE FOR THE ORGANIZATION OF THE DEPARTMENT, WHICH FALLS WITHIN THE SPHERE OF THE HIGH AUTHORITY'S DISCRETIONARY POWER, BUT THAT IT ADVERSELY AFFECTS THE RIGHTS HELD BY THE APPLICANT UNDER THE STAFF REGULATIONS BY REQUIRING HIM TO PERFORM DUTIES WHICH DO NOT CORRESPOND TO HIS POST AND GRADE . THE APPLICATION IS THEREFORE ADMISSIBLE AND WELL FOUNDED . Decision on costs THE APPLICANT HAS BEEN SUCCESSFUL IN HIS APPLICATION . UNDER THE TERMS OF ARTICLE 69(2 ) OF THE RULES OF PROCEDURE THE DEFENDANT MUST THEREFORE BE ORDERED TO PAY THE COSTS . Operative part THE COURT ( FIRST CHAMBER ) HEREBY : 1 . ANNULS THE DECISION OF THE DEFENDANT INSTITUTION OF 2 DECEMBER 1964, NOTIFIED TO THE APPLICANT ON 16 DECEMBER 1964, BY WHICH HE WAS ATTACHED TO THE DIRECTORATE-GENERAL FOR ECONOMY AND ENERGY IN THE POST OF ASSISTANT TO THE DIRECTOR - GENERAL; 2 . ORDERS THE DEFENDANT TO PAY THE COSTS .

OPINION OF ADVOCATE GENERAL SHARPSTON delivered on 16 July 2015 (1) Case C‑73/14 Council of the European Union v European Commission (Submission by the Commission of a written statement on behalf of the European Union to the International Tribunal for the Law of the Sea — Articles 13(2), 16(1) and 17(1) TEU — Articles 218(9) and 335 TFEU — External representation of the European Union — Violation of the Council’s prerogatives — Sincere cooperation — Article 263 TFEU — Admissibility) 1. On 29 November 2013, the European Commission submitted a written statement on behalf of the European Union (‘the EU’) to the International Tribunal for the Law of the Sea (‘ITLOS’) regarding an advisory opinion to be delivered by that court. 2. The Council of the European Union seeks annulment of ‘the Commission’s decision of 29 November 2013’ to submit that statement. Supported by a number of Member States, it claims essentially that the Commission should have requested and obtained its approval before submitting the written statement to ITLOS. The Council claims that, by failing to do so, the Commission violated Article 218(9) TFEU and/or Article 16 TEU (first and second parts, respectively, of the first plea) and breached the duty of sincere cooperation (second plea). For its part, the Commission claims that it was competent to submit that statement without the Council’s approval; and that it cooperated fully with the Council. 3. The central issue debated between the parties thus concerns the identity of the EU institution entrusted with the task of deciding upon the position of the EU before a judicial body constituted in accordance with an international agreement to which the EU is a Contracting Party. 4. I shall examine the various aspects of that highly important issue in due course, but it seems to me that the Council’s action is in fact inadmissible and should be dismissed on that ground alone. Law governing ITLOS 5. The EU, together with its Member States, is a Contracting Party to the United Nations Convention on the Law of the Sea (‘UNCLOS’). (2) 6. ITLOS is constituted and governed by UNCLOS, in particular by Annex VI thereto, which contains its Statute. 7. Article 16 of the ITLOS Statute requires ITLOS to lay down its rules of procedure. Article 20 provides that ITLOS shall be available to Contracting Parties. 8. Under Article 133 of the ITLOS rules of procedure, which apply to the advisory opinion proceedings of the Seabed Dispute Chamber of ITLOS, the Contracting Parties to UNCLOS shall be invited by ITLOS to present written statements on the question(s) raised in the request for an advisory opinion. 9. Article 138(1) of the ITLOS rules of procedure provides for ITLOS to ‘give an advisory opinion on a legal question if an international agreement related to the purposes of [UNCLOS] specifically provides for the submission to [ITLOS] of a request for such an opinion’. Article 138(3) provides that, in such circumstances, ITLOS ‘shall apply mutatis mutandis Articles 133 to 137’. EU law Treaty on European Union 10. Article 13(2) TEU provides: ‘Each institution shall act within the limits of the powers conferred on it in the Treaties, and in conformity with the procedures, conditions and objectives set out in them. The institutions shall practice mutual sincere cooperation.’ 11. The second sentence of Article 16(1) TEU states that the Council is to ‘carry out policy-making and coordinating functions as laid down in the Treaties’. The remainder of Article 16 lays down the general rules governing Council action. In particular, Article 16(3) provides that ‘[t]he Council shall act by a qualified majority except where the Treaties provide otherwise’. 12. Article 17(1) TEU provides: ‘The Commission shall promote the general interest of the [EU] and take appropriate initiatives to that end. It shall ensure the application of the Treaties, and of measures adopted by the institutions pursuant to them. It shall oversee the application of [EU] law under the control of the Court of Justice of the [EU]. ... It shall exercise coordinating, executive and management functions, as laid down in the Treaties. With the exception of the common foreign and security policy, and other cases provided for in the Treaties, it shall ensure the [EU]’s external representation. …’ Treaty on the Functioning of the European Union 13. External action by the EU is regulated by Part V TFEU, Title V of which relates to international agreements. Within that title, Articles 216 and 217 TFEU empower the EU to conclude agreements with one or more third countries or international organisations, and Article 218 TFEU sets out the procedure in accordance with which such agreements must be negotiated and concluded. Its relevant provisions read as follows: ‘1. Without prejudice to the specific provisions laid down in Article 207 [common commercial policy], agreements between the [EU] and third countries or international organisations shall be negotiated and concluded in accordance with the following procedure. 2. The Council shall authorise the opening of the negotiations, adopt negotiating directives, authorise the signing of agreements and conclude them. 3. The Commission … shall submit recommendations to the Council, which shall adopt a decision authorising the opening of negotiations and … nominating the [EU] negotiator … 4. The Council may address directives to the negotiator … 5. The Council, on a proposal from the negotiator, shall adopt a decision authorising the signing of the agreement … 6. The Council, on a proposal by the negotiator, shall adopt a decision concluding the agreement. 7. When concluding an agreement, the Council may, by way of derogation from paragraphs 5, 6 and 9, authorise the negotiator to approve on the [EU]’s behalf modifications to the agreement where it provides for them to be adopted by a simplified procedure or by a body set up by the agreement. The Council may attach specific conditions to such authorisation. 8. The Council shall act by a qualified majority throughout the procedure. However, it shall act unanimously [in specified circumstances]. 9. The Council, on a proposal from the Commission …, shall adopt a decision … establishing the positions to be adopted on the [EU]’s behalf in a body set up by an agreement, when that body is called upon to adopt acts having legal effects, with the exception of acts supplementing or amending the institutional framework of the agreement. 10. The European Parliament shall be immediately and fully informed at all stages of the procedure. 11. [This subparagraph contains the procedure for obtaining the opinion of the Court as to whether an agreement envisaged is compatible with the Treaties and the consequences of an adverse opinion.]’ 14. The first, second and sixth paragraphs of Article 263 TFEU provide: ‘The Court of Justice of the [EU] shall review the legality of legislative acts, of acts of the Council, of the Commission and of the European Central Bank, other than recommendations and opinions, and of acts of the European Parliament and of the European Council intended to produce legal effects vis-à-vis third parties. It shall also review the legality of acts of bodies, offices or agencies of the [EU] intended to produce legal effects vis-à-vis third parties. It shall for this purpose have jurisdiction in actions brought by a Member State, the European Parliament, the Council or the Commission on grounds of lack of competence, infringement of an essential procedural requirement, infringement of the Treaties or of any rule of law relating to their application, or misuse of powers. … The proceedings provided for in this Article shall be instituted within two months of the publication of the measure, or of its notification to the plaintiff, or, in the absence thereof, of the day on which it came to the knowledge of the latter, as the case may be.’ 15. Article 264 TFEU provides that, if the action is well founded, the Court of Justice is to declare the act concerned to be void and may, if it considers necessary, state which of the effects of the act which it has declared void are to be considered as definitive. 16. Article 335 TFEU provides: ‘In each of the Member States, the [EU] shall enjoy the most extensive legal capacity accorded to legal persons under their laws; it may, in particular, acquire or dispose of movable and immovable property and may be a party to legal proceedings. To this end, the [EU] shall be represented by the Commission. However, the [EU] shall be represented by each of the institutions, by virtue of their administrative autonomy, in matters relating to their respective operation.’ UN Fish Stocks Agreement 17. By Council Decision 98/414/EC, (3) the EU concluded the Agreement implementing the provisions of UNCLOS relating to the conservation and management of straddling stocks and highly migratory fish stocks (‘the UN Fish Stocks Agreement’). Article 3 of Decision 98/414 states: ‘Where the Community initiates a dispute settlement procedure as provided for by the [UN Fish Stocks Agreement], it shall be represented by the Commission. Before taking any action the Commission shall consult the Member States, taking into account binding procedural time limits.’ 18. ITLOS is amongst the jurisdictions before which such proceedings may be lodged. Statute and Rules of Procedure of the Court of Justice 19. Article 21 of the Statute of the Court of Justice of the European Union (‘the Statute’) states, inter alia, that an application before the Court ‘… shall be accompanied, where appropriate, by the measure of which the annulment is sought …’. 20. Articles 120 and 122 of the Rules of Procedure of the Court of Justice require an application to state, inter alia, the subject-matter of the dispute and the form of order sought, and to be accompanied, in particular, by the measure the annulment of which is sought. 21. Article 150 states that: ‘On a proposal from the Judge-Rapporteur, the Court may at any time of its own motion, after hearing the parties and the Advocate General, decide to rule by reasoned order on whether there exists any absolute bar to proceeding with a case.’ Background to the dispute 22. On 28 March 2013, ITLOS received a request for an advisory opinion from the Sub-Regional Fisheries Commission (‘the SRFC’), an intergovernmental organisation for fisheries cooperation established by the Convention of 29 March 1995 between Cape Verde, The Gambia, Guinea, Guinea-Bissau, Mauritania, Senegal and Sierra Leone. (4) The EU has concluded fisheries partnership agreements with five of the SRFC States and, with two of them, protocols granting fishing access in return for a financial contribution. 23. That request, registered as Case No 21, concerns questions relating essentially to the rights, obligations and liabilities of flag States, international agencies and coastal States in cases of illegal, unreported and unregulated (‘IUU’) fishing and with regard to ensuring the sustainable management of shared stocks and stocks of common interest. 24. On 24 May 2013, ITLOS invited the Contracting Parties to UNCLOS to present their written statements on the questions submitted by 29 November 2013 at the latest, and decided to hold oral proceedings. 25. Within the Council, the request for an advisory opinion was discussed on several occasions in two working parties: the Law of the Sea Working Party (‘COMAR’), essentially with regard to issues of jurisdiction and admissibility; and the Working Party on Internal and External Fisheries Policy (‘FISH’), with regard to the substance of the questions. During the initial discussions in COMAR between April and July 2013, the Commission indicated that its services were considering whether the EU should intervene in Case No 21 and undertook to consult the Council as appropriate. 26. On 5 August 2013, the Commission adopted an explicit decision (5) to submit written statements on behalf of the EU to ITLOS in Case No 21 and to participate in the oral proceedings (Article 1). It instructed its legal service to give effect thereto (Article 2). In that decision, recital 9 mentioned Article 335 TFEU as the legal basis for the Commission’s participation on behalf of the EU and recital 11 specified that, under the principle of sincere cooperation, the Commission should inform the Council via its competent working group. 27. During meetings of FISH on 12 September 2013 and COMAR on 17 September 2013, the Commission reaffirmed that it would submit written observations on behalf of the EU and argued that, in accordance with Article 335 TFEU, no prior approval by the Council was needed for the Commission to act. At the FISH meeting, the Council Presidency stated that it was necessary for the Council to approve the content of the submission made on behalf of the EU and invited the Commission to submit a draft written statement to the Council no later than the end of October 2013. 28. On 22 October 2013, the Commission sent the Council’s working parties a first working document indicating the main lines of the text to be submitted to ITLOS. The introductory paragraph to that document cited the decision of 5 August 2013 in which the Commission had decided to submit observations on behalf of the EU in Case No 21, reiterating that the Council’s working parties would be informed in accordance with the principle of sincere cooperation. The Commission also stressed that it looked forward to taking the fullest account of any suggestion and advice from the Member States in order to make the EU’s case more solid. 29. That document was examined by FISH and COMAR on 24 and 30 October 2013 respectively, when the Commission repeated that it would not submit any draft statement for prior approval by the Council. Revised versions of the document were discussed during FISH meetings on 15 and 22 November 2013. On 27 November 2013, on the basis of a report prepared by FISH, the Permanent Representatives Committee (‘Coreper’) discussed the matter. The Member States’ delegations and the Presidency insisted that it was for the Council, in accordance with its policy-making functions under Article 16 TEU, to decide whether the EU should submit observations and, if so, to endorse their content. Furthermore, if the Council could not endorse any position regarding such a submission on behalf of the EU, no EU position existed and no submission could be made. The Commission stressed that no Council approval was required and that it would submit a written statement to ITLOS. 30. On 29 November 2013, having taken account of comments received from a number of Member States, the Commission submitted the written statement on behalf of the EU and communicated a copy to the Council’s Secretariat via email. Between 18 and 29 November 2013, in their capacity as States Parties to UNCLOS, seven Member States had submitted their written statements to ITLOS. 31. Subsequently, after the lodging of the application in the present case, the Commission submitted a further written statement on 13 March 2014 in a second round of written proceedings and took part in the oral proceedings on 2 to 5 September 2014. ITLOS delivered its advisory opinion on 2 April 2015. Procedure, pleas and forms of order sought 32. In its application lodged on 10 February 2014, the Council advances two pleas in law. In its first plea, the Council contends that the task of deciding on the EU’s position in international judicial proceedings falls within its competence under Article 218(9) TFEU or, in any event, under Article 16(1) TEU. Accordingly, the Council submits that the Commission should have obtained its prior approval before transmitting a written statement on behalf of the EU to ITLOS. In its second plea, the Council accuses the Commission of having disregarded the duty of mutual sincere cooperation in Article 13(2) TEU. 33. The Council therefore asks the Court to ‘annul the Commission’s decision of 29 November 2013 to submit a “Written statement by the European Commission on behalf of the [EU]” to [ITLOS] in Case [No] 21’ and to order the Commission to pay the costs. It specifies that it does not request the annulment of the Commission’s statement. 34. The Commission asks the Court to reject the application and to order the Council to bear the costs. In the alternative, it requests the Court to maintain the effects of its decision until a new decision has been taken within a reasonable time. 35. The Austrian, Czech, Finnish, French, Greek, Lithuanian, the Netherlands and Spanish Governments have submitted statements in intervention in support of the Council. At the hearing on 14 April 2015, oral argument was presented by the representatives of the parties, the Czech, French, Netherlands, Spanish and United Kingdom Governments (the latter also supported the Council). On that occasion, the Council stated that, if the contested decision were annulled, it did not object to the Commission’s request for maintaining its effects until a new decision was adopted. At the hearing, issues relating to admissibility were also canvassed. Assessment 36. As I have stated, I consider the Council’s action to be inadmissible – for reasons, which I shall set out below, relating to the absence of a reviewable act challenged in good time. The admissibility of an action is a matter which it falls to the Court to examine of its own motion. (6) In principle, and in all logic, it must be examined before turning to the substance of the case. However, the issue has on occasion been bypassed where, although the admissibility of the action appeared doubtful, the Court considered it desirable to give a ruling on the merits. (7) 37. I do not propose such a course of action in the present case, as I consider that the rules on admissibility should be applied uniformly and not in a discretionary manner. However, I recognise that the parties wish to have a clear ruling on the important issue of the extent of their respective competences and obligations, as laid down by the Treaties, in a situation such as that which has given rise to the dispute. I shall therefore turn to those matters after having set out my reasoning, which I consider should prevail, on admissibility. Admissibility 38. The Council’s application is based on Articles 263 and 264 TFEU; it seeks review by the Court of the legality of an act of the Commission and a declaration that the act is void. Article 21 of the Statute and Articles 120 and 122 of the Court’s Rules of Procedure apply to such proceedings. 39. In its application, the Council seeks annulment of ‘the Commission’s decision of 29 November 2013’ to submit a written statement to ITLOS on behalf of the EU in Case No 21. The application is not accompanied by that ‘decision’ in any form, merely by evidence that the written statement was in fact submitted to ITLOS on 29 November 2013 and that the Council was informed of the submission on the same day. 40. However, it is the decision to submit a written statement that is exclusively and explicitly the act which the Council seeks to have annulled. The Council expressly states, in a footnote to the form of order sought in its application and again in its reply, that it does not seek the annulment of the Commission’s statement to ITLOS. 41. If a decision to submit a written statement was in fact taken by the Commission on 29 November 2013, it can only have been, it would appear, an implicit decision, since it has not been shown to have been expressed in any document or even oral utterance. 42. It seems clear to me, however, that no such decision was taken. On 5 August 2013, the Commission did take an explicit, reasoned decision to submit a written statement to ITLOS in Case No 21 and instructed its legal service to give effect to that decision. No further decision was required in order to submit that statement. Nor is there any evidence in the case-file that any such decision was taken, whether embodied in written form or not. There is no shred of an indication that the Commission decided on 29 November 2013 to do anything which it had not already decided to do in that earlier decision. There is only the unchallenged fact that the statement was indeed submitted, and an email from the Commission informing the Council of that statement. 43. If no decision was taken on 29 November 2013, it cannot be annulled – nor can its effects be maintained until a new decision is taken. The absence of a reviewable act is an absolute bar to proceeding with a case, within the meaning of Article 150 of the Court’s Rules of Procedure. (8) The same is true, a fortiori, of the absence of any act whatever. 44. The purpose of the procedure under Articles 263 and 264 TFEU is to obtain a finding that an act having legal effects is (or is not) void. Such a finding would be pointless, and a waste of judicial time, if it could itself have no tangible effect. The procedure is not designed to deliver solely an abstract statement of the law governing relations between the institutions, although of course such statements are likely to be an integral part of the reasoning necessary to rule on the validity of an act. (9) The annulment procedure cannot be used in order to obtain such a ruling in the absence of any act whose annulment is capable of affecting any legal position. Consequently, the institutions should examine attentively their procedural positions before submitting applications to the Court which may not meet the requirements of the Treaties, the Statute or the Rules of Procedure. 45. It seems to me, however, that the Council’s aim is to challenge the Commission’s decision of principle to submit a written statement to ITLOS without having first obtained the Council’s approval. That would appear to imply that it should have sought the annulment of the decision of 5 August 2013, in which that decision of principle was taken. 46. If the Council had done so, in accordance with the sixth paragraph of Article 263 TFEU, the two-month time-limit for bringing proceedings (‘extended on account of distance by a single period of 10 days’, pursuant to Article 51 of the Court’s Rules of Procedure) would have run from the day on which the decision of 5 August 2013 came to its knowledge. 47. According to the Commission, that decision was not notified or communicated to the Council. However, the Council was clearly and explicitly informed of it and of its essential content in the introductory paragraph of the Commission’s first working document of 22 October 2013, (10) which was discussed in the Council working group meetings of FISH and COMAR on 24 and 30 October 2013 respectively, by which time the Council necessarily had knowledge of the decision of 5 August 2013. Any possible doubt as to the Commission’s interpretation of that decision and how it intended to implement it also evaporated as a result of those meetings. The Commission’s position was clear and unambiguous: it would not submit any draft statement for prior approval by the Council. 48. The Council did not seek annulment of the decision of 5 August 2013 within 2 months and 10 days of the latest possible date on which it can have had knowledge of that decision, and did not lodge its application in the present proceedings until 10 February 2014. 49. None the less, I am well aware that both parties to the action earnestly desire a ruling on their respective competences and prerogatives, as do all the intervening Member States. I also acknowledge that such a determination of the law is of cardinal importance for the conduct of the EU’s external representation, and that the Court has in the past addressed comparable substantive issues even where there were strong indications of inadmissibility. I shall therefore turn now to examine the substantive issues which arise in circumstances such as those of the present case, but in doing so I shall not address my reasoning to the question whether the Commission’s decision to submit a written statement to ITLOS in Case No 21 should be annulled – a question which I consider cannot be answered in these proceedings, for the reasons I have given. Substance Preliminary remarks 50. I need first to address two preliminary aspects of this case: whether it is necessary to resolve whether the EU has exclusive or shared competence in relation to the questions raised before ITLOS; and the exact scope of the Council’s complaint. 51. First, as regards exclusive or shared competence: the Council accepts that the questions posed concern, at least in part, matters falling within the EU’s exclusive competence regarding conservation of marine biological resources under the Common Fisheries Policy within the meaning of Article 3(1)(d) TFEU. However, the Council maintains that the preliminary issue of whether ITLOS has jurisdiction to deliver advisory opinions falls entirely within the competence of the Member States. The Commission submits that the EU has exclusive competence in relation to the questions posed; and that the EU is also competent to take a position on the extent of ITLOS’ jurisdiction. 52. It is common ground that the EU, as a Contracting Party to UNCLOS, may express itself before ITLOS. (11) As the French Government has rightly pointed out, the central question in the present case is whether the Commission or the Council is competent to decide on the EU’s position before that tribunal. That question is unrelated to the question of the division of powers between the EU and the Member States; and the Council has raised no complaint on that score. I therefore suggest that the Court need not address the latter issue. 53. Second, what is the exact scope of the Council’s complaint? 54. Put as simply as possible: the Council requests the Court to decide which institution is entrusted, under the Treaties, with the task of deciding on (as distinct from expressing) the EU’s position before ITLOS in advisory proceedings. 55. The Council does not claim that its prerogatives include representing the EU before ITLOS or in any other international judicial proceedings. It accepts that that task falls to the Commission by virtue of Article 335 TFEU (read either alone or in conjunction with Article 17(1) TEU). (12) That is distinct, however, from the question of which institution is competent to decide on the position which is then expressed by the Commission on behalf of the EU before a judicial body such as ITLOS. 56. In the remainder of this Opinion, I shall first look in turn at whether (i) Article 218(9) TFEU applies to the submission of written statements in international judicial proceedings in which the EU has standing; and (if not) whether (ii) Article 16(1) TEU constitutes a legal basis for reserving competence to the Council to decide on the submission of such statements. I shall then examine the duty of sincere cooperation. Finally, I shall address the scope and limits of Article 335 TFEU, on which the Commission has relied as a legal basis for submitting the written statement to ITLOS. First part of the first plea: Article 218(9) TFEU 57. By the first part of its first plea, the Council claims that the Commission infringed its prerogatives under Article 218(9) TFEU according to which the Council is to establish, on a proposal from the Commission, the position to be adopted on the EU’s behalf in a body set up by an agreement when that body is called upon to adopt acts having legal effects. The Council submits that ITLOS, including when it is requested to deliver an advisory opinion, is a ‘body’ within the meaning of that provision and adopts acts having legal effects (even if those effects are not binding). Moreover, the Council maintains that, since the entry into force of the Treaty of Lisbon, Article 218(9) TFEU, unlike its predecessor Article 300(2) EC, no longer constitutes a lex specialis in relation to the procedure for the negotiation, signature and conclusion of international agreements, but should rather be read as a stand-alone provision. 58. The Commission contests the application of Article 218(9) TFEU to the EU’s interventions in international judicial proceedings. It interprets that provision as applying to rule-making bodies exercising treaty-making and/or quasi-legislative functions which are established by an international agreement in order to allow that agreement to be developed by taking a series of decisions within the framework of the agreement. The term ‘body’ in Article 218(9) TFEU does not cover bodies exercising judicial functions because such functions do not involve the creation of new rules. Moreover, the phrase ‘in a body’ clearly indicates that positions expressed by the EU before a court fall outside the scope of Article 218(9) TFEU. 59. I shall first examine the wording of Article 218(9) TFEU before turning to its drafting history, context and objectives. 60. Article 218(9) TFEU only applies where a position is to be adopted on the EU’s behalf ‘in a body set up by an agreement’ and, in principle, ‘when that body is called upon to adopt acts having legal effects’. 61. In my opinion, the first part of the Council’s first plea must fail because when the EU participates in international judicial proceedings, such as ITLOS advisory proceedings, it is not taking a position in the body (however it may be characterised) that has been called upon to settle disputes falling within its jurisdiction or deliver an opinion on purely interpretative questions. 62. In such circumstances, neither the EU nor any other party having standing to appear before such a body takes part in the formation that deliberates. Nor does it participate in the adoption of a judgment or any other type of judicial decision. Rather, a party expresses its position on the matter put to the body through (oral and/or written) submissions ‘to’ (or ‘before’) that body with the objective of influencing the outcome of the proceedings. 63. The rules of the World Trade Organisation (‘the WTO’) dispute settlement system helpfully illustrate the dividing line between the situation where the position on the EU’s behalf is taken ‘in’ a body (to which Article 218(9) TFEU applies) and the situation where it is not. Whereas all WTO Members, including the EU, are represented and take part in the decision-making processes of the Dispute Settlement Body (‘the DSB’), including when the DSB adopts panel and Appellate Body reports (so that they become legally binding), (13) they do not participate in the panels’ and the Appellate Body’s exercise of their (respective) jurisdiction. 64. This interpretation is consistent with the Court’s judgment in Case C‑399/12 (‘the OIV case’). The Court there held that Article 218(9) TFEU applies in the context of recommendations, relating to the Common Agricultural Policy, to be voted on at the General Assembly of the International Organisation of Vine and Wine (‘the OIV’), despite the fact that the EU (unlike its Member States) cannot formally participate in the governing body of the OIV because it is not an OIV Member. The Court specifically recalled its case-law according to which, where an area of law falls within a competence of the EU, the fact that the EU does not take part in the international agreement in question does not prevent it from exercising that competence by establishing, through its institutions, a position to be adopted on its behalf in the body set up by that agreement, in particular through the Member States which are party to that agreement acting jointly in its interest. (14) The EU’s position concerning the recommendations to be adopted by the OIV General Assembly was thus to be expressed ‘in’ that body by the Member States acting collectively in the EU’s interest. 65. Whilst the phrase ‘when that body is called upon to adopt acts having legal effects’ provides context for reading the phrase ‘in a body set up by an agreement’ (because it makes it clear that the scope of Article 218(9) TFEU is confined to situations in which that body adopts acts having legal effects), it cannot be used to argue that Article 218(9) TFEU also applies when the EU participates in international judicial proceedings. I accept that judgments and other judicial decisions may very well be ‘acts having legal effects’. Whilst in Treaty terminology, the word ‘act’ is not typically used to designate the outcome of judicial proceedings, (15) the Court itself has already used the term ‘acte juridictionnel’ to describe a court decision. (16) Moreover, whilst an advisory opinion does not have exactly the same legal effects as a binding judicial decision on the interpretation and application of an international agreement (or any other rule of international law which is part of the applicable law governing a dispute and for which jurisdiction is established), I agree with the Commission that Article 218(9) TFEU does not specify that the legal effects of an act must be binding. That was also the position of the Court in the OIV case where it accepted that (non-binding) OIV recommendations could influence decisively the content of EU legislation regulating the common organisation of the market in wine markets and that such recommendations, in particular by reason of their incorporation into EU law, had legal effects. (17) I would therefore be prepared to consider that an advisory opinion of ITLOS is capable of constituting an ‘act having legal effects’ because it contains an interpretation by the body which has authority to do so and informs the meaning of the obligations assumed under UNCLOS and other agreements which ITLOS has jurisdiction to interpret, such as the UN Fish Stocks Agreement. 66. However, this wide reading of ‘acts having legal effects’, read in isolation, cannot alter the meaning of ‘in a body set up by an agreement’ so as to include situations in which the EU does not participate in a body’s adoption of such acts. 67. I also note that Article 218(7) TFEU allows, ‘by way of derogation’ from Article 218(9), for further simplification of the procedure, by giving the Council power to authorise the negotiator to approve, on the EU’s behalf, modifications to the agreement where it provides for them to be adopted by a simplified procedure or by a body set up by the agreement. 68. That derogation makes good sense if the acts referred to in Article 218(9) TFEU are to be negotiated by the Contracting Parties ‘in’ the body set up by the agreement. But the context is clearly one of negotiating and approving texts that will have legal effects, rather than that of international judicial proceedings in which such acts are interpreted. 69. The reading of ‘in a body’ which I propose is also confirmed by the drafting history of Article 218(9) TFEU. 70. That history shows that Article 218(9) TFEU was included because many bilateral or multilateral international agreements, through which the EU assumed obligations vis-à-vis third States or other international organisations, established bodies entrusted with implementing the agreements and empowered to adopt decisions having (binding) legal effects for the Contracting Parties. An early example is the EEC-Turkey Association Council, (18) whose decisions concerning the rights of Turkish workers are, according to the Court, capable of having direct effect within the EU legal order. (19) The status of those decisions is therefore generally assimilated to that of the underlying international agreements; and they may consequently be considered as an additional source of EU law. (20) 71. Before the entry into force of the Treaty of Amsterdam, no specific Treaty provision established a procedure for deciding on the (then) EC’s position in such decision-making bodies. Unless ad hoc arrangements were adopted between the institutions, the procedure in Article 228 EC for concluding international agreements was typically used. (21) 72. This situation was considered unsatisfactory, because the procedure for concluding international agreements required prior assent or prior consultation of the European Parliament and was therefore rather elaborate. The Commission therefore suggested using a simplified procedure, limiting the involvement of the European Parliament, so as to enable more effective EU participation in decision-making bodies created by international agreements. (22) The Treaty of Amsterdam partly achieved this objective by amending Article 228 EC (which became Article 300 EC) and adding a second subparagraph to Article 300(2) EC (which is the predecessor to Article 218(9) TFEU). This set up a simplified procedure, in which no assent or consultation of the European Parliament was required for the Council to decide on ‘the positions to be adopted on behalf of the Community in a body set up by an agreement… when that body was called upon to adopt decisions having legal effects …’. However, the material scope of the second subparagraph of Article 300(2) EC was confined to association agreements concluded by the EU. Furthermore, the consultation or assent of the European Parliament was still required when association councils were called upon to adopt ‘decisions supplementing or amending the institutional framework of the agreement’. 73. The Treaty of Nice extended the material scope of the provision, so that the simplified procedure could be used to decide on the position to be adopted by the Community in bodies set up by any international agreement. That remains the current situation. 74. I cannot therefore accept that Article 218(9) is a stand-alone provision, as the Council suggests. Its drafting history clearly shows that it forms an integral part of the rules applicable to the conclusion of international agreements. Its purpose remains identical to that of Article 300(2) EC. It enables the EU to use a simplified procedure to take part in the decision-making process of bodies set up under an international agreement that are called upon to adopt acts having legal effects, unless the acts in question supplement or amend the institutional framework of the agreement (in which case the European Parliament’s prior involvement is required). (23) 75. The reading that I propose on the basis of both the text and the drafting history of Article 218(9) TFEU is, thus, confirmed by the overall scheme of that provision. 76. Finally, I draw attention to certain legal and practical consequences that would follow from concluding that Article 218(9) TFEU does apply to the submission of statements in international legal proceedings. 77. First, since on that reading, provisions currently found in EU secondary legislation which authorise the Commission to initiate dispute settlement procedures after merely consulting or informing Member States would no longer be permissible. 78. Amongst the provisions thereby invalidated would be Article 3 of Decision 98/414 (24) and Article 13 of Council Regulation (EC) No 3286/94, as amended (the Trade Barriers Regulation: ‘the TBR’). (25) More generally, the discretion that the Commission currently enjoys to lodge WTO proceedings and to participate therein would obviously be fettered. (26) 79. Second, since judicial proceedings are subject to the observance of strict procedural time-limits (unlike the situation that normally pertains when negotiating acts to be adopted in decision-making bodies), there is a risk that the Council may not manage to reach a qualified majority (27) regarding the EU’s position rapidly enough to enable action to be taken on the EU’s behalf. That would tend to reduce the EU’s ability to influence the interpretation and application of international agreements to which it is a signatory. That result would appear to run counter to the Court’s existing approach to the EU’s involvement as an international actor, exemplified in the OIV case. (28) 80. I conclude that, because the EU does not participate in the decision-making process in international judicial proceedings, Article 218(9) TFEU is not intended to cover the situation in which the EU submits written or oral statements in such proceedings. It is therefore unnecessary to consider in greater detail the remaining conditions for the application of Article 218(9) TFEU. (29) I therefore propose that the first part of the Council’s first plea be dismissed. Second part of the first plea: Article 16(1) TEU 81. The Council contends that, pursuant to Article 16(1) TEU, it is responsible for defining the EU’s policies. The Commission’s function, under Article 17 TEU, is to execute those policies once defined and, in that context, to ensure (where necessary) the EU’s external representation. Although the Council accepts that it is for the Commission to represent the EU before ITLOS in accordance with Article 335 TFEU, which is a specific reflection of Article 17(1), sixth sentence, TEU, it falls within the Council’s exclusive prerogatives to determine whether the EU should express a position and, if so, to settle the content or at least the broad lines of such a position. As a result, by submitting written statements to ITLOS without the Council’s approval, the Commission infringed the Council’s prerogatives under Article 16(1) TEU. The Commission responds that the Council disregards the distinction between external representation for political purposes (to which the sixth sentence of Article 17(1) TEU applies and in relation to which Article 16(1) may be relevant if no EU policy has yet been defined) and the EU’s representation before an international tribunal (to which the second sentence of Article 17(1) TEU applies in connection with Article 335 TFEU). 82. As I see it, whether this part of the Council’s first plea is successful depends, first, on whether deciding on the EU’s position in international judicial proceedings is a question of policy-making and, second, on whether carrying out such functions is ‘laid down in the Treaties’. 83. As regards the first of those conditions, the Council, supported by some of the intervening Member States, contends that the decision to submit a written statement to ITLOS was a political decision. The EU was under no obligation to participate in the proceedings. Since the correct answer to the request for an advisory opinion cannot be objectively and neutrally deduced from the relevant texts (in particular, UNCLOS), any submissions by the EU involve political choices, including as regards the preliminary issues as to the general jurisdiction of ITLOS and the admissibility of the request for an advisory opinion. 84. I accept that any act of an EU institution, especially in external relations, can have political consequences. Likewise, submissions made in (international) judicial proceedings are, by their very nature, intended to influence the decision resulting from those proceedings. Depending on the rules governing the international judicial proceedings, a party having standing to intervene may, for example, question jurisdiction, express doubts as to the admissibility of some or all of the questions raised, suggest answers to some or all of those questions, or focus on one argument rather than another. 85. However, as I see it, this does not necessarily mean that submissions made in international judicial proceedings fall within the Council’s ‘policy-making functions’ under Article 16(1) TEU. (30) 86. In the present case, the Council had already exercised its ‘policy-making’ role within the framework of UNCLOS before the Commission submitted a written statement to ITLOS. 87. First, the EU became a party to both UNCLOS and the fisheries partnership agreements with five of the SRFC States described above in accordance with procedures in which the Council played to the full the role reserved to it by the Treaties. (31) It has consequently, in particular, agreed to be bound by their dispute settlement provisions (32) and, more generally, by arrangements concerning the jurisdiction to interpret them. Under Article 216(2) TFEU, these international agreements are binding on the EU and form an integral part of EU law. (33) 88. Second, the EU has adopted a wide range of internal rules which cover the substantial aspects of those agreements. In particular, as the Commission has pointed out, provisions of Council (EC) Regulation No 1005/2008 relevant to IUU fishing, such as those defining ‘illegal fishing’, are constructed upon the basis of pre-existing international rules. (34) 89. These are the ‘policy-making’ choices which the Council has made in accordance with Article 16(1) TEU and the specific procedural rules in the Treaties which protect the Council’s prerogatives with respect to the negotiating, signing and conclusion of international agreements. 90. The subsequent clarification and application of existing commitments of the EU under international law through international judicial proceedings, including ITLOS advisory proceedings, represent in most cases merely the consequences of the Council’s earlier ‘policy’ choices and thus do not require defining a new policy. 91. Although that is the situation here, I would be reluctant to accept that this will always be the case. Thus, it is not unforeseeable that, in the context of international judicial proceedings in which the EU has standing, the EU might need to take a position on an issue that is not yet covered either by existing EU commitments under international law which are to be interpreted (and applied) in those proceedings or by any other rules of international law on which the EU has already taken a position. In such circumstances, the Council’s prerogatives would need to be respected. However, it seems to me that the ITLOS proceedings at issue here, and the submissions made by the EU, concerned matters arising within the operation of UNCLOS and the UN Fish Stocks Agreement. 92. As regards the second condition on which this part of the Council’s plea depends, it seems to me that, in any event, the Council cannot rely on the second sentence of Article 16(1) TEU in isolation from any other provision in the Treaties. 93. I read the phrase ‘as laid down in the Treaties’ as meaning necessarily that the Council’s policy-making functions cannot be exercised without a separate provision (or, where relevant, a series of provisions) in the Treaties creating that power, thus respecting the principle of conferral. 94. I do not think, however, that the absence of another provision in the Treaties laying down the role of the Council with respect to the adoption of specific instruments through which the EU acts externally – and through which EU policies may be given effect – is an obstacle to the Council exercising its prerogatives under Article 16(1) TEU to decide on EU policies in external relations where no sufficient policy yet exists. If that were the case, the EU might be seriously hampered in its efforts to act effectively. In fact, the Treaties do not contain separate provisions on many instruments of external action through which the EU, having international legal personality, may act. (35) Effective external action by the EU must nevertheless be able to use a variety of instruments and in so doing, the Council’s prerogatives must be respected. 95. I add that, where the Treaties have laid down the procedural rules within which the Council is to act with respect to a particular instrument of EU external action, the Council cannot use Article 16(1) TEU to undermine those rules. (36) The Court has confirmed that it follows from Article 13(2) TEU that the rules regarding the manner in which the EU institutions are to arrive at their decisions are laid down in the Treaties and are not at the disposal of the Member States or of the institutions themselves. (37) 96. That said, as I have already explained above, deciding on the EU’s position in international judicial proceedings did not here require the Council to exercise these prerogatives further. 97. I conclude that the second part of the Council’s first plea should be dismissed. Second plea: Article 13(2) TEU 98. By its second plea, the Council contends that the Commission’s course of action clearly violates the principle of sincere cooperation set out in the second sentence of Article 13(2) TEU. The Council submits that the Commission failed: (i) to present, under Article 218(9) TFEU, a proposal for a Council decision establishing the EU’s position to be expressed before ITLOS, (ii) to cooperate with the Council as regards establishing the content of the statement to be made and (iii) to take account of the Council’s view that, in the absence of an EU position agreed by the Council, no written statement could be submitted to ITLOS, by announcing at the Coreper meeting of 27 November 2013 that it would proceed with submitting the statement and then doing exactly that two days later. For its part, the Commission stresses that it kept the Council fully informed throughout and, so far as possible, took into account detailed comments from individual Member States when preparing the written statement that it submitted to ITLOS. 99. The duty of mutual sincere cooperation under the second sentence of Article 13(2) TEU applies within the limits of the powers conferred on each institution by the Treaties. It is therefore not such as to add to or reduce those powers. (38) Thus, where the Treaties provide that the Commission is competent to act without the Council’s approval, the Commission’s duty to cooperate with the Council cannot extend as far as precluding the Commission from so acting. 100. As I see it, the first and third parts of the Council’s second plea are predicated on the assumption that, on a correct reading of Article 218(9) TFEU, the Commission required the Council’s prior authorisation in order to lodge written submissions in the ITLOS advisory proceedings and no level of consultation or sincere cooperation could remedy that breach. However, if — as I have concluded — Article 218(9) TFEU did not require the Commission to obtain such prior authorisation, the Commission cannot have failed in its duty of sincere cooperation by not taking steps to obtain it. 101. As regards the second part, I consider that the facts available show that, during the preparation of the statement, the Commission did, indeed, consult the Member States and the Council, and took their comments into account (including those relating to ITLOS’s jurisdiction) (39) before lodging the written statement on behalf of the EU within the time-limit specified by ITLOS. 102. For these reasons, I therefore conclude that the second plea should also be dismissed. Additional issue: Article 17(1) TEU and Article 335 TFEU 103. If Article 16(1) TEU and Article 218(9) TFEU do not apply, the Council’s application should be dismissed: at least under those provisions, the Council had already taken the relevant position; and it was not competent to decide on the submission of the written statement at issue. But does that conclusion also imply that the decision to submit that statement was properly based, as the Commission contends, on Article 335 TFEU (read together with Article 17(1) TEU) and therefore fell within the Commission’s competence? Or, if Article 335 TFEU does not apply, was the Commission nevertheless competent, under Article 17(1) TEU, to take that decision? I shall address those questions now. 104. As I see it, given that the relevant EU position already exists, it is then the task of the Commission, pursuant to Article 17(1) TEU, to execute that position by giving effect to it and representing that position on the international scene (including in international judicial proceedings). After all, it is the task of the Commission to promote the general interest of the EU and to ensure the application of the Treaties and of measures adopted by the institutions pursuant to them. (40) 105. If Article 335 TEU is simply the specific expression, in respect of representing the EU, of the general principle laid down in Article 17(1) TEU, Article 335 TFEU, read together with Article 17(1) TEU, would give the Commission competence to decide on written statements such as those at issue in this case. 106. The Court in Reynolds Tobacco has already accepted that Article 282 EC (now Article 335 TFEU) is, despite the phrase ‘[i]n each of the Member States’ in that provision, ‘… the expression of a general principle and states that the Community has legal capacity and is, to that end, to be represented by the Commission’. (41) The Court there relied also on the fact that the Commission must ensure that the Treaty provisions and the measures taken pursuant thereto are applied (Article 211 EC, now the second sentence of Article 17(1) TEU). As a result, the Court dismissed an appeal against a judgment of the Court of First Instance (42) which had declared inadmissible the annulment proceedings lodged by cigarette manufacturers against a Commission decision to initiate proceedings before the courts of a third State (the USA) concerning these manufacturers’ alleged involvement in a system of smuggling in the territory of the European Community. The Commission had commenced those US proceedings without prior approval by the Council. (43) 107. In Reynolds Tobacco, the Commission’s competence under those provisions was thus to decide, without the Council’s prior approval, to commence proceedings before the courts of a third State and to define the scope and the substance of the legal action brought. The Court appeared to accept that all those elements constitute ‘representation’ of the EU by the Commission. As I see it, that necessarily implies that the Court did not regard the role of the Commission, as one of the EU’s main political institutions, to be comparable to that of a lawyer (the Commission) representing his client (the EU). 108. The Court made it clear that the EU’s representation by the Commission exists to give effect to the legal personality of the EU by acting in legal proceedings. Unlike the Council and the Austrian Government, I see no valid reason why the extent of the Commission’s competence thus to represent the EU should differ depending on the forum before which the EU participates as a party to the judicial proceedings. 109. Nor am I convinced by the Council’s contention that, contrary to the situation in Reynolds Tobacco, the written statements submitted by the Commission to ITLOS do not pertain to its role as ‘guardian of the Treaties’ under the second sentence of Article 17(1) TEU. 110. True, in Reynolds Tobacco the civil action in the United States sought essentially to obtain compensation from the tobacco companies in respect of their alleged participation in smuggling cigarettes within the European Community, thereby eluding the payment of custom duties and VAT. The Commission was therefore acting to protect the integrity of the customs union and the financial interests of the European Community. (44) 111. However, the fact that, when submitting written statements to ITLOS in Case No 21, the Commission did not seek to obtain similar immediate practical consequences for the functioning of the internal market and the budget of the EU does not mean that it was not acting in accordance with its mandate under the second sentence of Article 17(1) TEU. 112. First, whilst ITLOS advisory proceedings are necessarily different in nature from a civil action seeking the payment of financial compensation for loss, both may generate outcomes that have consequences for the EU. Both may therefore require the Commission to take ‘appropriate initiatives’ and to ‘promote the general interests of the [EU]’. 113. Second, the Court has already confirmed that the Commission’s remit as ‘guardian of the Treaties’ includes ensuring the correct implementation by a third State of the obligations it has assumed under an agreement concluded with the EU, using the means provided for by the agreement or by the decisions taken pursuant thereto, (45) including the procedure for settling disputes. (46) Consistent therewith, I see no reason of principle for excluding representation in international judicial proceedings from the Commission’s competence. 114. Third, the questions submitted to ITLOS for its advisory opinion concerned the interpretation of an international agreement concluded by the EU (UNCLOS), the EU’s bilateral fisheries agreements with third States (in particular, with five members of the SRFC) and the UN Fish Stocks Agreement. All these international instruments form an integral part of the EU legal order and are binding on the institutions. Moreover, the specific questions put related to the issue of concurrent coastal State jurisdiction and flag State jurisdiction to secure sound conservation of marine biological resources, particularly in the context of the fight against IUU fishing – an area in which the EU has adopted specific secondary legislation on the basis of pre-existing international rules. (47) The fact that, in the course of such proceedings, additional aspects may be raised relating to general issues (here, the jurisdiction of ITLOS to give advisory opinions and the admissibility of the questions referred) is inherent in any legal proceedings. 115. I therefore consider that Article 335 TFEU, taken in conjunction with the second sentence of Article 17(1) TEU, provided the Commission with an adequate legal basis for submitting written and oral statements to ITLOS on behalf of the EU. Conclusion 116. In light of all the foregoing considerations and of Articles 138 and 140 of the Court’s Rules of Procedure concerning the allocation of costs, I propose that the Court should: – dismiss the action of the Council of the European Union; – order the Council to pay its own costs and those of the European Commission; – order the Austrian, Czech, Finnish, French, Greek, Lithuanian, Netherlands, Portuguese, Spanish and the United Kingdom Governments to bear their own costs. 1 – Original language: English. 2 – Done at Montego Bay, 10 December 1982, 1833 UNTS 3. UNCLOS entered into force on 16 December 1994. See Council Decision 98/392/EC of 23 March 1998 concerning the conclusion by the European Community of the United Nations Convention of 10 December 1982 on the Law of the Sea and the Agreement of 28 July 1994 relating to the implementation of Part XI thereof (OJ 1998 L 179, p. 1). 3 – Council Decision 98/414/EC of 8 June 1998 on the ratification by the European Community of the Agreement for the implementing of the provisions of [UNCLOS] relating to the conservation and management of straddling stocks and highly migratory fish stocks (OJ 1998 L 189, p. 14). 4 – The 1995 Convention signed in Dakar was amended on 14 July 1993 at Praia, Cape Verde. The text of the Convention, as amended, is available only in French and may be consulted at: http://spcsrp.org/Documents. 5 – Decision C(2013) 4989 final (not published; ‘the decision of 5 August 2013’). 6 – See, for example, judgment in Spain v Council, C‑141/05, EU:C:2007:653, paragraph 29. 7 – See, for example, judgment in France v Commission, C‑233/02, EU:C:2004:173, paragraph 26; see also the considerations set out by Advocate General Jacobs in his Opinion in Italy v Commission, C‑301/03, EU:C:2005:550, points 61 to 81. 8 – Order in Brüggemann v ESC, 248/86, EU:C:1987:429, paragraph 6. 9 – Compare, in a different context, the rationale underlying the line of case-law based on the judgment in Foglia, 104/79, EU:C:1980:73. 10 – Which reads: ‘By Decision C(2013)4989 of 5 August 2013 the Commission decided to submit observations on behalf of the [EU] on the request from a sub-regional entity … for an advisory opinion to [ITLOS]. Under the principle of loyal cooperation the competent working group of the Council is to be informed.’ 11 – See points 8 and 9 above. 12 – In contrast, a number of intervening Member States argue that Article 335 TFEU is not applicable in the current case, notably because the wording of that article only confers on the Commission the task of representing the EU in certain legal proceedings brought before the courts of the Member States. 13 – See Articles IV:2 and IV:3 of the Agreement Establishing the World Trade Organization and Articles 16(4) and 17(14) of the Understanding on Rules and Procedures Governing the Settlement of Disputes. 14 – Judgment in Germany v Council, C‑399/12, EU:C:2014:2258, paragraph 52 and case-law cited. 15 – The term ‘act’ (rather than ‘decision’) is also used in other language versions of Article 218(9) TFEU that I have examined (see, in particular, ‘acte’ in the French, ‘actos’ in the Spanish, ‘Akte’ in German, ‘akty’ or ‘actów’ in Polish, ‘atos’ in Portuguese, ‘säädoksiä’ in Finnish, ‘akter’ in Swedish); and (as in English) is not used in those languages when the provisions of the Treaties mention courts or tribunals. See, for example, Article 67(4) TFEU: ‘… the principle of mutual recognition of judicial and extrajudicial decisions in civil matters’; Article 256(1) TFEU: ‘Decisions given by the General Court …’ and Article 267 TFEU: ‘Where any such question is raised in a case pending before a court or tribunal of a Member State against whose decisions there is no judicial remedy …’. 16 – See, for example, judgments in Köbler, C‑224/01, EU:C:2003:513, paragraph 26, and European Community, C‑199/05, EU:C:2006:678, paragraph 33. 17 – See judgment in Germany v Council, C‑399/12, EU:C:2014:2258, paragraphs 63 and 64. 18 – As is the pattern with Association Agreements, the EEC-Turkey Association Council is composed of representatives of both the European Union and Turkey. Article 22 of the EEC-Turkey Association Agreement (OJ 1973 C 113, p. 2) confers a ‘power of decision’ on the Association Council for the attainment of the objectives laid down by that agreement. 19 – See judgment in Sevince, C‑192/89, EU:C:1990:322, paragraphs 17 to 24. 20 – See, inter alia, Dashwood, A., ‘External Relations Provisions of the Amsterdam Treaty’, 35 CMLRev. (1998), p. 1019, at 1026, and Martenczuk, B., ‘Decisions of Bodies Established by International Agreements and the Community Legal Order’, in Kronenberger, V., (ed.), The European Union and the International Legal Order: Discord or Harmony?, TMC Asser Press, The Hague, 2001, p. 141, at 157. 21 – The Court therefore treated acts to be adopted by such bodies as envisaged agreements within the meaning of what is now Article 218(11) TFEU, thus enabling it to review their compatibility with the Treaties prior to their adoption. See Opinion 2/92, EU:C:1995:83, paragraph II-8, in relation to the Third Revised Decision on national treatment of the Council of the Organisation for Economic Cooperation and Development. See also Opinion of Advocate General Cruz Villalón in Germany v Council, C‑399/12, EU:C:2014:289, point 44. 22 – See paragraph 26 of the Commission’s opinion ‘Reinforcing political union and preparing for enlargement’ (COM(96) 90 final, 28 February 1996) on holding the 1996 Intergovernmental Conference for amending the Treaties which noted that the EU was ‘ill-equipped to conduct negotiations in international organisations and take part in their activities, as it is increasingly called upon to do. … The [EU]’s negotiating position is weakened in many cases’. The Commission therefore proposed that ‘the Treaty should include provisions explicitly designed to enable the EU to speak with one voice and thus defend all relevant interests more effectively’. 23 – See, to that effect, Opinion of Advocate General Kokott in United Kingdom v Council, C‑81/13, EU:C:2014:2114, point 97. 24 – See point 17 above. 25 – Council Regulation No 3286/94 of 22 December 1994 laying down Community procedures in the field of common commercial policy in order to ensure the exercise of the Community’s rights under international trade rules, in particular those established under the auspices of the World Trade Organisation (OJ 1994 L 349, p. 71), as last amended by Regulation (EU) No 37/2014 of 15 January 2014 of the European Parliament and of the Council amending certain regulations relating to the common commercial policy as regards the procedures for the adoption of certain measures (OJ 2014 L 18, p. 1). Under Article 13, the Commission is, inter alia, empowered, following a complaint by EU enterprises, industries or their associations, to adopt decisions relating to the initiation and conduct of WTO dispute settlement proceedings, after having informed the Member States. 26 – According to the WTO’s website (https://www.wto.org/english/tratop_e/dispu_e/dispu_by_country_e.htm), the EU has acted (as of 16 June 2015) as a complainant in 95 cases, as a respondent in 82 cases and intervened as a third party in 149 cases. 27 – Article 218(8) TFEU specifies that the Council must act by qualified majority throughout the procedure. The same is of course true of Article 16(3) TEU. 28 – Judgment in Germany v Council, C‑399/12, EU:C:2014:2258. 29 – Touched on briefly at point 65 above. 30 – I note in this regard that the Council appears to accept (at least for the present) that such choices can validly be made by the Commission when initiating dispute settlement proceedings in compliance with the procedural requirements laid down in the TBR and in Article 3 of Decision 98/414 (relating to the UN Fish Stocks Agreement), without infringing Article 16(1) TEU. The Council has not explained why ITLOS advisory proceedings (or any other international judicial proceedings for that matter) should be regarded differently. 31 – See point 13 above. When ratifying UNCLOS on behalf of the EU, the Council relied on, inter alia, Article 113 EC (common commercial policy) and Article 228(2) and (3) EC (conclusion of international agreements). The Council also relied on Article 300(2) and (3) EC (conclusion of international agreements) when it adopted the most recent Council regulations ratifying the fisheries agreements with the SRFC States. The earlier regulations were based solely on the Treaty provisions relating to the Common Fisheries Policy. 32 – The EU has not yet chosen one or more of the means for the settlement of disputes concerning the interpretation or application of UNCLOS as laid down in Article 287 UNCLOS. In accordance with Article 7 of Annex IV to UNCLOS, that means that the EU is deemed to have accepted the arbitration procedure. 33 – See, for example, judgment in Air Transport Association of America and Others, C‑366/10, EU:C:2011:864, paragraph 73. 34 – In accordance with Article 30 of Council Regulation (EC) No 1005/2008 of 29 September 2008 establishing a Community system to prevent, deter and eliminate illegal, unreported and unregulated fishing, amending Regulations (EEC) No 2847/93, (EC) No 1936/2001 and (EC) No 601/2004 and repealing Regulations (EC) No 1093/94 and (EC) No 1447/1999, the Commission has adopted an EU list of IUU vessels (regularly revised) which is based on the lists established by Regional Fisheries Management Organisations (‘RFMO’): see Commission Regulation (EU) No 486/2010 of 28 May 2010 establishing the EU list of vessels engaged in illegal, unreported and unregulated fishing (OJ 2010 L 131, p. 22). The EU has also implemented RFMO measures concerning some States: see, for example, Council Regulation (EC) No 826/2004 of 26 April 2004 prohibiting imports of Atlantic blue-fin tuna (Thunnus thynnus) originating in Equatorial Guinea and Sierra Leone and repealing Regulation (EC) No 2092/2000 (OJ 2004 L 127, p. 19), which implements the recommendations of the International Commission for the Conservation of Atlantic Tunas (ICCAT), to which the EU is a Contracting Party. 35 – See also my Opinion in Joined Cases Parliament and Commission v Council, C‑103/12 and C‑165/12, EU:C:2014:334 (‘Venezuelan fisheries’), points 107 and 108. 36 – Similarly the European Parliament, which, in accordance with Article 14(1) TEU, ‘… exercises functions of political control and consultation as laid down in the Treaties’, cannot rely on that expression of its competence to expand its role with respect to international agreements for which Article 218 TFEU provides. See, in that regard, judgment in Parliament v Council, C‑658/11, EU:C:2014:2025 (‘Mauritius transfer of suspected pirates’), paragraphs 54 and 55. 37 – See judgments in Parliament v Council, C‑133/06, EU:C:2008:257 (‘refugee status’), paragraph 54, and Commission v Council, C‑28/12, EU:C:2015:282 (‘double mixity case’), paragraphs 41 and 42. 38 – Judgment in Parliament v Council, C‑48/14, EU:C:2015:91 (‘radioactive substances case’), paragraphs 57 and 58. 39 – See further points 103 to 115 below as regards the scope and extent of the Commission’s powers under Article 335 TFEU. 40 – See also judgment in Reynolds Tobacco and Others v Commission, C‑131/03 P, (‘Reynolds Tobacco’), EU:C:2006:541, paragraph 94. 41 – Judgment in Reynolds Tobacco and Others v Commission, C‑131/03 P, EU:C:2006:541, paragraph 94. 42 – Judgment in Philip Morris International v Commission, T‑377/00, T‑379/00, T‑380/00, T‑260/01 and T‑272/01, EU:T:2003:6. 43 – The Court was fully aware of that fact: the Council had specifically drawn attention to it in its statement in intervention in support of the Commission. 44 – See judgment in Philip Morris International v Commission, T‑377/00, T‑379/00, T‑380/00, T‑260/01 and T‑272/01, EU:T:2003:6, paragraphs 1 to 3. 45 – Judgment in C.A.S. v Commission, C‑204/07 P, EU:C:2008:446, paragraph 95 (concerning the Association Agreement with Turkey) and order in Mugraby v Council and Commission, C‑581/11 P, EU:C:2012:466, paragraph 68 (concerning the Euro-Mediterranean Agreement establishing an Association between the European Community and its Member States, of the one part, and the Republic of Lebanon, of the other part, signed in Luxembourg on 17 June 2002 and approved on behalf of the European Community by Article 1(1) of Council Decision 2006/356/EC of 14 February 2006 (OJ 2006 L 143, p. 1)). 46 – See judgment in Kaufring and Others v Commission, T‑186/97, T‑187/97, T‑190/97 to T‑192/97, T‑210/97, T‑211/97, T‑216/97 to T‑218/97, T‑279/97, T‑280/97, T‑293/97 and T‑147/99, EU:T:2001:133, paragraph 270. 47 – See, for example, point 88 above.

Judgment of the Court (Fifth Chamber) of 9 March 1995. - Fazenda Pública and Ministério Público v Américo João Nunes Tadeu. - Reference for a preliminary ruling: Supremo Tribunal Administrativo - Portugal. - Motor vehicle tax - Internal taxation - Discrimination. - Case C-345/93. European Court reports 1995 Page I-00479 Summary Parties Grounds Decision on costs Operative part Keywords ++++ 1. Free movement of goods ° Customs duties ° Charges having an equivalent effect ° Definition ° Motor vehicle tax applicable to domestic and imported vehicles alike ° Excluded ° Internal taxation (EEC Treaty, Arts 9, 12 and 95) 2. Tax provisions ° Internal taxation ° Registration tax for second-hand vehicles ° Rules resulting in higher rate for imported vehicles than for vehicles sold on the domestic market ° Incompatible with Article 95 of the Treaty (EEC Treaty, Art. 95) Summary 1. A motor vehicle tax applied without distinction to vehicles assembled or manufactured in the Member State where it is levied and to both new and used imported vehicles is not a customs duty or a charge having an effect equivalent thereto within the meaning of Articles 9 and 12 of the Treaty, since it forms part of a general system of internal charges imposed on categories of products in accordance with an objective criterion. Such taxes constitute, on the contrary, internal taxation within the meaning of Article 95 of the Treaty. 2. It is incompatible with Article 95 of the Treaty for a Member State to levy on second-hand cars from other Member States a tax which, calculated without taking the vehicle' s actual depreciation into account, exceeds the residual tax incorporated in the value of similar second-hand motor vehicles already registered in the national territory, which, having been taxed at the time of such registration, are not taxed when sold second-hand. Parties In Case C-345/93, REFERENCE to the Court under Article 177 of the EEC Treaty by the Tax Section of the Supremo Tribunal Administrativo (Portugal) for a preliminary ruling in the proceedings pending before that court between Fazenda Pública, Ministério Público and Américo João Nunes Tadeu on the interpretation of Articles 9, 12 and 95 of the EEC Treaty, THE COURT (Fifth Chamber), composed of: J.C. Moitinho de Almeida, Judge, acting as President of the Fifth Chamber, D.A.O. Edward and J.-P. Puissochet (rapporteur), Judges, Advocate General: F.G. Jacobs, Registrar: L. Hewlett, Administrator, after considering the written observations submitted on behalf of: ° Américo João Nunes Tadeu, Abogado ° the Portuguese Government, by Luis Fernandes, Director of the Legal Service, General Directorate of the European Communities at the Ministry of Foreign Affairs, and Maria Luisa Duarte, Legal Adviser at the same Directorate, acting as Agents, ° the Greek Government, by Nikolaos Mavrikas, Assistant Legal Adviser in the State Legal Service and Dimitrios Anastassopoulous, Legal Assistant in the State Legal Service, acting as Agents, ° the Netherlands Government, by A. Bos, Legal Adviser at the Ministry of Foreign Affairs, acting as Agent, ° the Commission of the European Communities, by Enrico Traversa and Francisco de Sousa Fialho, members of the Legal Service, acting as Agents, having regard to the Report for the Hearing, after hearing the oral observations submitted by the Portuguese Government, by the Greek Government, represented by Panagiotis Kamarineas, Assistant Legal Adviser in the State Legal Service, acting as Agent, and by the Commission at the hearing on 17 November 1994, after hearing the Opinion of the Advocate General at the sitting on 13 December 1994, gives the following Judgment Grounds 1 By a judgment of 26 May 1993, which was received at the Court on 6 July 1993, the Supremo Tribunal Administrativo (Supreme Administrative Court) (Portugal) referred to the Court of Justice for a preliminary ruling under Article 177 of the EEC Treaty two questions concerning the interpretation of Articles 9, 12 and 95 of the EEC Treaty. 2 The questions arose in proceedings between the Portuguese tax authorities (the Fazenda Pública) and Mr Nunes Tadeu, who seeks reimbursement of the motor vehicle tax he was charged when he imported a second-hand car into Portugal from another Member State. 3 On 10 August 1990 Mr Nunes Tadeu bought a second-hand Peugeot car, a 205 XS, for BF 200 000 in Belgium. The car' s initial registration had been made in Belgium on 11 February 1987. On 20 August 1990 he returned to Portugal in that car under a transit registration and began completing the formalities necessary for its definitive importation. 4 In May 1991 the customs authorities in Oporto asked him to pay ESC 271 665 motor vehicle tax, calculated in accordance with Article 1 of Decree-Law 152/89 of 10 May 1989 (Díario da República, Ist series, No 107 of 10 May 1989, p. 1858, hereinafter "the Decree Law"), which as amended read at the material time as follows: "1. The Motor Vehicle Tax is a domestic tax levied on light passenger motor vehicles imported new or second-hand, or assembled or manufactured in Portugal, and which have been duly registered. 2. ... 3. The tax is a specific single-stage tax varying according to cylinder capacity in accordance with the table which is annexed to this text and forms an integral part thereof. 4. The tax on imported second-hand cars first registered more than two years previously shall be 10% less than the amount resulting from the table referred to in the preceding paragraph." 5 Mr Nunes Tadeu paid the tax but in December 1991 applied to the Tribunal Fiscal Aduaneiro do Porto (Oporto Customs Tribunal) for reimbursement on the ground that its application to second-hand imported cars was incompatible with Articles 5, 85 and 95 of the EEC Treaty. His application was granted by a judgment of 3 April 1992 which was challenged by the Portuguese tax authorities (the Fazenda Pública), supported by the Portuguese Public Prosecutor' s Office, in an appeal brought before the Supremo Tribunal Administrativo, which referred the following questions to the Court of Justice for a preliminary ruling: "1. Is the application of a motor vehicle tax with the characteristics described above on second-hand light motor vehicles imported from Belgium into Portugal compatible with the first and second paragraphs of Article 95 of the Treaty of Rome when other second-hand vehicles, whether imported new or assembled or manufactured in Portugal, are not subject to the tax? 2. Is such taxation to be regarded as a charge having an effect equivalent to a customs duty on imports, which is prohibited by Articles 9 and 12 of the Treaty?" 6 It should first be noted that the tax, which the Court has already considered in Case C-343/90 Lourenço Dias [1992] ECR I-4673, paragraphs 53 and 54, is applied without distinction to vehicles assembled or manufactured in Portugal and to imported new and second-hand vehicles, and forms part of a general system of internal charges imposed on categories of products in accordance with an objective criterion, namely cylinder capacity. Such taxes constitute internal taxation within the meaning of Article 95 of the EEC Treaty. 7 The reply to the second question is therefore clearly that a motor vehicle tax applied without distinction to vehicles assembled or manufactured in the Member State where it is levied and to both new and used imported vehicles is not a customs duty or a charge having an effect equivalent thereto within the meaning of Articles 9 and 12 of the Treaty. 8 In the first question the Portuguese court asks essentially whether it is compatible with Article 95 of the Treaty for a Member State to charge on second-hand motor vehicles imported from other Member States a tax which is not applicable to second-hand cars purchased on its own territory. 9 The plaintiff in the main action considers that distinction to be contrary to Article 95 of the Treaty because it makes imported second-hand vehicles more expensive and therefore favours the national used car market. 10 It has been established that the disputed tax applies equally and on the basis of objective criteria to both vehicles assembled or manufactured in Portugal and those which are imported new or second-hand. It does not apply to used car transactions within the country because it is charged only once, when the vehicle is first registered in the national territory, and part of it remains incorporated in the value of second-hand vehicles which have already been registered and purchased on the Portuguese market. 11 There is at present no rule of Community law which prevents Member States from introducing a general system of internal taxes charged in accordance with objective criteria on a particular category of goods, such as the category concerned here. 12 However, in applying Article 95, and in particular when comparing the taxes applicable to imported second-hand cars with those applicable to second-hand cars purchased at home, which are similar or competing products, it is necessary to have regard, as the Court held in (inter alia) Case C-47/88 Commission v Denmark ([1990] ECR I-4509, paragraph 18), not only to the rate of direct or indirect internal taxation on domestic or imported products but also to the basis of assessment and the detailed rules for levying the tax. 13 In that context, it is common ground that in the case of imported second-hand vehicles, the tax charged under the decree-law may not be less than 90% of the tax charged on a new car regardless of their age or condition, whereas the residue of the tax incorporated in the value of a second-hand car purchased in the national territory may be less than that since the residual value of the tax diminishes proportionately with the vehicle' s depreciation. 14 As a result, a motor vehicle tax on imported second-hand vehicles which is not less than 90% of the tax charged on new cars is manifestly excessive for those vehicles compared with the residue of the tax in second-hand vehicles already registered, and purchased on the Portuguese market. 15 Consequently, a rule such as that contained in Article 1(4) of the decree-law which restricts the reduction in the amount of the tax charged on new cars to 10% without having regard to the vehicle' s actual depreciation discriminates against imported second-hand cars. 16 The fact that the motor vehicle tax is calculated on the cylinder capacity and not on a flat-rate taxable value, as the Netherlands Government has observed, does not affect that conclusion: the residue of the tax incorporated in the value of the second-hand vehicle purchased on Portuguese territory still diminishes automatically with the depreciation of the vehicle, unlike the tax charged on imported second-hand vehicles, which, as stated above, is never less than 90% of the tax charged on new cars. 17 The Portuguese Government argues that the tax scheme is solely intended to ensure that the commercial value of domestic second-hand cars is more or less equivalent to that of imported second-hand vehicles. It cannot be discriminatory or protectionist because imported second-hand vehicles cost less, even after motor vehicle tax has been added, than equivalent domestic second-hand vehicles. 18 That argument cannot be accepted. A national tax system which is liable to eliminate a competitive advantage held by imported products over domestic products would be manifestly incompatible with Article 95, which seeks to guarantee that internal charges have no effect on competition between domestic and imported products (Commission v Denmark, cited above, paragraph 9). 19 Lastly, the Portuguese Government alluded to certain practical difficulties in estimating the real market value of the second-hand vehicles for the purposes of calculating the tax. Even if their existence were proved, such difficulties cannot justify the application of internal charges which discriminate against products from other Member States in breach of Article 95 of the Treaty. 20 In the light of all those considerations the reply to the first question must be that it is incompatible with Article 95 of the EEC Treaty for a Member State to charge on second-hand cars from other Member States a tax which, being calculated without taking the vehicle' s actual depreciation into account, exceeds the residual tax incorporated in the value of similar second-hand motor vehicles already registered in the national territory. Decision on costs Costs 21 The costs incurred by the Portuguese, Greek and Netherlands Governments and the Commission of the European Communities, which have submitted observations to the Court, are not recoverable. Since these proceedings are, for the parties to the main proceedings, a step in the proceedings pending before the national court, the decision on costs is a matter for that court. Operative part On those grounds, THE COURT (Fifth Chamber), in answer to the questions referred to it by the Tax Section of the Supremo Tribunal Administrativo by a judgment of 26 May 1993, hereby rules: 1. A motor vehicle tax applied without distinction to vehicles assembled or manufactured in the Member State where it is levied and to both new and used imported vehicles is not a customs duty or a charge having an effect equivalent thereto within the meaning of Articles 9 and 12 of the EEC Treaty. 2. It is incompatible with Article 95 of the EEC Treaty for a Member State to levy on second-hand cars from other Member States a tax which, calculated without taking the vehicle' s actual depreciation into account, exceeds the residual tax incorporated in the value of similar second-hand motor vehicles already registered in the national territory.

FIRST SECTION CASE OF RADOVANOVIC v. AUSTRIA (Application no. 42703/98) JUDGMENT STRASBOURG 22 April 2004 FINAL 22/07/2004 This judgment will become final in the circumstances set out in Article 44 § 2 of the Convention. It may be subject to editorial revision In the case of Radovanovic v. Austria, The European Court of Human Rights (First Section), sitting as a Chamber composed of: MrC.L. Rozakis, President,MrG. Bonello,MrsF. Tulkens,MrE. Levits,MrsS. Botoucharova,MrA. Kovler,MrsE. Steiner, judges,and Mr S. Nielsen, Section Registrar, Having deliberated in private on 27 March 2003 and 25 March 2004, Delivers the following judgment, which was adopted on the last‑mentioned date: PROCEDURE 1. The case originated in an application (no. 42703/98) against the Republic of Austria lodged with the European Commission of Human Rights (“the Commission”) under former Article 25 of the Convention for the Protection of Human Rights and Fundamental Freedoms (“the Convention”) by a national of Serbia and Montenegro, Mr Jovo Radovanovic (“the applicant”), on 9 July 1998. 2. The applicant, who had been granted legal aid, was represented by Mr H. Vana, a lawyer practising in Vienna. The Austrian Government (“the Government”) were represented by their Agent, Ambassador H. Winkler, Head of the International Law Department at the Federal Ministry for Foreign Affairs. 3. The applicant alleged that the residence prohibition of unlimited duration imposed on him amounted to a violation of Article 8 of the Convention. 4. The application was transmitted to the Court on 1 November 1998, when Protocol No. 11 to the Convention came into force (Article 5 § 2 of Protocol No. 11). 5. The application was allocated to the Third Section of the Court (Rule 52 § 1 of the Rules of Court). 6. On 1 November 2001 the Court changed the composition of its Sections (Rule 25 § 1). This case was assigned to the newly composed First Section (Rule 52 § 1). Within that Section, the Chamber that would consider the case (Article 27 § 1 of the Convention) was constituted as provided in Rule 26 § 1. 7. By a decision of 27 March 2003 the Court declared the application admissible. 8. The applicant and the Government each filed observations on the merits (Rule 59 § 1). The Chamber having decided, after consulting the parties, that no hearing on the merits was required (Rule 59 § 3 in fine), the parties replied in writing to each other’s observations. THE FACTS THE CIRCUMSTANCES OF THE CASE 9. The applicant was born in Vienna in 1979 and lives at present in Serbia and Montenegro. A. Conviction by the Vienna Juvenile Court 10. The applicant stayed with his parents, who are both citizens of Serbia and Montenegro and lawfully residing in Vienna, for about seven months after his birth in Austria. He then lived with his grandparents in the former Federal Republic of Yugoslavia, now Serbia and Montenegro. There he completed primary school, though he spent the yearly school holidays with his parents in Austria. 11. In 1989, at the age of 10 years, he came back to live with his parents and his sister in Austria, where he finished secondary school and completed a three-year vocational training as a butcher. During this time, he resided lawfully in Austria and, on 5 May 1993, he received an unlimited residence permit (unbefristeter Sichtvermerk). 12. On 30 July 1997 the Vienna Juvenile Court (Jugendgerichtshof) convicted the applicant of aggravated robbery and burglary and sentenced him to thirty months’ imprisonment, out of which twenty-four months were suspended with a probationary period of three years. It found that the applicant, on 29 January 1997, together with his co-accused born in 1980, had knocked down the victim with a perfume bottle and had stolen cash in the amount of 65,000 Austrian schillings (ATS). On 11 and 14 April 1997 they had attempted to steal another victim’s daily cash receipt by using a wheel nut tool. Still on 14 April 1997, they had broken into that victim’s car and had taken away his daily cash receipt and a cheque, totalling almost ATS 125,000. When fixing the sentence, the court considered as mitigating circumstances that the applicant had so far no criminal record, that he had admitted the offences and had partly made amends (Schadensgutmachung), and that in two instances the offences remained attempts. As aggravating circumstances the court considered the concurrence of two different offences, the amount of damage, the injury of the victim and the qualification of the burglary. The judgment became final in the absence of an appeal by the applicant. B. Proceedings concerning the issuing of a residence prohibition against the applicant 13. On 30 September 1997 the Vienna Federal Police Office (Bundespolizeidirektion Wien) issued a residence prohibition of unlimited duration against the applicant. It referred to Section 18 §§ 1 and 2 (1) of the 1992 Aliens Act (Fremdengesetz) according to which a residence prohibition is to be issued against an alien, if he has been sentenced to more than three months’ imprisonment by final judgment of a domestic court. 14. The applicant served his prison sentence until 14 October 1997. Subsequently he was transferred to a detention centre with a view to his expulsion. 15. On 28 October 1997 the Vienna Public Security Authority (Sicherheitsdirektion) dismissed the applicant’s appeal. Noting that the applicant had lived for seven months after his birth in Austria and that, after his return from former Yugoslavia in 1989, he had continuously lived with his family in Austria for eight years, it found that the residence prohibition at issue constituted an interference with his right to private and family life. However, it was necessary to achieve the aims set out in Article 8 § 2 of the Convention, namely the prevention of disorder and crime and the protection of the rights of others. In particular, the applicant had committed aggravated robbery by using a weapon. Given the seriousness of the offences and the implied disrespect for physical safety and the property of others, no positive prognosis was possible. Therefore, the interest in issuing a residence prohibition of unlimited duration against the applicant prevailed over the applicant’s interest in staying in Austria. 16. On 11 November 1997 the applicant lodged a complaint with the Constitutional Court (Verfassungsgerichtshof). He argued that the lower authorities had incorrectly established the facts and had failed to give sufficient reasons for their decisions. He stressed in particular that his family had already been residing lawfully in Austria for decades and that he had completed secondary school and vocational training, upon which he had legally worked as a butcher. Before his conviction by the Juvenile Court, the applicant had had no criminal record and the offences had been committed within a very short period of two and a half months. Since his grandparents had died in the meantime, he had no other relatives in Yugoslavia. The centre of his private and family life was exclusively in Austria. Referring to the Moustaquim and Beldjoudi judgments of the European Court of Human Rights, the applicant argued that the authorities had failed to comply with the Convention standards. In particular they had failed to balance correctly his interests in respect for his private and family life against public interests. There was no pressing need to issue an unlimited residence prohibition against him. 17. On 28 November 1997 the Constitutional Court declined to deal with the matter and remitted the complaint to the Administrative Court (Verwaltungsgerichtshof). 18. On 4 December 1997 the Administrative Court dismissed the complaint. It found that the Public Security Authority had duly considered the applicant’s private and family situation and had correctly assessed the interests involved when issuing the residence prohibition. Furthermore the Administrative Court found that in the cases of Moustaquim and Beldjoudi the persons concerned had had stronger family ties in the host country than the applicant. The decision was served on the applicant’s counsel on 16 January 1998. 19. On 4 February 1998 the applicant was expelled to the former Federal Republic of Yugoslavia, now Serbia and Montenegro. C. Proceedings concerning the applicant’s request to revoke the residence prohibition in view of the 1997 Aliens Act 20. On 14 October 1997 the applicant requested the Vienna Federal Police Office to revoke the residence prohibition issued against him in view of Section 38 § 1 (4) of the 1997 Aliens Act, which was to enter into force on 1 January 1998. Pursuant to that provision, a residence prohibition may not be issued “where a foreigner has grown up in Austria from an early age on and has been lawfully residing there for many years”. Section 114 § 3 of the 1997 Aliens Act establishes that if a residence prohibition has not expired at the date of the entry into force of the 1997 Aliens Act, the residence prohibition has to be regarded as a residence prohibition issued under the 1997 Aliens Act. However, the residence prohibition has to be revoked if it was not lawful to issue it under the 1997 Aliens Act. 21. On 25 March 1998 the Federal Police Office dismissed this request. It noted in particular that the applicant did not comply with the requirements of the above provision, since he had not grown up in Austria within the meaning of Section 38 § 1 (4). Therefore, the imposition of the residence prohibition was also lawful under the 1997 Aliens Act. 22. In his appeal of 14 April 1998 the applicant complained that the Federal Police Office had incorrectly applied the provision at issue. 23. On 27 April 1998 the Vienna Public Security Authority dismissed his appeal. It noted that the provision at issue required that a foreigner had commenced growing up in Austria at the age of two or three years or even younger, whereas the applicant had only been in Austria during the first seven months of his life and had come back when he was already ten. Therefore, he clearly did not comply with that provision. 24. The applicant did not appeal to the Constitutional Court and the Administrative Court. THE LAW I. ALLEGED VIOLATION OF ARTICLE 8 OF THE CONVENTION 25. The applicant complained that the issuance of the residence prohibition of unlimited duration against him was in breach of his right to respect for his private and family life under Article 8 of the Convention, which reads as follows: “1. Everyone has the right to respect for his private and family life, his home and his correspondence. 2. There shall be no interference by a public authority with the exercise of this right except such as is in accordance with the law and is necessary in a democratic society in the interests of national security, public safety or the economic well-being of the country, for the prevention of disorder or crime, for the protection of health or morals, or for the protection of the rights and freedoms of others.” 26. The applicant argued that the measure constituted an interference with his rights under Article 8 of the Convention, which had also been conceded by the Austrian authorities. However, when applying the relevant provisions of the 1992 Aliens Act, the domestic authorities had wrongly found that the measure was “necessary in a democratic society”. In particular it did not correspond to a “pressing social need” for the prevention of disorder or crime. Unlike the administrative authorities, the Juvenile Court, by suspending the major part of the sentence, had obviously made a positive prognosis in respect of the applicant. The Juvenile Court had taken into account the applicant’s young age of eighteen years, the short period of time during which he had committed the offences, namely two and a half months, together with the fact that the applicant had no previous criminal record. Further, the administrative authorities had grossly disregarded the applicant’s high degree of integration in Austria, namely his lawful residence and that of his family for years, as well as his school education and completion of a vocational training on the one hand, and the lack of any family ties with Serbia and Montenegro after his grandparents’ death on the other. Thus, the imposition of a residence prohibition of an unlimited duration was disproportionate to the aims pursued. 27. The Government accepted that the residence prohibition interfered with the applicant’s right to respect for his private and family life. In the Government’s view, the measure at issue was justified under paragraph 2 of Article 8 of the Convention as being in accordance with the law, namely the relevant provisions of the 1992 and 1997 Aliens Act. In this respect they submitted that the applicant did not meet the requirements of Section 38 § 1 (4) of the 1997 Aliens Act, as he clearly had not grown up in Austria from an early age onwards since he had left Austria when he was only seven months old and did not return until he was ten. This had also been pointed out in the reasoning of the domestic authorities’ decisions of 25 March and 27 April 1998 which dismissed his application for lifting the residence prohibition. The measure also pursued the legitimate aim of the prevention of disorder or crime. Having regard to the seriousness of the offence and the severity of the penalty, the Government argued that the measure had been necessary in a democratic society, within the meaning of Article 8 § 2 of the Convention and that the Austrian authorities had not overstepped their margin of appreciation. 28. The Court notes that it was common ground between the parties that the residence prohibition constituted an interference with the applicant’s right to respect for his private and family life, as guaranteed by Article 8 § 1 of the Convention. Furthermore, there was no dispute that the interference was in accordance with the law and pursued a legitimate aim, namely the prevention of disorder or crime, within the meaning of Article 8 § 2 of the Convention. The Court endorses this assessment. 29. The dispute in the case relates to the question whether the interference was “necessary in a democratic society”. 30. The Court recalls that no right of an alien to enter or to reside in a particular country is as such guaranteed by the Convention. Nevertheless, the expulsion of a person from a country where close members of his family are living may amount to an infringement of the right to respect for family life guaranteed by Article 8 § 1 of the Convention (see Moustaquim v. Belgium, judgment of 18 February 1991, Series A no. 193, p. 18, § 36). 31. The Court reiterates that it is for the Contracting States to maintain public order, in particular by exercising their right, as a matter of well-established international law and subject to their treaty obligations, to control the entry and residence of aliens. To that end they have the power to deport aliens convicted of criminal offences. However, their decisions in this field must, in so far as they may interfere with a right protected under paragraph 1 of Article 8, be necessary in a democratic society, that is to say justified by a pressing social need and, in particular, proportionate to the legitimate aim pursued (see Dalia v. France, judgment of 19 February 1998, Reports of Judgments and Decisions 1998-I, p. 91, § 52; Mehemi v. France, judgment of 26 September 1997, Reports 1997-VI, p. 1971, § 34; and Boultif v. Switzerland, no. 54273/00, § 46, ECHR 2001-IX). 32. Accordingly, the Court’s task consists in ascertaining whether the Austrian authorities, by imposing a residence prohibition of unlimited duration on the applicant, struck a fair balance between the relevant interests, namely the applicant’s right to respect for his private and family life, on the one hand, and the prevention of disorder and crime, on the other. 33. The Court notes that the applicant, a single young adult at the time of his expulsion, is not a second generation immigrant as, despite his birth in Austria, he did not permanently live there until the age of ten. Given the young age at which he arrived, the Court will nevertheless assess the necessity of the interference by applying the same criteria it usually applies in cases of second generation immigrants who have not yet founded a family of their own in the host country. These criteria, so far as material, are the nature and gravity of the offence committed by the applicant and the length of his stay in the host country. In addition the applicant’s family ties and the social ties he established in the host country by receiving his schooling and by spending the decisive years of his youth there are to be taken into account (see Benhebba v. France, no. 53441/99, §§ 32-33, 15 June 2003). 34. The Court considers the present case needs to be distinguished from a number of cases concerning the expulsion of second generation immigrants, in which the Court found no violation of Article 8 of the Convention (see Boujlifa v. France, judgment of 21 October 1997, Reports 1997-VI, p. 2264, § 42; Bouchelkia v. France, judgment of 29 January 1997, Reports 1997-I, p. 65, §§ 50-51; El Boujaïdi v. France, judgment of 26 September 1997, Reports 1997-I, p. 63, §§ 40-41; and Dalia, cited above, p. 92, §§ 53-54). These cases all involved second generation immigrants who arrived in the host country at an early age and were convicted of serious offences with lengthy terms of unconditional imprisonment. Furthermore, they concerned drug offences, the kind of offence, for which the Court has shown understanding of domestic authorities’ firmness with regard to those who actively contribute to its spread (see C. v. Belgium, 7 August 1996, Reports 1996-III, p. 924, § 35; Dalia, cited above, p. 92, § 54, Baghli v. France, no. 34374/97, 30 November 1999, § 48 in fine, ECHR 1999-VIII; and Yilmaz v. Germany, no. 52853/99, § 46, 17 April 2003). In the present case, despite the shorter duration of the applicant’s stay in Austria the Court attaches considerable weight to the fact that although the applicant was convicted of aggravated robbery, he was only sentenced to a six-month unconditional term of imprisonment, whereas twenty-four months were suspended on probation. 35. In the applicant’s case the Austrian authorities balanced his right to respect for private and family life against the public interest and gave priority to the latter interest in order to prevent disorder and crime. Without disregarding the serious nature of the offences, the Court notes, however, that the applicant committed them as a juvenile, that he had no previous criminal record and that the major part of the relatively high sentence was suspended on probation by the Juvenile Court. Therefore the Court is not convinced by the Government’s argument and the administrative authorities’ assessment that the applicant constituted such a serious danger to public order which necessitated the imposition of the measure concerned (see mutatis mutandis, Ezzouhdi v. France, no. 47160/99, § 34, 13 February 2001). 36. Given the applicant’s birth in Austria, where he later also completed his secondary education and vocational training while living with his family, and also taking into account that his family had already lawfully stayed in Austria for a long time and that the applicant himself had an unlimited residence permit when he committed the offence, and considering that, after the death of his grandparents in Serbia and Montenegro, he no longer has any relatives there, the Court finds that his family and social ties with Austria were much stronger than with Serbia and Montenegro. 37. The Court therefore considers that, in the circumstances of the present case, the imposition of a residence prohibition of unlimited duration was an overly rigorous measure. A less intrusive measure, such as a residence prohibition of a limited duration would have sufficed. The Court thus concludes that the Austrian authorities, by imposing a residence prohibtion of unlimited duration against the applicant, have not struck a fair balance between the interests involved and that the means employed were disproportionate to the aim pursued in the circumstances of the case (see mutatis mutandis, Ezzouhdi, cited above, § 35; and Yilmaz, cited above, §§ 48-49). 38. Accordingly, there has been a violation of Article 8 of the Convention. II. APPLICATION OF ARTICLE 41 OF THE CONVENTION 39. Article 41 of the Convention provides: “If the Court finds that there has been a violation of the Convention or the Protocols thereto, and if the internal law of the High Contracting Party concerned allows only partial reparation to be made, the Court shall, if necessary, afford just satisfaction to the injured party.” 40. The applicant sought EUR 10,000 as compensation for non-pecuniary damage sustained on account of the imposition of the residence prohibition. He also requested reimbursement of costs and expenses incurred in the domestic proceedings and the Convention proceedings in the amount of EUR 9,649.93. 41. The Government contended that the applicant’s claim in respect of non-pecuniary damage was not supported by any evidence. The Government further cast doubts on whether the costs claim, in particular in respect of unspecified telephone calls, had been necessary in order to prevent the violation found. 42. The Court considers the question of the application of Article 41 is not ready for decision. Accordingly, it shall be reserved and the subsequent procedure fixed having regard to any agreement which might be reached between the Government and the applicants (Rule 75 § 1 of the Rules of Court). FOR THESE REASONS, THE COURT UNANIMOUSLY 1. Holds that there has been a violation of Article 8 of the Convention; 2. Holds that the question of the application of Article 41 was not ready for decision; accordingly, (a) reserves the said question in whole; (b) invites the Government and the applicant to submit, within three months from the date on which the judgment becomes final according to Article 44 § 2 of the Convention, their written observations on the matter and, in particular, to notify the Court of any agreement that they may reach; (c) reserves the further procedure and delegates to the President of the Chamber the power to fix the same if need be. Done in English, and notified in writing on 22 April 2004, pursuant to Rule 77 §§ 2 and 3 of the Rules of Court. Søren NielsenChristos RozakisRegistrarPresident

Mr Justice Kitchin : Introduction This is an action for breach of trust. The first claimant ("Mr Barnes") and the second claimant ("Mrs Barnes") are the present trustees of a deed of settlement dated 31 March 1973 ("the Settlement") made by Mr Barnes. The intended purpose of the Settlement was to benefit Mr Barnes' children and grandchildren. The third claimant ("Dominic") is the son of Mr and Mrs Barnes and the fourth and fifth claimants are their grandchildren. The claimants collectively seek an order that the third to fifth claimants may represent all the persons now and or in the future beneficially interested under the Settlement. That order is not resisted by the defendants. The first defendant ("Mr Tomlinson"), the second defendant ("Mr Bretherton"), Mr Burton and a Mr Gould were the original trustees of the Settlement. I shall refer to them (with the exception of Mr Gould) collectively as "the trustees". Mr Burton was originally the third defendant. He died on 15 November 2005 and by order dated 11 May 2006 his widow and administratrix, Marjorie Burton, was substituted as third defendant. Mr Tomlinson died in July 2005 and his estate is the subject of an insolvent administration order. The claimants do not pursue Mr Tomlinson's estate in these proceedings. The present action therefore concerns only Mr Bretherton and Mr Burton. The claims made are based upon the actions of Mr Bretherton and Mr Burton as trustees of the Settlement from 1994 to 2000. In order to understand the nature of the claims and the basis for them I must set out a certain amount of the background. Background The early days In 1972 Mr Barnes formed a company called Elizabethan House Trust Limited ("EHT"). The nominal share capital comprised 250,000 £1 shares which were issued in full to Mr Barnes. EHT was formed to finance property development projects. The directors of EHT were Mr Barnes and a Mr Sharples. Mr Sharples subsequently resigned. At that time Mr Bretherton was employed by Northern Developments (Holdings) Limited ("Northern Developments"), another company which Mr Barnes had founded and of which he was at the time chairman and managing director. Its shares were listed on the London Stock Exchange and it was principally involved in the development of residential property. Mr Bretherton worked at the head office in Blackburn. He was 27 years old and had been personally head hunted by Mr Barnes from his previous employment in London. Mr Tomlinson and Mr Burton were chartered accountants and partners in Bedell & Blair, a firm of chartered accountants based in Manchester which audited the accounts of Northern Developments. Mr Gould was a director of Northern Developments. The Settlement As I have mentioned, the Settlement was established by Mr Barnes by a deed made on 31 March 1973. The trustees were the defendants and Mr Gould. Mr Barnes transferred 249,998 of the shares in EHT into the trust, the remaining two shares being held by Mr Barnes and Mr Sharples (Mr Sharples later transferred his share to Mr Barnes). In addition, Mr Barnes made a loan of £250,000 to EHT. The total sum of about £500,000 was used by Mr Barnes and Mr Sharples (without consultation with the trustees) shortly after the date of the Settlement to acquire for EHT 352,920 shares in Northern Developments. The Settlement contained the following provisions relevant to these proceedings. Clause 8: "Monies subject to the trusts hereof may in the Trustees' discretion be applied to the purchase of such assets of whatsoever nature and wheresoever situate and whether involving liabilities or not and whether purchased for the production of income or with a view to capital appreciation or to the purchase of any dwelling house for the actual use or enjoyment of any of the Beneficiaries or upon such personal credit with or without security as the Trustees shall in their absolute discretion think fit to the intent that the Trustees shall have the same full and unrestricted power of investing and transposing investments in all respects as if they were absolutely entitled thereto beneficially but no money subject to the trusts hereof shall be given lent or otherwise transferred to or for the benefit of the Settlor or any person for the time being his wife AND the Trustees shall be under no obligation to diversify the investments made hereunder AND it shall be no objection to the exercise by the Trustees of their powers hereunder that the whole or substantially the whole of the Trust Fund is invested in shares or securities of one body corporate only;" Clause 9: "During the Trust Period and during such further period if any as the law may allow the Trustees shall have the following additional powers: (1) power to allow all investments at any time forming part of the Trust Fund to remain in their then actual state of investment as long as the Trustees may think fit and at any time or times to sell call in or convert the investments or any of them or any part thereof into money." (2) power (but during the lifetime of the Settlor not without his consent in writing) to change or vary any investment for the time being forming part of the Trust Fund for others hereby or by law authorised… Clause 11: "Every discretion and power hereby conferred on the Trustees shall be an absolute and uncontrolled discretion or power and the Trustees shall not be liable or answerable to any Beneficiary for the manner in which they shall exercise any power or discretion nor shall any Trustee be held liable for any loss or damage accruing as a result of his concurring or refusing to concur in any exercise of any such power or discretion." Clause 12: "In the professed execution of the trusts and powers hereof no Trustee being an individual shall be liable for any loss to the Trust Fund arising by reason of any improper investment made in good faith or for the negligence or fraud of any agent employed by the Trustees or by him or by any other Trustee (although the employment of such agent was not strictly necessary or expedient) or by reason of any mistake or omission made in good faith by any trustee hereof or by reason of any matter or thing except wilful and individual fraud or wrongdoing on the part of the Trustee who is sought to be made so liable." Clause 14: "Any Trustee (other than the Settlor or any person to whom the Settlor is for the time being married ) who shall be or become a Director or who holds or shall hold any remunerated office in relation to any company in the shares of which (or in the shares of any other company controlling it) any of the Trust Fund is invested shall be entitled to receive and retain for his own use all remuneration and other benefits derived from that Directorship or office and shall not be liable to account therefore whether or not voting rights available to the Trustees have been exercised in order to enable the Trustees to obtain or retain the Directorship or remunerated office." Clause 16: " The Trustees shall not be bound or required to intervene in the management or conduct of the business of any company British or otherwise in which (or any subsidiary of which) the Trustees shall hold or control the whole or a majority of any part of the shares carrying the control of the company or other the voting rights of the company but as long as there shall be no notice of any act of dishonesty or misappropriation of money on the part of the Directors of such company or on the part of the manager of its business the Trustees shall be at liberty to leave the conduct of its business (including the payment or non-payment of dividends other than cumulative preferential dividends) wholly to its Directors and no Beneficiary or potential Beneficiary pursuant to this Settlement shall be entitled to require the distribution of any dividend by any Company British or otherwise in which the Trust Fund or any part thereof may be invested or require the Trustees to exercise any powers they may have of compelling any such distribution." The collapse of the property market and the compromise with Barclays In 1974 a number of significant events occurred. First, Mr Barnes and Mr Sharples, again without consultation with the trustees, arranged for EHT to borrow the sum of £900,000 from National Westminster Bank ("NatWest") and lent the money to Northern Developments and a subsidiary of Northern Developments, GCT Construction Limited ("GCT"). The loans to Northern Developments and GCT were secured by legal charges granted by GCT and Daleholme (Builders) Limited ("Daleholme"), another subsidiary of Northern Developments, over two large pieces of potential development land at West Ardsley near Morley, West Yorkshire ("the West Ardsley land"). At the same time EHT granted a sub-charge to NatWest as security for the loan. Second, Mr Barnes persuaded the trustees to borrow a substantial sum of money from Barclays Bank ("Barclays") in order to buy shares through the Stock Market in Northern Developments. The trustees used this money to buy 628,920 shares in Northern Developments in about February 1974. At the request of Mr Barnes the trustees bought a further tranche of shares in Northern Developments in June 1974 and again borrowed the full purchase price from Barclays. This brought their total share holding purchased using the borrowed monies to 743,920 shares. The trustees only agreed to borrow from Barclays on the basis that Mr Barnes gave them an indemnity, which he duly did. In addition, Mr Barnes gave Barclays a guarantee, deposited a large number of shares in Northern Developments to support his obligations and charged in favour of Barclays certain monies standing to his credit at Barclays. In March 1974, and by way of further security for the loan, the trustees charged to Barclays their shareholding in EHT. Third, the property market crashed. Financial advisors began to investigate the affairs of Northern Developments which apparently had outstanding loans from over 30 banks secured on a large land bank. At about this time Mr Sharples resigned. In February or March 1975 Peat Marwick Mitchell organised a moratorium on debt repayment with all the bankers. It was a condition of the moratorium that there should be a restriction on fresh housing starts. Mr Barnes did not, however, observe the restriction and, as a result, receivers were appointed over all the assets of Northern Developments on 2 June 1975. At this time the assets of the Settlement were 743,920 shares in Northern Developments and 249,998 shares in EHT. The trustees and Mr Barnes believed the Settlement to be insolvent because the shares in Northern Developments were almost certainly valueless; it was most unlikely that Northern Developments and GCT would be able to repay to EHT the loan of £900,000, together with interest; the West Ardsley land held by EHT as security for the loan had been valued at substantially less than the amount of the loan plus interest; and finally, the trustees had no means of repaying the Barclays loan, then standing at something of in excess of £800,000. I should add that the trustees believed that the indemnity from Mr Barnes was likely to prove worthless as his wealth was largely tied up in Northern Developments when he had himself given substantial guarantees to banks. This was a deeply anxious time for all the trustees. They faced personal ruin and so they turned to a Manchester firm of solicitors, Davis Blank Furniss, for advice. Originally they were advised by Mr Blank and subsequently by Mr Alcock. On 6 November 1975 Mr Burton was appointed a director of EHT. By 1977 the trustees had lost faith in Mr Barnes' commercial judgment. They were also concerned that Mr Barnes was at loggerheads with the receivers of Northern Developments and it was not possible for the board of EHT to negotiate with them in a proper manner. Moreover, there was a conflict between the personal interest of Mr Barnes and the interests of EHT. Accordingly, the trustees concluded that the right course was to remove Mr Barnes as a director of EHT, which they did in February 1977. Following his removal, EHT petitioned for the winding up of Northern Developments. A winding up order was made in October 1977. During the course of the same year Mr Bretherton spent a good deal of time working with Mr Alcock. The aim of this work was to determine the legal position of the West Ardsley site, the only asset which could possibly be realised to provide any value for the Settlement. In January 1978 Mr Tomlinson was appointed a director of EHT. Thereafter EHT issued and pursued complex proceedings against Daleholme and others in connection with the enforcement of the charge given by Daleholme to secure the loans to Northern Developments and GCT. Further, the trustees and EHT pursued lengthy and complex negotiations with the creditors of Northern Developments and its receivers with a view to concluding a scheme of arrangement. The trustees were also actively engaged in trying to find buyers for the West Ardsley land. I should also mention that in the course of 1978 NatWest brought pressure to bear upon EHT to repay its borrowing. Certain reductions in the level of debt were made, largely out of funds provided by Manchester Industrial Finance Limited, a private company. In addition NatWest appropriated £317,000 standing to the credit of a sister company, also controlled by Mr Barnes, called Elizabethan House Securities Limited. In September 1980 the aggregate debt of the trustees to Barclays was well over £1,200.000. Barclays did not make a formal demand for repayment but did make it clear that they regarded the trustees as personally liable for the full amount of the debt. However they also indicated that they might be prepared to compromise their claims subject to the scheme of arrangement becoming effective. This was vital because it was anticipated that the only way that the trustees could obtain funds was via the claims of EHT against Northern Developments and the realisation of the West Ardsley land. Eventually the trustees entered into a compromise with Barclays, the terms of which were as follows: "In consideration of your procuring the consent of Elizabethan House Trust Limited ("EHT") to the proposed Scheme of Arrangement regarding Northern Development (Holdings) Limited and provided that such a Scheme becomes effective, we hereby agree to accept in full settlement of your liability to us in respect of your Loan Account Number 11001906 at our York Street, Manchester Branch the amount ultimately to be received in respect of your shareholding in EHT charged to us and all other assets owned by the Trust or £900,000 (nine hundred thousand pounds) whichever is the greater, provided that if the amount ultimately to be received as aforesaid shall be less than £850,000, we agree to accept in full settlement as aforesaid such amount plus £50,000." By letter dated 16 January 1981 ("the Interest letter") Barclays agreed to stop charging interest if the scheme of arrangement became effective: "The balance standing to the debit of the Trustees' account at the close of business on the 31st December 1980 was £1,253,641.20. After careful consideration we are prepared to cease charging interest on this sum with effect from the 1st January 1981 provided the Scheme of Arrangement goes ahead. We retain the right, however, at our discretion to continue to charge interest after 1980 should for some reason the Scheme not take effect." In 1981 Mr Tomlinson and Mr Burton thought it appropriate for Mr Bretherton to join the board of EHT so that the three active trustees were also board members of the company holding the only potentially valuable asset. Accordingly Mr Bretherton was appointed a director of EHT on 12 November 1981. A scheme of arrangement between Northern Developments, its subsidiaries and its creditors was finally approved by the court on 31 March 1982 and became effective on 1 April 1982. I will return to the terms of compromise later in this judgment. Suffice to say for present purposes that the trustees recognised that their personal liability was capped at £50,000 and that Barclays continued to have a charge over the shares in EHT as security for the indebtedness of the trustees. Further, the trustees themselves continued to have a right of indemnity against Mr Barnes, but this was thought to have very little value. No one contemplated that there would ever be any sums available for the beneficiaries of the Settlement. At some time after the scheme of arrangement became effective Mr Gould ceased to play any role as a trustee of the Settlement. The restoration of EHT Over the ensuing years the trustees gradually put EHT on a better financial footing. They repaid the loans from NatWest, partly with the secured commercial loans from Manchester Industrial Finance Limited and partly with monies repaid by Northern Developments after the implementation of the scheme of arrangement. Second, the claims of NatWest and the mortgagors over the West Ardsley land were extinguished by orders for redemption and foreclosure made in 1983. The freehold of the land was transferred to EHT in 1985. Third, and importantly, in September 1983 and after extensive negotiations, EHT entered into an agreement with McLean Homes Northern Limited ("McLean") for the sale of the West Ardsley land by instalments for residential development. Under that agreement EHT was to receive a fixed percentage on all sale proceeds of the West Ardsley land and the homes to be built on the land and McLean guaranteed minimum annual payments to EHT over the seven years from 1984 to 1990, such minimum aggregate payments to 31 December 1990 totalling £1,500,000. 1986 was a period of intense discussions with McLean. Mr Burton and Mr Bretherton were concerned about the potential liability of EHT for the development site. Mr Bretherton constantly tried to get McLean to erect warning signs to discourage trespassers. That and other work involved a considerable amount of time and effort on Mr Bretherton's part. 1987 saw the culmination of extensive negotiations carried out by the trustees with the Inland Revenue over a number of years. No corporation tax had been paid, although a series of assessments had been made and were held over. In the course of 1987 all the secured creditors of EHT were paid off and a small sum was deposited in a savings account. Advice was taken from tax counsel to investigate the tax liability of EHT and to assess the best method of dealing with the Inland Revenue in the future. In addition, advice was sought from counsel about directors' fees. Further, Mr Alcock had lengthy correspondence with the Development Land Tax Office over the West Ardsley site. After a further conference with counsel, and in the light of the advice received, the defendants secured a satisfactory outcome to the claims for corporation tax and the Development Land Tax Office abandoned its claim in respect of the West Ardsley site. The trustees also considered approaching Barclays to propose a settlement, on the basis that money paid there and then would be better than a long and uncertain wait. However the decision was made that it was not appropriate to make such an approach at that time. In 1987 and 1988 McLean proceeded with the development of the West Ardsley site and to sell off plots. A considerable amount of time was taken ensuring that the 1987 accounts correctly reflected the agreements reached on tax affairs. 1989 saw the first payment of emoluments by EHT to the trustees. Each of them was paid £80,000 representing £10,000 in respect of each year from 1982 to 1989 inclusive. The trustees set aside a portion of these fees to establish a fund to use in the event that the minimum payment under the compromise agreement had to be paid out to Barclays. Matters progressed in much the same way during each of the years 1990, 1991, 1992 and 1993. EHT was run as a development company, the development being the West Ardsley site. Accounts for each year were prepared and filed and show the assets of the company gradually increasing. As directors of EHT, the trustees received total emoluments over those four years of £40,113, £59,420, £59,310 and £60,509. There was, however, one material change. In the summer of 1991 the trustees learnt from Barclays that at the particular branch dealing with the compromise there was no one left who knew the background circumstances. In the period 1992 through 1993 Barclays made no contact with the trustees at all. Mr Bretherton started to form the view that any claim by Barclays might well be statute barred by 2003, with the result that at that time there would be a real possibility of making a substantial distribution to the beneficiaries. 1994 to 2000, the period of the claim I now come to the period in respect of which the claim is made. Before dealing with the details of the claim, it is convenient to set out certain background facts which were not in dispute or which I find established on the evidence. 1994 By December 1994 the net assets of EHT had increased to £1,816,481, the bulk of which represented sale proceeds of the West Ardsley land and net recoveries of money owed by Northern Developments. The assets of the company consisted primarily of cash. At this time the development of the site at West Ardsley was coming to an end. There was a certain amount of tidying up still to be done but the trustees began to consider the future of EHT. At the same time Mr Burton's health was deteriorating. He was often unable to travel to meetings but tried to attend by telephone. He was concerned that his health would further deteriorate if he remained a director and began to discuss the possibility of relinquishing his position. The trustees were also greatly exercised about the course the company should take bearing in mind their obligations to Barclays. As the trustees were subsequently advised by Mr Sher QC and Mr Taussig (in circumstances I relate in more detail hereafter), the compromise agreement is susceptible to different possible interpretations. One is that Barclays were to receive everything realised through EHT. The other is that the amount to be paid to Barclays was capped at £1.2 million. I believe that the latter is the correct interpretation, particularly in the light of the interest letter. Nevertheless, the former is at least a possible interpretation, as Mr Sher advised. Moreover I believe that it is likely that Mr Bretherton had forgotten the Interest letter by 1994. What he was particularly concerned about was the personal liability of the trustees – and this was dealt with in the main compromise proposal. This also appears from paragraph 33 of an affidavit sworn by Mr Tomlinson on 3 May 1999 which was put to Mr Bretherton in re-examination: "As I explained in para 22 above at the time of the Compromise everyone including the Original Trustees expected that the amount ultimately to be received by the Settlement would be less than the amount – over £1.2 million – then owing to Barclays and in the years after the Compromise became effective the Plaintiffs saw themselves as realising the assets of the Settlement and in particular the West Ardsley Land held by EHT for the benefit of Barclays. It did not occur to the Plaintiffs that there would ever be funds available for the Beneficiaries. Against this background the Interest Letter had never appeared to be of any significance and it was perhaps for this reason that both the Plaintiffs and their Solicitors simply forgot about it. I understand from Mr Alcock that it was only very recently when he was preparing the papers for Mr Jules Sher QC that he recalled the existence of the Interest Letter". I have to say I found Mr Bretherton's evidence on this issue to be not entirely consistent. At various points he suggested that he was aware that the liability was capped at £1.2 million. Nevertheless, I am satisfied in the light of his evidence as a whole that in 1994 he believed that all monies held by the Settlement were payable to Barclays under the terms of the compromise. Accordingly, and after a good deal of discussion and thought, the trustees took the decision not to re-awaken Barclays' interest by initiating settlement discussions and decided to invest the assets of the company in property for the next few years until they could be sure that Barclays had lost interest and would be unable to recover its loan. The trustees therefore decided to develop EHT as a property company in order to generate profits with the cash that it had realised. They were influenced in reaching this decision by Mr Tomlinson's experience in the commercial property market. In that year £51,650 was paid to the trustees in emoluments. Net of social security costs, Mr Bretherton and Mr Tomlinson received £15,000 and Mr Burton received £18,000. The trustees again spent a good deal of time on the business and affairs of the company and Settlement. 1995 By May 1995 Mr Burton's health had deteriorated to such an extent that it prevented him from fulfilling his duties as a director and company secretary. He therefore resigned and Mr Bretherton was appointed company secretary. Nevertheless, Mr Burton remained a trustee. At about the same the time the name of EHT was changed to Thane Investments Limited although, for convenience, I shall continue to refer to it as EHT in this judgment. May 1995 also saw the completion of the purchase of a parade of shops called Gilda Parade in Bristol for £1,475,000. The purchase was effected through a new subsidiary company, Lemones Limited. At about this time Mr Bretherton turned for advice to a Mr Hugh Kemsley, the senior partner of Kemsley Whiteley & Ferris, a firm of surveyors in the City of London. Mr Bretherton had met Mr Kemsley in the course of his main job as Director of Corporate Affairs (and Chairman of the Pension Trustees of Senior and Staff Pension Schemes) at Provident Financial plc. He agreed to help Mr Bretherton with desk top valuations so that he could have a second opinion on the proposals which were emerging at the meetings of EHT. This proved important to Mr Bretherton because he found himself with little spare time. The directors' emoluments for the year totalled £73,146. This figure included £25,000 paid by EHT to Mr Burton and described in the accounts of the company as "compensation for loss of office". 1996 In 1996 the trustees spent a good deal of time considering various property proposals. Mr Tomlinson was by this time being advised by Mr Giles Knopp, the former auditor of EHT and now a property consultant, and Mr Bretherton was advised by Mr Kemsley. They did not always agree. Mr Bretherton paid Mr Kemsley's fees himself because he did not wish EHT to incur the extra costs. Mr Bretherton also felt uncomfortable that he was slowing deals down because he knew little about property and was based in Bradford whilst Mr Tomlinson was based in London. By letter dated 26 November 1996 Mr Alcock wrote to Mr Bretherton saying that he had been asked by Mr Tomlinson to let him have copies of the trust deed, the deed of indemnity and the compromise agreement and that he had put in hand the preparation of a deed of retirement and the appointment of a new trustee. The clear implication was that Mr Tomlinson wanted Mr Bretherton to retire and it made Mr Bretherton cross. It was followed by a letter from Mr Tomlinson direct to Mr Bretherton on 5 December 1996. This made it clear that Mr Tomlinson wanted Mr Bretherton to resign as a director, although he was happy from him to remain as a trustee. In the course of 1996 the remaining directors were awarded emoluments of £43,344. 1997 Mr Bretherton decided to resign as a director and company secretary of EHT on his return from holiday in January 1997. He told me, and I accept, that he did not resign because he was "pushed" by Mr Tomlinson but rather because he had little time in the light of his full time job and because he had less experience of property transactions than Mr Tomlinson. He also was aware that he was being replaced by Mr Knopp, a chartered accountant and EHT's former auditor. Mr Bretherton regarded him as honest and experienced. Indeed in these circumstances he thought there was no need for him to remain on the board and it would simply result in the company paying a greater level of emoluments. Mr Knopp was therefore appointed a director in place of Mr Bretherton on 5 February 2006. Mr Tomlinson became company secretary as well as director. Nevertheless Mr Bretherton remained a trustee because he considered he had undertaken obligations which he had to see through, albeit for no financial reward. He still thought that a period of 12 years from the date of the last contact with Barclays (that is to say 2003) would be the optimum time to open negotiations. Mr Bretherton wrote a letter of resignation on 31 January 1997 in which he acknowledged that he had no financial claim of any kind. Shortly after he resigned he received an "ex gratia" payment of £45,000. In a letter of 27 March 1997 acknowledging receipt he described it as "very generous" and "a most pleasant surprise". This is another matter to which I shall return in considering the claims advanced in this case. In July 1997 Slater Heelis, solicitors acting for Mr Barnes and the beneficiaries, wrote to the trustees drawing attention to the fact that their client had never seen accounts for the trust, asking for all such accounts and other relevant documents, noting that EHT appeared to have large amounts of cash and asking for details of the activities of the company and its goals. On the 5 August Mr Tomlinson replied: "As far as Thane Investments Limited ("TIL") (formerly Elizabethan House Trust Limited) is concerned, the whole of its issued share capital was charged to Barclays Bank Limited in 1974 as security for the loan from that Bank. However, the directors of TIL continued to manage the Company and TIL now has a fund of approximately £1.8m which TIL is in the process of investing in commercial properties. I am the only trustee who has been a director of TIL throughout the whole of the period in question, although each of Mr. Bretherton and Mr. Burton has been a director and/or secretary for considerable periods. The objective is to achieve over a period of years sufficient growth to repay the outstanding debt and interest. The chances of success are remote bearing in mind the size of the debt and interest." He also enclosed a statement of assets and liabilities as at 31 March 1997 stating that the amount owing to Barclays was £10,838,150 and that the trust had a net deficiency of £10,588,150. The letter and enclosed statement are difficult to explain and Mr Bretherton was cross examined closely upon them. One possible explanation is that Mr Tomlinson had forgotten about the interest letter – that would be consistent with the affidavit he produced in 1999 and to which I have referred in paragraph [41] above. Mr Bretherton accepted that the schedule was far from the complete picture but again explained that he was under the impression that Barclays were entitled to everything in the Settlement and, as he put it, "we were working for Barclays". For that reason he did not think it necessary to elaborate or correct it. On 31 August 1997 Mr Barnes and his son Dominic made an unannounced visit to Mr Bretherton's home. At the commencement of the trial I gave the claimants leave to amend the particulars of claim to introduce an allegation that Mr Bretherton knew that Mr Barnes did not consider that the company was being run for the benefit of the beneficiaries because Mr Barnes expressed that view to Mr Bretherton in the course of this meeting. In particular, Mr Barnes asserted and confirmed in the course of his evidence in chief that the gist of his conversation was that he had not seen Mr Bretherton for 25 years and wanted to know what was going on; he had received no documents despite making requests to Mr Alcock; he wanted to know why Mr Tomlinson was using trust funds to invest in property; Dominic was a beneficiary and that something funny was going on and that he intended to sue the trustees. He also asserted that Mr Bretherton informed him that Barclays had served a writ for £6 million. Mr Bretherton's account was rather different. The following is a summary. He explained that he was surprised to see Mr Barnes and Dominic at 7.0 pm on a Sunday evening but asked them in and gave them tea and biscuits. They asked him why he had resigned as a director of EHT and he explained that it was for reasons of time and because he had no experience of property dealings. He thought it better to let Mr Tomlinson run EHT together with another colleague (Mr Knopp) who had worked in property and step down as a director but not as a trustee. He also explained that if a way out of the position with Barclays could be found which did not involve personal loss to the trustees and insolvency for EHT so that there was something left for the beneficiaries then he had no desire to stay on as a trustee either. He said that with the benefit of hindsight he would never have taken on the onerous task of being a trustee. I am satisfied that Mr Bretherton's recollection of events is broadly accurate. Nevertheless I also have no doubt that Mr Barnes and Dominic were determined to find out as much as possible about the affairs of EHT and as to why Mr Bretherton had resigned. Moreover, I believe they were concerned to find that EHT was engaging in property dealings. I am sure that these were matters raised in the course of the meeting. I also think it likely that Mr Barnes was assertive and expressed his determination to gain a full understanding of the activities of the trustees and further, that he proposed to take action if he found any evidence of wrongdoing. However I do not accept, as Mr Barnes suggested, that he gave Mr Bretherton any cause to suppose that Mr Tomlinson and Mr Knopp were acting dishonestly; nor that he had any basis for issuing proceedings against the trustees. Indeed Dominic and Mr Barnes accepted in cross examination that they left Mr Bretherton on reasonably good terms. Further, I do not accept that Mr Bretherton suggested that Barclays had issued proceedings claiming £6 million, although I think it likely that Mr Bretherton explained his understanding of the compromise with Barclays. During the remainder of 1997 Slater Heelis pursued their requests for documentation concerning the Barclays loans and compromise. Finally I should note that the accounts for 1997 show directors' emoluments of £81,448 (including social security costs). These were signed on 14 October 1998 and would have been seen within a few days thereafter by Mr Burton and Mr Bretherton. 1998 1998 saw the requests for information continue. The trustees, through their solicitors Davis Blank Furniss, instructed counsel, Mr Geoffrey Pass, to advise on two occasions. The advice was on each occasion provided to Slater Heelis. In his second advice Mr Pass explained that the beneficiaries had the right to see all documents relevant to the administration of the trust, including its investments. The trustees were not required, however, to give reasons for the manner in which they had chosen to exercise any discretion vested in them. As Mr Alcock explained in cross examination and I accept, this guided the way they chose to act. They regarded Mr Barnes as a difficult character and had in the back of their minds the fact they had had to remove him as a director of EHT because of the way he had fallen out with the banks in the past. They did not want him to interfere with the running of the trust or to try to remove its assets or otherwise create difficulties with Barclays. In something of an understatement, Mr Alcock said they felt Mr Barnes had nothing constructive to add. In the late summer Mr Barnes instructed a new firm of solicitors, Black Norman and in November they too made a wide ranging request for information and documents. On 30 November Mr Barnes appointed himself as trustee of the Settlement in place of Mr Gould who, it was said, had died. Directors' emoluments for the year amounted to £121,429. They were set out in the accounts which were signed on 22 October 1999 and provided to the trustees, including Mr Barnes, shortly thereafter. 1999 In March 1999 the trustees decided to seek advice from Mr Sher QC and Mr Taussig. On 17 May they gave preliminary advice in writing that i) Barclays had a claim against the trustees for £1,253,641 to which there was no defence on the merits and probably no defence on the basis of limitation ii) Barclays might well have a good claim against the whole balance of the trust fund either (a) on the footing that the waiver of interest on the sum of £1,253,641 was never binding on Barclays or ceased to be binding on Barclays or (b) on the footing that Barclays had a right to interest or other income received by EHT on cash balances or other assets which could have been distributed to EHT. They also advised that that the only safe course for the trustees was to realise the assets of EHT and to approach Barclays with a view to negotiating a settlement. For this purpose they should seek directions from the court. They concluded: "Finally we should say that this does not appear to be a case of trustees losing substantial trust assets or of beneficiaries losing valuable rights. Rather it appears to be a case of trustees who never had any material trust assets (apart from the shares in EHT, now Thane Investments Limited) borrowing large sums at the request of the Settlor and investing those sums, again at the request of the Settlor, in shares in the Settlor's company. When shortly afterwards the Settlor's company was unable to pay its debts and its shares became worthless the trustees were left with large loans they were personally liable to repay and no means of repayment. Since that time the trustees have in substance been working for Barclays – and if at the end of the day there is anything left for the beneficiaries (which is far from certain) this will be due (it seems) to a combination of skilful management by the trustees, generosity or incompetence on the part of Barclays and plain good luck." In the meantime, on 3 February 1999, Mr Barnes executed a further deed confirming his appointment as trustee. Further, on 3 March 1999 Mr Barnes and his family commenced proceedings seeking an order that the trustees be directed to concur in the appointment of Mrs Barnes and Mr Norman Black, a solicitor with Black Norman, in place of the trustees and in the transfer of all the trust property into the names of Mr Barnes and the new trustees. The trustees responded by issuing proceedings seeking directions pursuant to the advice given by Mr Sher and Mr Taussig. Directors' emoluments for 1999 amounted to £133,016. They were provided to the trustees shortly before the litigation came to a head in July 2000. 2000-2005 On 10 July 2000 the trustee litigation came on for hearing before Laddie J. It was settled by order that the trustees would retire, Mr Tomlinson would resign as a director of EHT and that he would use his best endeavours to procure Mr Knopp's resignation. In the event Mr Knopp did not resign but was dismissed. He brought proceedings for wrongful dismissal under action No. HQ 01011185 which were met by a counterclaim alleging that he was guilty of gross misfeasance. The trial came before HH Judge Thompson QC sitting as a judge of the High Court. By order dated 23 May 2002 he dismissed Mr Knopp's claim, gave judgment for EHT and ordered Mr Knopp to pay £50,000 on account of the costs of the action. In short he found that Mr Knopp and Mr Tomlinson had been guilty of misfeasance in a number of respects over the period 1997 to 2000. Some idea of the degree of wrongdoing can be gained from paragraph 129 of the judgment: "In my judgment this was symptomatic of the way in which Mr Giles Knopp and Mr Tomlinson treated the Thane and Denbrae companies as their own private fiefdom. They had started as they intended to go on, with Mr Giles Knopp enjoying meals at expensive restaurants, drawing cash and travelling at the company's expense when there was no conceivable benefit or interest to the company. The excuse put forward by Mr Giles Knopp that everything he did was approved by his other director, I regard as jejune. Between them Mr Giles Knopp and Mr Tomlinson ran the companies for their own benefit and that of their friends. In my judgment there was a gross misfeasance and breach of fiduciary duty on the part of Mr Giles Knopp in his role of Director of the companies. In summary this is instanced as follows. He disposed of three properties owned by himself and his family to Denbrae, without obtaining independent valuations at a profit of £24,000 to himself, and in the case of the Newport property, enjoyed interest-free loans during the year preceding the transfer. In relation to seven other properties which were acquired during his stewardship, he caused £17,880 to be paid by way of commission to G.K. Ben, half of which found its way back to him. He authorised the acquisition of the Grant Arms Hotel at a price which did not represent its market value but which represented the amount Mr Wagner, Mr Tomlinson's old friend, needed, and authorised the payment of Mr Wagner's sale costs as well as the acquisition costs of the company. He then participated in the leasing the Grant Arms Hotel to Mr Wagner (who was supposed to have provided vacant possession) at a rental which Mr Wagner was able to pay rather than what the premises were worth. He was complicit in the preparation of the homemade lease by Mr Tomlinson, which he duly executed on behalf of Astim either without considering it or knowing that it did not contain a rent review clause. He was complicit in the concealment of that lease from the solicitors who were acting for the companies, with the consequence that if the sale to the Devonshire Pub Company had not been aborted, would have resulted in a payment of £215,000 to Mr Wagner, which but for that lease would have gone to the company. He approved a thoroughly reckless and wholly inappropriate exchange of the company's property stock for some cash and a large number of penny shares in an Isle of Man company quoted on the AIM which had no track record and no dividend payments for the two previous years. He also approved the payment of commission or an introductory fee said to amount to 2.15% or the transfer of £800,000 shares in the Isle of Man Company notionally worth £56,000. Finally, together with his friend of 30 years standing, Mr Tomlinson, they provided each other with generous contracts of employment which contain provision for expensive motor cars, private health care at the top of the range, and expenses which enabled them to enjoy a luxurious lifestyle dining in expensive restaurants and drawing large sums of cash while only being answerable to each other." On 30 July 2002 Mr Knopp was ordered to pay £206,778 by way of damages for misfeasance and, with interest, his total liability amounted to in excess of £317,026 by June 2005. EHT also brought proceedings against Mr Tomlinson and his company Reyall under action No HC 0201377. EHT was in the process of preparing an application for judgment based upon the failure by Mr Tomlinson to comply with various court orders when Mr Tomlinson died. As I have indicated, his estate is subject to an insolvent administration order and the decision was therefore taken not to proceed with the claim. EHT has, however, obtained judgment against Reyall in the sum of £222,384 and costs. In short, it has become clear that following Mr Bretherton's resignation as a director Mr Knopp and Mr Tomlinson embarked on a course of misfeasance to the great cost of EHT and the Settlement. The claimants' case in outline The claimants sought to establish that Mr Bretherton and Mr Burton each: i) received excessive emoluments whilst acting as directors of EHT or its subsidiaries; ii) resigned as a director in circumstances in which there were obligations to the beneficiaries rendered it wrong for them so to do; iii) wrongfully accepted ex gratia payments from EHT; iv) failed to take any steps to remove Mr Tomlinson and Mr Knopp from their positions as directors of EHT when their duties as trustees dictated that they should do so. During the course of the trial it emerged that there was a certain amount of common ground between the claimants on the one hand and Mr Bretherton and Mr Burton on the other. First, in the light of clauses 8 and 9 of the Settlement it was accepted that, subject to the trustees acting honestly and in good faith, there was no objection to them retaining shares in EHT. Second, clause 11 of the Settlement made clear that the discretion and the powers conferred on the trustees were absolute and uncontrolled and, importantly, the trustees were not to be held liable or answerable to any beneficiary for the manner in which they exercised any such power or discretion; nor were the trustees to be held liable for any loss or damage accruing as a result of the exercise or failure to exercise any such power or discretion. Nevertheless, Mr Burton and Mr Bretherton both accepted that clause 11 must be read subject to the irreducible core obligations of a trustee, namely, to act honestly and in good faith. Clause 11 must also be read together with the wide exclusion contained in clause 12. This exempts the trustees save for wilful and individual fraud or wrongdoing. It was accepted that, in the context of a trustee's duties, fraud means dishonesty and, wilful means a deliberate breach of trust. As to the meaning of dishonesty, the parties drew my attention to a number of authorities. Mr Heap, on behalf of the claimants, relied on Walker v Stones [2001] 1 QB 902. Mr Jones QC, who appeared on behalf of Mr Bretherton, relied, in particular, upon Twinsectra v Yardley [2002] UKHL 12; [2002] 2 AC 164, as explained in Barlow Clowes International v Eurotrust International [2005] UKPC 37; [2006] 1 WLR 1476. In the end they agreed that the position can be summarised as follows: i) It is for the court to determine what are the normally acceptable standards of honest conduct. ii) The fact that a defendant genuinely believes that he has not fallen below the normally acceptable standards of honest conduct is irrelevant. It has been long established that the test of honesty in the context of an express trustee is whether the trustee is conscious that he is committing a breach of duty or is recklessly careless whether he is committing a breach of duty or not: Armitage v Nurse [1998] Ch 241. Where the trustee is a solicitor then the issue is whether or not the trustee transgressed the normally acceptable standards of honest conduct expected from a solicitor. It is pertinent to ask: What view would an honest solicitor in the position of the trustee have held? Did the trustee fall below that standard? This is relevant in the case of Mr Bretherton who was a solicitor, albeit one who had not been in private practice for a number of years. Clause 14 of the Settlement also has a bearing on the issues I have to decide. This expressly allowed the trustees to receive and retain for their own use all remuneration and other benefits derived from a directorship or other remunerated office in relation to any company in the shares of which any of the funds of the Settlement were invested. Again, this must be subject to the irreducible obligations upon any trustee. In the case of the emoluments and ex gratia payments received by Mr Bretherton and Mr Burton I must therefore consider whether they were of such a size or nature that it was dishonest of Mr Bretherton and Mr Burton to accept them. The case against Mr Bretherton Were Mr Bretherton's emoluments excessive in the years 1994 to 1996? At the outset I should make it clear that the claimants accepted during the course of the proceedings that they could not maintain any claim against Mr Bretherton in respect of the remuneration which he and his fellow directors paid themselves during the period he was a director. Any loss is merely reflective of EHT's loss for which EHT has or had a cause of action. Such was established by the Court of Appeal in Shaker v Al-Bedrawi [2002] EWCA Civ 1452, [2003] Ch 350 at [73] to [86]. There the court found that a beneficiary under a trust of shares cannot make a claim against his trustee for the diminution in the value of the shares owing the wrongful payment of money by the trustee from the company while acting as a director of that company where the company itself has a cause of action to recover from the trustee director the loss suffered by reason of the wrongful payment. Mr Heap, on behalf of the claimants, did not dispute this as a matter of principle. Nevertheless, he maintained his reliance upon the payment of what he described as excessive emoluments in support of the contention that the trustees were behaving dishonestly in the period 1994 to 1996 and that I should infer from this that Mr Bretherton well knew of the misfeasance of Mr Tomlinson and Mr Knopp in the period from 1997 to 2000. Mr Heap submitted that there was no logical, consistent or ordered approach to the process of fixing the directors' level of emoluments. Further, there was no correlation between the level of emoluments set and the directors' duties, level of responsibility and hours worked. This, he said, was demonstrated by two matters. First, Mr Bretherton gave evidence that, as the company grew, so did its directors' emoluments. Second, in 1994 Mr Burton received £3,000 more by way of emoluments than did Mr Tomlinson and Mr Bretherton. This was apparently awarded by reason of his "additional duties" as company secretary. In truth, however, Mr Burton did a good deal less work than Mr Bretherton. In all the circumstances Mr Heap invited me to conclude that the level of emoluments was largely a function of whether or not the company had a significant income in any particular year. Turning to the specific years in issue, emoluments for 1994 amounted to £51,670. The income of EHT in that year was £99,826. Mr Heap submitted that these emoluments were manifestly excessive and based upon no sensible or justifiable reasoning. In particular he relied upon the following matters: i) There was very little company activity during the year because the development of the West Ardsley land was coming to an end. The only income, excluding bank interest, was £6,750 from plot sales. ii) It is extremely doubtful that the amount of work done by Mr Bretherton was anything like the 300 hours which he estimated. iii) Consistent with the above, Mr Burton wrote a letter to Mr Bretherton dated 20 October 1994 suggesting emoluments of £33,000 in the light of what he described as the "much reduced activity and profit" of EHT. iv) The directors met to discuss emoluments on 14 November 2004. At that meeting, and for no apparent reason, the proposed level of emoluments was increased from £33,000 to £48,000. As for 1995, emoluments were £48,148, excluding the ex gratia payment made to Mr Burton upon his retirement in April of that year. Mr Heap submitted that the key to understanding the directors' approach to emoluments for this year lies in that ex gratia payment of £25,000. He argued that Mr Burton had no legal entitlement to such a payment and that it was clear from Mr Bretherton's evidence that the decision to make the payment took no account of the beneficiaries' interest but rather was based upon Mr Burton's poor health and anticipated future difficulties. He further submitted that in the absence of any directors' service agreements, in circumstances where there was no consistent or explicable approach to the way in which emoluments were fixed and in the light of the fact that the company had no employees and that its only activity was the acquisition of property, the level of emoluments which Mr Bretherton and Mr Tomlinson awarded themselves could not be justified. As for 1996, emoluments amounted to £43,344 and the claimants maintained the same criticisms as for the two earlier years. These are powerful points and they need careful consideration. At the outset I accept the submission that the directors of EHT had no service contracts at the relevant time and, moreover, had no defined approach to the process of fixing the directors' level of emoluments. Mr Bretherton accepted as much in cross examination. Nevertheless, he explained, and I accept, that, although there was no set formula, the directors tried to take into account relevant factors such as the size of the company, the nature of the business, the time spent by the directors on the affairs of the company, the responsibility of the directors and the strategic decisions they were taking. He was also conscious that Barclays would be looking at the accounts and any figures for remuneration therefore had to be reasonable. Second, I accept Mr Bretherton's evidence that the directors felt their responsibilities increased as the company grew. It is right to acknowledge that the assets of the company consisted almost entirely of cash at the bank. This was a matter of which the directors were fully conscious and it gave rise to a good deal of discussion and thought as to the direction that EHT should take in the future. In the end, and as I have explained, they decided to invest the assets and to develop EHT as a property company. It must be remembered that by 1994 the trustees had not heard from Barclays for some time. This was a matter to which the trustees gave careful consideration. As I have found, Mr Bretherton believed at the time that Barclays were entitled to all the assets of the Settlement under the terms of the compromise. However he also believed that as time moved on and what he believed to be the limitation period expired, there was a possibility of doing a deal with Barclays and producing a return for the beneficiaries. I must also consider the time which the trustees believe they spent on the affairs of the Settlement and the business of EHT. In my judgment the best evidence of this is a schedule prepared by Mr Burton during the course of the trust litigation, most probably in about 1999. I am satisfied in the light of Mr Bretherton's evidence that each of Mr Burton, Mr Bretherton and Mr Tomlinson contributed to that schedule. At that time they had access to all the documents of EHT. As Mr Alcock explained in evidence, there were many documents and they filled some 12 boxes. They were all handed over to Dominic following the order of Laddie J and yet have not been disclosed in this action. This has inevitably made the task of confirming the time estimates more difficult. Returning to the schedule, this reveals the approximate number of hours devoted to the Settlement and the business of EHT by the trustees in each of the years 1994 to 1996 as follows: Year Mr Tomlinson Mr Bretherton Mr Burton 1994 1995 1996 200 350 500 300 350 350 150 150 - It is apparent from this table that Mr Bretherton spent in excess of 300 hours on the business of the Settlement and EHT in each of those years. I have explained earlier in this judgment the nature of the activities Mr Bretherton undertook. In my judgment the level of emoluments does not seem unreasonable in the light of this degree of effort and commitment. I think it is also important to keep in mind a number of other matters upon which Mr Jones has placed reliance. First, it is notable that apart from the allegation of excessive remuneration, the claimants have not produced a single example of any abuse of EHT for the benefit of the directors. This is in striking contrast to the period 1997 to 2000 where the abuses where manifest and summarised by HH Judge Thompson QC in paragraph [129] of his judgment. Second, in my judgment the evidence in fact reveals quite the opposite. Mr Bretherton explained that, with one exception, he never claimed any expenses while acting as a trustee or a director despite the fact it would have been quite legitimate for him to have done so. No expenses were claimed in respect of telephone bills, stationery, postage, computer costs, petrol consumption or, indeed, anything else. Particularly striking to my mind is the fact that Mr Bretherton engaged Mr Kemsley to assist him in relation to potential property transactions and paid Mr Kemsley himself personally out of his own pocket. This is not the mark of a dishonest man. It is true that in 1994 Mr Burton received £3,000 more by way of emoluments than did Mr Tomlinson and Mr Bretherton. Clearly this cannot be justified on the basis of the numbers of hours devoted to the Settlement as the table set in paragraph [88] above shows. But is this evidence of dishonesty? In my judgment it is not. The difference in emoluments is relatively modest. Further, Mr Burton's main role was dealing with the financial side of the company, that is to say the annual accounts, corporation tax and the like. He was company secretary and the onus lay upon him to ensure that it complied with all necessary formalities. In addition to these responsibilities he also participated in the decision making process in relation to the strategic direction of EHT and this was a matter of considerable concern to the trustees for the reasons that I have already given. Finally, in relation to 1994 I must deal with the submission that Mr Bretherton could give no plausible explanation as to why Mr Burton's proposed level of emoluments of £33,000 rose to £48,000 when the directors met on 14 November 2004. Mr Bretherton could provide no detailed explanation for the increase. But this is hardly surprising bearing in mind how long ago these events occurred. He did, however, maintain that Mr Burton's letter was merely a proposal for consideration by all of the directors together. At the meeting the directors would have taken into account all the various matters to which I have referred, such as the size of the company, the amount of work they had done and their responsibilities. I would also note that the letter of 20 October 1994 is hardly consistent with the submission that these directors were engaged together in trying to extract as much money as they could from EHT. To the contrary, Mr Burton specifically suggested that they take less in fees that year in view of the reduced activity and profit. For all these reasons, and subject to the ex gratia payment which I consider later in this judgment, I have reached the conclusion that Mr Bretherton's emoluments in the years 1994 to 1996 do not evidence dishonesty. Mr Bretherton's resignation Mr Heap submitted that Mr Bretherton's resignation as a director came about in a curious way and, to put it bluntly, he was 'pushed' and did not 'jump'. He submitted the only realistic conclusion which I can reach on the evidence is that Mr Tomlinson decided that Mr Bretherton had to go and he therefore forced him out. He further submitted that the letter written by Mr Tomlinson to Mr Bretherton on 5 December 1996 should have "set bells ringing" in Mr Bretherton's mind, particularly as Mr Tomlinson saw fit to remind Mr Bretherton of the protection that the deed of Settlement offered him. I have no doubt that Mr Tomlinson did indeed want Mr Bretherton to retire. Nevertheless, I have already rejected the submission that Mr Bretherton decided to resign because of pressure from Mr Tomlinson. On the contrary, I have concluded that he decided to resign because he had little time available in the light of his full time job and because Mr Tomlinson was much more experienced in property transactions and that was the direction that EHT was taking. In my judgment this does not form any basis for a contention that Mr Bretherton's resignation amounted to an abrogation of his duties as a trustee. The payment to Mr Bretherton Mr Heap submitted that Mr Bretherton was wrong to accept the ex gratia payment of £45,000 which he received after retiring as a director of the company. I have referred in paragraph [52] of this judgment to the letter which Mr Bretherton wrote on 31 January 1997 acknowledging that he had no claim for compensation for loss of office and to the letter of 27 March 1997 in which he thanked Mr Tomlinson for what he described as the very generous cheque. Mr Bretherton accepted in cross examination that he thought about whether or not it was appropriate to keep the cheque when he received it and he decided that it was. Mr Heap submitted that if I accept that Mr Bretherton did give thought to the matter then I must conclude that his decision to keep the money was dishonest. He submitted that the situation would have been different if Mr Bretherton had not been a trustee because, in those circumstances, the payment could have been viewed as a normal commercial transaction. It followed, so he submitted, that Mr Bretherton must have known that in making the payment Mr Tomlinson was acting in a way which was directly contrary to the interests of the beneficiaries. Alternatively, if he did not think about it then he was recklessly indifferent as to whether or not Mr Tomlinson's decision was incompatible with those interests. Before dealing with the substance of these submissions I would make the following two preliminary observations. First, EHT has already brought a claim against Mr Bretherton in respect of the ex gratia payments made to Mr Bretherton and Mr Burton. The proceedings were compromised before the claim in the present proceedings was issued. In the circumstances the claimants accept that they have no claim against Mr Bretherton in respect of the payment itself. Secondly, and as I have already mentioned, clause 14 of the Settlement expressly permitted Mr Bretherton and Mr Burton to receive and retain remuneration and other benefits derived from their directorship of EHT subject, of course, to their irreducible requirement to act honestly. Once again therefore the claimants rely upon the payment as evidence of dishonesty on the part of Mr Bretherton and Mr Tomlinson and this forms part of the background against which the claimants invite me to conclude that Mr Bretherton dishonestly allowed Mr Tomlinson remain as a director of EHT or at least deliberately turned a blind eye to the obvious misfeasance of Mr Tomlinson and Mr Knopp. I have to say that I do consider that £45,000 was a rather large sum for Mr Bretherton to accept as an ex gratia payment. However, in the course of his cross examination he explained that such payments were, to his mind, relatively common in commerce and that he therefore did not consider that accepting the money was in any way improper. He also explained that he regarded the payment as a reward to which he was not legally entitled but nevertheless represented a 'thank you' gift for all the hard work that he had put into the Settlement and stress that he had endured. The reason he paid the money back was because he did not wish to become involved in substantial litigation. I have reached the conclusion that I should accept Mr Bretherton's evidence. He dealt with the questions put to him in a frank and open manner and I am satisfied that he genuinely believed that it was reasonable, appropriate and lawful for him to retain the ex gratia payment. I do not accept that he behaved dishonestly. I accept the submission advanced on his behalf that he honestly considered that the payment accorded with normal commercial practice and was perfectly proper. Permitting Mr Tomlinson and Mr Knopp to remain as directors The claimants submitted that Mr Bretherton dishonestly permitted Mr Tomlinson and Mr Knopp to remain as directors of EHT when he knew of or was recklessly indifferent to their misfeasance. In support of this submission Mr Heap relied on the following matters. First, it was said that the trustees adopted a very curious approach to the Barclays loan. They negotiated a limit to their own personal liability at £50,000, entered into the compromise agreement with Barclays and then persuaded the bank to freeze the interest. In these circumstances, so it was submitted, it was odd to say the least that the trustees, and Mr Bretherton in particular, did not press to wind up the Settlement in 1994 when there was apparently sufficient money in EHT to pay off the Barclays loan, avoid any personal liability and perhaps even make a distribution to the beneficiaries. Instead, it was submitted, the trustees allowed the business of EHT to continue for their own personal benefit. I have addressed the substance of this contention in paragraphs [39] to [43] of this judgment. I have reached the conclusion that Mr Bretherton believed that all monies held by the Settlement were payable to Barclays, that there was therefore no possibility of making a distribution to the beneficiaries unless an agreement with Barclays could be reached and that such an agreement was unlikely to be achieved before 2003. In all circumstances the best course was to 'lie low', continue to develop the business of EHT as best they could and try and negotiate with Barclays in 2003, once some 12 years had elapsed since the last contact and in the hope that a suitable settlement could then be reached. I have no doubt that a major concern of Mr Bretherton was his own personal liability and, as the claimants rightly submitted, he accepted that he carried everywhere with him the letter in which Barclays agreed to limit the trustees joint liability to £50,000. I do not, however, think that this is in any way inconsistent with the conclusion that I have reached. For the reasons that I have given the compromise agreement was, in my judgment, susceptible to different interpretations. A reasonable interpretation, particularly if the Interest letter is not taken into account, is that Barclays were entitled to all assets of the Settlement, and it was so understood by Mr Bretherton. Subsequently, Mr Sher and Mr Taussig confirmed the ambiguous nature of the compromise agreement in their advice of March 1999. Second, it was said that the trustees sought to mislead Mr Barnes in respect of the Barclays loan. The claimants rely in particular here upon the letter of 5 August 1997 in which Mr Tomlinson informed Mr Barnes's solicitors that the amount outstanding to Barclays was over £10.5 million. The claimants say that Mr Bretherton must have known the letter was an attempt to mislead Mr Barnes and did nothing to correct the impression it gave. I have set out the details of this letter and Mr Bretherton's reaction to it in paragraphs [53] to [55] of this judgment. I do not believe that Mr Bretherton thought the letter was accurate and, to the best of his knowledge, no calculation had been carried out suggesting that the amount owing to Barclays was £10,838.150. Nevertheless, I have accepted Mr Bretherton's evidence that he was under the impression that Barclays were entitled to everything in the Settlement and for that reason he did not think it necessary to elaborate or correct the letter. I think it also true to say that none of the trustees wished to excite Mr Barnes's interest. They considered Mr Barnes to have a difficult personality and that he was a person who was unlikely to make any useful contribution to the administration of the Settlement or the running of EHT. Under clause 16 of the Settlement the trustees were at liberty to leave the conduct of the business of EHT wholly to its directors and no beneficiary was entitled to require the distribution of any dividend or require the trustees to exercise any powers they might have of compelling any such distribution. The trustees had no obligation to consult the beneficiaries when exercising powers conferred by the trust deed and, indeed, Mr Barnes himself was the settlor, not a beneficiary, and the trustees owed no duty to him personally at all. They were conscious that he was a domineering and difficult man to work with. In summary, I believe that they wanted as little as possible to do with him. Against this background I do not accept that Mr Bretherton deliberately sought to mislead Mr Barnes and do not accept that he behaved dishonestly. The third matter upon which the claimants rely is the meeting which took place at Mr Bretherton's house on 31 August 1997. It was submitted that I should accept Mr Barnes's version of events and that Mr Barnes put Mr Bretherton on notice of his belief that "something funny was going on" within EHT and that such was his concern that he threatened to take action against the trustees should that suspicion prove correct. I have dealt with this meeting in paragraphs [56] to [58] of this judgment. I gained the clear impression that Mr Barnes's principal concern was the direction that EHT was taking and, in particular, he did not approve of the fact it was engaging in property dealings. But for the reasons I have already given I do not accept that this meeting gave Mr Bretherton any ground to suppose that Mr Tomlinson was acting dishonestly. It was also submitted that Mr Bretherton at the least deliberately turned a blind eye to the obvious. Had he not done so, with very little effort and simple means he could have ascertained the extent to which Mr Tomlinson and Mr Knopp had begun to run EHT for their own benefit. Had he asked whether or not they had awarded themselves service contracts and called for the relevant documents, he would have realised that the two directors had acted in a way which was wholly contrary to the beneficiaries' interests. He should have concluded that, unless stopped, Mr Tomlinson and Mr Knopp were likely to run EHT for their own benefit in flagrant disregard of the beneficiaries of the Settlement. I do not accept these submissions. As clause 16 of the Settlement makes clear, the trustees were not required to intervene in the management or conduct of the business of EHT. Unless they had notice of any dishonesty or misappropriation of money then they were at liberty to leave the conduct of the business wholly to its directors. Mr Bretherton had known Mr Tomlinson for over 20 years. Mr Tomlinson was a chartered accountant, at one time a partner in Bedell & Blair, the firm which audited the accounts of Northern Developments, and for many years had been engaged in the property investment business as a director of a quoted property company called Dares Estates. Mr Knopp's appointment as a director of EHT was also, to Mr Bretherton's mind, a logical progression. He was originally the "deal finder" and Mr Bretherton though it appropriate that he should become a director of EHT. Mr Knopp had been known to Mr Tomlinson and Mr Burton since 1972. From 1972 to 1979 Mr Knopp was the auditor of EHT's accounts and was also for a time employed by Dares Estates as finance director. In summary, he was familiar with property matters, a qualified accountant, and had previous involvement in the affairs of EHT. Mr Bretherton did not at any time discuss with Mr Tomlinson or Mr Knopp their terms of employment or the method to be used for assessing their remuneration. Prior to his resignation, none of the directors of EHT had ever had a contract of employment or a service agreement of any kind and Mr Bretherton had no reason to think that there would be any change of policy thereafter. He was never party to any discussions about a new policy or any such change. Mr Bretherton believed that Mr Knopp and Mr Tomlinson would continue to approach the business of EHT in the way it had been approached prior to his departure. Finally I turn to the accounts for the years 1997, 1998 and 1999. The claimants submitted that these show massively increased emoluments and benefits and even if Mr Bretherton genuinely did not realise what was happening within EHT then sight of those accounts must have led him to conclude that Mr Tomlinson and Mr Knopp were engaged in significant misfeasance. The claimants therefore contended that Mr Bretherton was duty bound to act to curb Mr Tomlinson's and Mr Knopp's excesses in 1997 and came under a new duty so to do each time that he read the company's annual accounts. The directors were paid emoluments for 1997, 1998 and 1999 of £81,448, £121,429 and £133,026 respectively. Were these figures so excessive that Mr Bretherton must have known or was recklessly indifferent as to whether the directors were guilty of misfeasance? In my judgment the answer to this question is clearly no. I arrive at that conclusion for all of the following reasons. First, the 1997 account were, in all likelihood, received by Mr Bretherton and Mr Burton in October 1998. They were signed by the auditors, Grant Thornton, on 21 October 1998. They revealed an increase in directors fees, certain pension costs and the acquisition of motor vehicles to the value of £33,850. To Mr Bretherton's mind these were not in anyway out of the ordinary for a company engaging in property dealings and with purchases of £1.87 million and assets of £3.3 million. Mr Bretherton discussed the accounts with Mr Burton who looked at them closely and it did not occur to either of them that there had been any mismanagement of the company. The 1998 accounts were signed off by the directors on 22 October 1999 and by the auditors, Grant Thornton, on 26 October 1999. The directors emoluments had risen to a total of about £122,000 and another motor vehicle had been added at a cost about £26,000. The assets of the company had apparently increased to some £4 million. I should also note that the Chairman's statement recorded, as a post balance sheet event, the acquisition by EHT of 8,450,000 shares in Manx & Overseas Plc, a property company, and described as a medium term investment. By this time it must be recalled that Mr Barnes had become a trustee and had begun proceedings seeking an order that the defendants be removed as trustees and replaced by Mrs Barnes and Mr Black. For their part, the trustees had begun proceedings seeking directions from the court pursuant to the advice of Mr Sher and Mr Taussig. The accounts were considered at what was described as an acrimonious AGM of EHT on 17 December 1999. There is no suggestion that Mr Barnes, or indeed anyone else, raised the issue of excessive emoluments being paid to the directors. Mr Barnes produced a memorandum in advance of the meeting setting out the matters he wished to raise. These did not include remuneration. It is also relevant to consider the skeleton argument prepared on behalf of the Barnes family in the trust litigation. Despite numerous references to the remuneration paid to the trustees, it is not suggested that the amounts were so excessive as to amount to evidence of dishonesty. The complaints were rather that the beneficiaries had lost confidence in the trustees' ability to have any regard to their welfare; the trustees had been less than open in the manner in which they had disclosed to the beneficiaries what had been going on; the trustees had failed to address over a number of years the issue of the Barclays loan; the trustees appeared not to recognise their fiduciary duties; the trustees had allowed one of their number (Mr Tomlinson) to indulge in commercial property speculation through EHT; and finally, the trustees now had no substantial interest to protect. Finally, I should mention the 1999 accounts which were signed off by the auditors on 22 May 2000, less than two months before the court hearing on 11 July 2000 when the trustees resigned. The emoluments were of the same order as for 1998 and Mr Bretherton assumed that the directors were liquidating the property assets of the company to leave EHT in a cash rich position in readiness for distribution to the Settlement, payment of tax liabilities and then final agreement with Barclays. It seems that these accounts add nothing to the accounts of the previous years. Indeed, Mr Bretherton does not even know whether they were ever presented to an AGM. In summary, I reject the conclusion that the emoluments for the period 1997 to 1999 as disclosed on the face of the accounts were so excessive that Mr Bretherton must have known or was reckless as to whether the directors were guilty of misfeasance. The case against Mr Burton Were Mr Burton's emoluments excessive in 1994? The claimants rely upon the same facts to support their claim against Mr Burton. Again it was submitted that the fact that the emoluments for the year were excessive did or should have alerted Mr Burton to the fact that the directors were prepared to disregard their duties as trustees and placed him under a duty to ensure that so long as he remained as a trustee the remaining directors did not take excessive emoluments. I reject this submission for like reasons to those given in relation to the equivalent allegation made against Mr Bretherton. In short, he was company secretary with the attendant responsibilities of that office, he dealt with the financial side of the company and was also responsible for the strategic direction of the company. I do not believe that the emoluments paid to Mr Burton in 1994 are evidence of dishonesty. Mr Burton's resignation The submission under this head depends upon the contention that Mr Burton's emoluments were excessive in 1994. It was submitted that because Mr Burton knew that the emoluments could not be justified he failed properly to bear in mind the beneficiaries' interests when resigning and so his resignation amounted to a breach of his duties as a trustee. Once again, I reject this submission. Not only were the emoluments for 1994 not so excessive as to amount to evidence of dishonesty but, in addition, I am wholly satisfied that he resigned as a director because of his extremely poor health and the severe stress which he suffered as a result of his duties as a trustee and director. The payment to Mr Burton The claimants maintained that the acceptance by Mr Burton of an ex gratia payment of £25,000 was again evidence of dishonesty. They submitted that, but for the fact that he was a trustee, Mr Burton could have justified his acceptance of the payment on the basis that it amounted to a relatively common business transaction. However, as a trustee, he could not have genuinely believed that his acceptance of it was anything other than directly contrary to the interest of the beneficiaries. Once again, and for like reasons to those that I have given in relation to the equivalent allegation made against Mr Bretherton, I reject this submission. I have no doubt that Mr Burton, like Mr Bretherton, thought that ex gratia payments were common in the commercial world. I do not believe for one moment that Mr Burton thought that his acceptance of the payment was in any way dishonest; rather, I think it overwhelmingly likely i) that he considered it formed a measure of compensation for the stress and ill health he had endured over many years. In reaching this conclusion I think it relevant that the directors worked for many years without any remuneration at all and did not pay themselves any money until EHT had discharged its debts. Further, Mr Burton's letter of 20 October 1994 suggested a lower level of remuneration for that year. This is a clear indication that Mr Burton was concerned to ensure that any remuneration he received was reasonable. Moreover, the remuneration was always stated in the published accounts of EHT and so available to Mr Barnes and the beneficiaries and indeed any other interested third party. I accept the evidence of Mr Bretherton and Mr Alcock that Mr Burton was both conscientious and a worrier. I also accept the submission advanced on Mr Burton's behalf that it is simply not credible that, at the end of a blameless career, he would had been prepared to expose himself to additional stress in his retirement by perpetuating the existence of EHT for the benefit of the remaining directors. On the contrary, when he retired, he left the company in the hands of Mr Bretherton and Mr Tomlinson whom he had known and respected for very many years and whom he knew to have worked diligently to fulfil their obligations. He had every reason to believe that, so long as Mr Tomlinson and Mr Bretherton remained directors, the company would be run entirely properly. Permitting Mr Tomlinson and Mr Knopp to remain as directors The claimants maintain that the accounts should have alerted Mr Burton to the misfeasance carried out by Mr Tomlinson and Mr Knopp. In so doing they relied upon the same arguments advanced against Mr Bretherton. Nevertheless the claimants accepted that their case against Mr Burton was not as strong as that against Mr Bretherton. In my judgment, and for like reasons to those that I have given already in relation to the claim against Mr Bretherton, I reject the submission that the accounts should have alerted Mr Burton to the misfeasance of Mr Tomlinson and Mr Knopp. Is the £25,000 paid to Mr Burton by EHT recoverable by the Settlement as a matter of law? During the course of the hearing the claimants accepted that they could not maintain a claim against Mr Burton in respect of the emoluments paid to him in 1994 because any loss to the Settlement was merely reflective of loss to EHT. The case against Mr Burton for repayment of the £25,000 was not, however, abandoned. Nevertheless the claimants accepted that, in so far as the payment was not properly made, EHT had a claim for its recovery. In the circumstances it seems to me that the claim for the repayment of the £25,000 is indistinguishable from the claim in respect of the directors' emoluments. In both cases any loss to the Settlement is reflective of loss to EHT. Neither claim is available to the claimants in the light of the decision of the Court Appeal in Shaker v Al-Bedrawi. Conclusion. I am satisfied that at all times Mr Bretherton and Mr Burton acted honestly and in good faith. Their behaviour did not at any time fall below the normally acceptable standard of honest conduct. The claims against them must be dismissed.

LORD JUSTICE HOOPER : On 7 January 2011 at the Crown Court at Nottingham (HHJ Teare) the appellants Kelham and Mitchell pleaded guilty to count 3, damaging railway cabling belonging to Network Rail and count 4, theft of railway cabling from network Rail. On 3 February 2011 Mitchell also pleaded guilty on re-arraignment to count 1, damaging railway cabling belonging to Network Rail and count 2, theft of railway cabling from network Rail. Both appellants were given (so it appears) the full discount for their pleas. Mitchell was sentenced on counts 2 and 3 to 3 months' imprisonment on both concurrent. On counts 2 and 4 he was sentenced to 3 years' imprisonment on both concurrent and concurrent to the sentences on counts 2 and 3. The total sentence was therefore one of 3 years' imprisonment, with a direction under section 240 of the Criminal Justice Act that 117 days spent on remand should count towards the sentence. Kelham was sentenced on count 3 to 3 months' imprisonment. On count 4 he was sentenced to 3 years' imprisonment concurrent to the sentence on count 3. The total sentence was therefore one of 3 years' imprisonment, with a direction under section 240 of the Criminal Justice Act that 117 days spent on remand should count towards the sentence. Kelham admitted to being in breach of a suspended sentence order comprising 10 weeks' imprisonment suspended for 12 months, imposed on 6 October 2010 at Newark Magistrates' Court for burglary involving the theft of cable. For this he received a sentence 10 weeks' imprisonment. The total sentence was therefore one of 3 years' imprisonment, with a direction under section 240 of the Criminal Justice Act that 117 days spent on remand should count towards the sentence. The total sentence was therefore a sentence of imprisonment for 3 years 10 weeks, with a direction under section 240 that 117 days spent on remand should count towards the sentence The offences related to the theft of and damage to cabling on the East Coast mainline railway near a junction outside Newark. There had been a spate of offences committed around that stretch of the track and the offences in this case took place on 8 October 2010. At about 8am that morning, Network Rail became aware of a signalling failure in the area and when engineers attended at the scene, they found that about 15 metres of signal control high voltage cable had been stolen from near the junction. The subsequent investigation revealed that Mitchell had stolen that cable and visited a scrap metal dealership in Newark shortly after the theft had taken place and he had been paid £44 for the cable. (Counts 1 and 2) As a result of Mitchell's actions there were serious and significant delays to services but whilst the engineers were at the trackside in the afternoon, they became aware of further damage to the track and they found a further section of some 30 to 40 metres of cable had been sawn through and was in the process of being removed. They saw Mitchell was nearby and summoned the police. A significant pursuit of the appellants took place involving police dogs and a helicopter before the police managed to track both appellants down and found them hiding some distance away. They were arrested (Counts 3 and 4). Network Rail had had to close that stretch of mainline causing delays and cancellations of services. As a result of their safety policy, failsafe systems brought trains to a halt, level crossings closed automatically and a conservative estimate of the loss caused to Network Rail was at least £75,000. When interviewed, Mitchell accepted his involvement to an extent but Kelham denied any involvement. Both are in their mid-twenties. Mitchell has a history of class A drug addiction and alcohol addiction. Both are or have been addicts and stole to pay for their addiction. Both have been unemployed for some time. Both appellants had significant criminal records. Mitchell's record of eighteen previous convictions include robbery, assault, arson, four previous convictions for theft, two for burglary, one for going equipped for theft and one for damaging property. The current offence was committed shortly after release from a 12 week custodial sentence imposed on 16 August 2010 for a burglary (non-dwelling) committed whilst on bail and involving the theft of copper piping from a warehouse and was committed before the sentence expiry date. Mitchell also committed the current offence whilst subject to a conditional discharge imposed on 20 August 2001 for an offence of criminal damage, also committed on bail. Kelham's record included four previous convictions for burglary and three for theft. Kelham committed these offences two days after receiving the suspended sentence. Kelham had also been involved in the theft of copper in April 2010. Mitchell's pre-sentence report dated 26 January 2011 recommended a Community Order with requirements of supervision, unpaid work and a programme. There was a high risk of him re-offending and the risk of him re-offending would increase if he were to resume consuming alcohol to excess. He was able to demonstrate insight into the consequences of his behaviour and expressed his regret at the potential jeopardy he caused to rail users, Kelham's pre-sentence report dated 26 January 2011 stated there was no realistic alternative to a custodial sentence. There was a high risk of him re-offending and that would remain until he addressed his misuse of drugs. He now expressed regret for the jeopardy he had placed the users of the railway in and expressed relief that no serious injuries resulted from his grossly irresponsible behaviour. In passing sentence the judge said that they both had a string of previous convictions and on 8 October had decided to steal some copper cable for either drink or drugs. The value of the cable was under £100 and would only have kept them in drink or drugs for a couple of days. They had decided to take the cable from Network Rail and anyone would have thought they would have realised the massive inconvenience that would cause. It was probable that hundreds or thousands of people had been inconvenienced but neither of them had thought about that. They only had their foolishness to blame for the sentences that would be imposed because the effect of their actions on the public could not be ignored. The mitigating factors were their admissions and eventual pleas and the fact they had not realised the extent or value of the damage they had caused, let alone the inconvenience. Nevertheless, a deterrent sentence had to be imposed so that other people did not trespass on the railway and steal signalling cable. They would receive credit for their pleas. The starting point before credit for the pleas must have been one of 4 ½ years' imprisonment. It is submitted that that is manifestly excessive. In the case of Kelham it is submitted that the judge should have passed a lower sentence to reflect the fact that he was facing only two counts. Although the judge did not explain why he had made no such reduction, Kelham had committed the offence within 2 days of the imposition of a suspended sentence for a similar offence. That in our view justified the same sentence for both appellants. We looked at the Sentencing Guidelines for theft, but they are of only limited help. Cases of theft of cable etc alongside railways do not sit easily within any of the guidelines because of a combination of unusual circumstances; the value of the goods and the gain to the thieves is relatively small; whereas the cost to the railway company is disproportionately large and the disruption to the travelling public is enormous. We note that Guideline, relying on section 143(1) of the Criminal Justice Act 2003, states in paragraph 5 that the primary factor in considering sentence is the seriousness of the offence which is determined by assessing the culpability of the offender and any harm which the offence caused, was intended to cause or might foresee ably have caused. Whatever the state of mind of the appellants vis a vis the harm caused by their actions, it is difficult to see how they were other than reckless as to the harm that would be caused in removing cable of this kind. In paragraph 6 it is stated that the starting point should be the loss suffered by the victim, which can properly be said to be in the region of £75,000 and that does not include the unquantifiable financial losses caused to the stranded passengers, as well as the enormous inconvenience. It is submitted on behalf of Mitchell that the current case was of a similar or lower level of seriousness to Austin [2009] 2 CR App R (S) 74 which involved graffiti on railway carriages and the heavy costs involved in its removal, some £60,000. In our view the index offences are considerably more serious. Significance is attached by counsel for the appellants to the word "deterrence" used by the judge and it is submitted that the judge was passing a higher sentence than would otherwise be justified because of local prevalence. This argument fails if for no other reason that any rail traveller or any reader of newspapers knows that thefts of the kind with which we are concerned are of nationwide prevalence. Particular reliance is placed on Manion and Kershaw [2011] EWCA Crim 234, decided coincidentally on the day before HHJ Teare passed sentence. Before we were shown that case it was our provisional view that the appropriate sentence for the two appellants after trial and given their appalling current records of offences including thefts of metals should have been at least 3 years' imprisonment and not the 4 ½ years considered by the judge to be appropriate. Quite apart from any deterrent value such a sentence might have on the appellants themselves and others minded to commit this kind of offence and quite apart from the necessary punitive value of such a sentence, Network Rail, the travelling public and other victims of their offending are entitled to a measure of protection from them in the future. Furthermore, the appellants need to learn to abstain from drugs and excessive alcohol. We were told that the appellants have made some progress in this area. Not only do we take into account the costs and inconvenience we also take into account that Network Rail is very vulnerable this kind of attack – there is no way that it can sensibly protect itself against attacks of the kind with which we are concerned. We turn to Manion and Kershaw. The appellants had pleaded guilty on re- arraignment to two counts of theft and had been sentenced to 3 years' imprisonment. The facts were: 4. … At about 2.45am on 12th January 2010, there was a total loss of power to railway lines in the area of Rotherham, South Yorkshire. A large amount of signalling cable had been stolen. There is some doubt as to the precise lengths, but it was a considerable quantity. 5. The following morning, police officers made inquiries at a local scrapyard and inside one of the metal bins was found a piece of cable matching the cable taken. Two males had brought the cable into the yard. The receipt for the cable was in the name of W Kershaw, with what was later found to be the appellant Kershaw's old address. 6. Both the appellants were arrested after the second offence but, when arrested, Mr Kershaw said in relation to this offence that he had not been at home and the receipt was not his. In a subsequent interview, he said that he had been out on the night in question and had dragged some cable away from a location close to the railway. Manion, in relation to this offence, said that he had had some involvement with the wire but denied that what he had done amounted to theft. 7. The offending underlying count 2 can be summarised as follows. On 14th January 2010, these appellants stole a further considerable length of cable valued at around £900. About 35 minutes after the loss of power to the railway, they were captured on closed circuit television dragging a tool box on wheels a little distance away from the railway. The track marks were followed to a housing estate close to where the appellants lived. The tool box was recovered from Kershaw's garden when he was arrested. 7. In relation to this, when interviewed, both said they had some involvement with the cable but it did not amount to theft and they had not actually taken anything away from the railway itself. 8. The cable which was stolen on count 1 was sold for £33 and the cable stolen on count 2 sold for £36. However, the cost of replacing the cable and the cost of disruption to the railways was far in excess of those figures. The cable and the workmanship on count 1 cost £1,777 in terms of replacement and £920 on count 2. The cost of disruption to the railway company was estimated to be £25,000 and, on the first occasion in particular, it caused extensive delay to the railways and huge disruption to passengers. Both had, like the appellants, appalling records of dishonesty. The court referred to the evidence of Mr Guy, Head of Operational Security and Continuity Planning for Network Rail, who was able to give a national view of the impact of this kind of offending. He said: Since the rise in the global price of copper which began in 2004, NR [National Rail] have experienced over a 300% increase in the theft of copper signal and power cable, as well as other metals. Copper cables have been stolen from the side of the railway track and from our storage depots. The impact of such thefts on the company, our staff and the travelling public has been significant both in terms of financial loss and personal hardship. In the words of the court: Later he emphasised how repairs after theft of cable from the lineside usually required motor vehicles for transportation to get access to the trackside and sometimes the track itself. This has historically given rise to dangerous collisions between vehicles and trains which would otherwise be wholly avoidable. Large amounts of cable are stolen from storage depots and there is a real impact on rail networks' capacity to replace stolen lineside cables. Such is the demand, suppliers are finding it difficult to meet the demand for more cable for such replacement in a reasonable time. In financial terms, he goes on: "... compensation for delays and additional security provisions are costing [National Rail] approximately £15 million each year." The court then said: 23. In our judgment, there is ample evidence of a high degree of disruption caused by this kind of offending nationally. Set against that body of evidence before the judge, comment by him as to the frequency of offending in his local area does not breach any principle set out in the guidelines. His emphasis was on the degree of disruption more than the local prevalence. The court continued: 24. All that said, as we have already indicated in the course of argument, we do accept the principle submission advanced here that the starting point was somewhat too high, producing sentences of three years after a plea of guilty. It seems to us that the appropriate starting point is two years' imprisonment for offending of this kind. The appropriate reduction here for pleas of guilty entered, as they were, only in the face of a trial, was 10 per cent. 25. Accordingly, the appropriate sentences here are sentences of 22 months' imprisonment on each count, to be served concurrently in respect of each appellant … Whereas our tentative view was that the starting point for these appellants after trial was one of 3 years' imprisonment, the court in this case took the view that the appropriate starting point was two years' imprisonment for offending of this kind. The only difference in the two cases is the amount of loss in the index cases is considerably greater than in Manion and Kershaw. The language of the earlier case is clearly not meant to be exact. A 'starting point' by definition permits of movement to either side. Anyone who is devising a guideline (which this was not) speaks of a range, and perhaps also of a starting point within it. But a starting point is not a fixed sentence and cannot be meant to be. Thus we do not take Manion to be setting an absolute standard for all cases of railway cable theft. In our view the appropriate sentence for the two appellants on the theft charges is two years' imprisonment, allowing a full discount for the pleas. To that extent the appeals are allowed.

OPINION OF MR ADVOCATE GENERAL CAPOTORTI DELIVERED ON 18 DECEMBER 1980 ( ) Mr President, Members of the Court, 1. Once again Article 30 of the EEC Treaty forms the subject-matter of a request for interpretation submitted under Article 177 of that Treaty. The facts are very simple. A company, Kelderman, has been charged with contravening the Netherlands Brood-besluit [Bread Order] of 21 December 1925 by placing on the market in the Netherlands “brioches” imported from France whose dry-matter content does not conform with the levels prescribed by Article 10 of that order. Before the Economische Politierechter [Magistrate in Economic Matters] at the Arrondissementsrechtbank [District Court] Amsterdam, the accused contended that the said provision was no longer of any legal effect since it was incompatible with Article 30 of the EEC Treaty. The magistrate was accordingly led to submit the following question to the Court: “Must the concept of ‘measures having an effect equivalent to quantitative restrictions on imports’ in Article 30 of the EEC Treaty be interpreted as extending to the requirement laid down in Article 10 of the Broodbesluit [Bread Order] (Warenwet [Law on Goods]) that the quantity of dry matter in a loaf must fall within certain limits, with the result that traditional products from other Member States, the dry-matter content of which exceeds the limits laid down, may not be marketed in the Netherlands?” 2. The Netherlands provisions under which the criminal proceedings against Kelderman were brought call for some clarification. The Broodbesluit was issued pursuant to Articles 14 and 15 of the Warenwet of 19 September 1919, which allows rules on the description, varieties and composition of certain products to be made for the purposes of protecting public health and furthering fair trading. Article 10 of the Broodbesluit provides in substance that the weight of the dry matter of a loaf must be less than 22 grams or fall within one of the brackets thereinafter listed (30-36g, 60-70g, 120-140g, 240-265g, 480-530g, etc.). Exceptions are provided for in the cases of bread containing raisins or sugar, and biscuits. It may appear surprising that in its order the Netherlands authorities preferred to adopt a system of brackets instead of prescribing specific minimum and maximum percentages of dry-matter content. There is, however, no difficulty in understanding that that system is linked to the existence of a number of traditional sizes of loaves and it appears that the order was also concerned to ensure the continuance of that range of sizes (bread-rolls of 50g and 100g; loaves of 200g, 400g and 800g etc.). It should also be noted that, whilst the minimum dry-matter content is consistently equivalent to 60%, the maximum values are fixed in accordance with a reducing scale. In the present case the “brioches” imported and sold by Kelderman weighed 400g — and thus corresponded to one of the customary sizes employed in the Netherlands — but they had a dry-matter content of 301g which thus exceeded by 36g the maximum provided for in the bracket for loaves of 400g. I would observe in this connexion that, curiously, the Netherlands administrative authority which instituted the criminal proceedings against Kelderman referred to the bracket for a loaf of 800g and proceeded on the assumption that the dry-matter content of the “brioches” in question was too low. This factual detail, however, clearly has no effect on the general terms of the problem. There is another aspect of this case which is puzzling, namely that the “brioches” have been treated as equivalent to bread. In fact, as the Commission has observed, for the purposes of the Common Customs Tariff ordinary bread is distinguished from bread containing eggs; furthermore there is no doubt that also from the point of view of the consumer the two products differ appreciably. On the other hand however, it is true that “brioches” are not amongst the kinds of bread expressly excepted by the Netherlands order in question, so that the national courts are probably unable to classify them as anything other than a variety of ordinary bread. At all events, the matter is purely one for the court dealing with the main case. 3. There is no doubt that rules of the kind described above are capable of hindering, at least indirectly, intra-Community trade. In fact, if minimum and maximum limits to dry-matter content are laid down with implied reference to a specified scale of sizes of bread not only are conditions imposed which are more stringent than a requirement relating to a minimum percentage of dry-matter (or of a maximum percentage of water) such as is found in several legal systems, but strict adherence to a scale of sizes (or forms) which reflect a local tradition is also presupposed. It is thus sufficient that in another Member State different traditions prevail, or that (as in this case) it is not considered necessary to restrict the maximum dry-matter content, for the sale of bread products imported from that State to be hindered. In the foregoing it is not my intention to deny that the Member States are nevertheless free to regulate the production, distribution and consumption of bread on their respective territories. In fact Community rules in this sphere have not yet been enacted although they were envisaged as part of the third stage of the programme of actions intended to eliminate technical obstacles to the trade in foodstuffs adopted by the Council on 28 May 1969 (and published in the Journal Officiel, C 76 on 17 June 1969). On 4 January 1973 the Commission submitted to the Council a proposal on the approximation of the laws concerning bread; that proposal was not, however, considered by the Council and the Commission ultimately withdrew it in 1976. Nevertheless, it is clear that Member States' powers in this field must remain within the limits set out by Article 30 of the EEC Treaty. That was confirmed by the Court of Justice in its judgment of 26 June 1980 in Case 788/79 Gilli and Andres [1980] ECR 2071 in which it stated (at paragraph 5 of the decision) that “in the absence of common rules relating to the production and marketing of the product in question it is for the Member States to regulate all matters relating to its production, distribution and consumption on their own territory subject, however, to the condition that those rules do not present an obstacle, directly or indirectly, actually or potentially, to intra-Community trade”. That said, in order to escape the prohibition laid down in the said Article 30 national provisions of the kind described above must either come within the scope of Article 36 — in particular under the head of the protection of the health of humans — or meet one of the other imperative requirements which decisions of the Court of Justice have held may prevail over the above-mentioned prohibition, namely fair trading and consumer protection (I refer in this connexion to the judgment of 20 February 1979 in Case 120/78, REWE [1979] ECR 649 and the aforementioned judgment of 26 June 1980 in Case 788/79 Gilli and Andres, at paragraphs 8 and 6 respectively of the decisions). It is therefore a question of establishing whether one of those exceptions applies in this case. 4. The objective of protecting public health certainly provides justification in principle for a national measure laying down a certain minimum dry-matter content for bread: it is clear that such a measure is concerned to ensure that bread is nourishing and that the quantity of water contained in it is not excessive. On the other hand I would deny that the fixing of a maximum dry-matter content may be justified on the same basis; it appears to me difficult to maintain that bread having a lesser degree of humidity is injurious to health. However, what is first and foremost at issue here is the system of fixing dry-matter content within brackets, which is strictly linked, as we have seen, to the manufacture of bread in specified sizes. That system, which is not related in any way to the protection of health, results in hampering the importation of bread which is made in different sizes in other Member States, a situation which is clearly contrary to Article 30. Recognizing that the system of fixing dry-matter content within brackets entails an obligation to produce bread in specified sizes, the Netherlands Government has argued that this promotes fair trading and consumer protection. In its view, since bread is usually sold without packaging, the standard sizes of the various loaves assure the consumer as to the weight. However, even if it is accepted that that requirement ought to be met it remains to be seen why the sale of bread otherwise than in the customary sizes may not be permitted subject to the condition that a wrapper be provided on which the weight is indicated (in the present case the “brioches” in question were marketed in precisely that state). It should be recalled that Article 3 of Commission Directive 70/50/EEC of 22 December 1969, based on the provisions of Article 33 (7) of the EEC Treaty, on the abolition of measures which have an effect equivalent to quantitative restrictions, considered as coming within that category “measures governing the marketing of products which deal, in particular, with shape, size, weight, composition, presentation, identification or putting up and which are equally applicable to domestic and imported products, where the restrictive effect of such measures on the free movement of goods exceeds the effects intrinsic to trade rules”. It was stated in the second paragraph of that provision that that is the case, in particular, where the restrictive effects on the free movement of goods are out of proportion to their purpose and where the same objective can be attained by other means which are less of a hindrance to trade. It appears to me beyond doubt that national arrangements cast in the form of Article 10 of the Netherlands Broodbesluit constitute a hindrance to the free movement of goods which is out of proportion to the objectives in view, which may be attained by other means. If it is desired to assure consumers as to the nature and weight of the product which is offered for sale otherwise than in traditional sizes, requiring traders to provide the necessary information on a label would constitute a sufficient means in relation to the intended objective. Finally, I must comment on the contention of the Netherlands Government that the Warenwet empowers the competent minister to grant exemptions from the conditions laid down in the Broodbesluit. I shall merely recall what the Court said in its judgment of 24 January 1978 in Case 82/77 van Tiggele [1978] ECR 25 (paragraph 19 of the decision), namely, that a measure which falls under the prohibition laid down in Article 30 of the Treaty does not escape the prohibition merely because the competent authority is empowered to grant exemptions, even if that power is freely applied to imported products. 5. In conclusion I consider that the Court should reply to the request for a preliminary ruling submitted to it by the Economische Politierechter at the Arrondissementsrechtbank, Amsterdam, by order lodged at the Court Registry on 29 May 1980, with the following ruling: “The prohibition on measures having an effect equivalent to quantitative restrictions on imports laid down in Article 30 of the EEC Treaty must be understood as embracing provisions of a Member State determining the minimum and maximum limits of dry matter in bread and similar products if those provisions are framed in such a way as to preclude the importation of products of that kind which have been duly manufactured and placed on the market in other Member States, which are not injurious to the health of humans and which are offered to the consumer with sufficient information as to their nature and weight”. ( ) Translated from the Italian.

JUDGMENT OF THE COURT OF FIRST INSTANCE (Second Chamber) 13 July 2004 ( *1 ) In Case T-115/03, Samar SpA, established in Mottalciata (Italy), represented by A. Ruo, lawyer, applicant, v Office for Harmonisation in the Internal Market (Trade Marks and Designs) (OHIM), represented by O. Montalto and MX. Capostagno, acting as Agents, defendant, the other party to the proceedings before the OHIM Board of Appeal, and intervening before the Court of First Instance, being Grotto SpA, established in Vicenza (Italy), represented by M. Bosshard and S. Verea, lawyers, ACTION brought against the decision of the Third Board of Appeal of OHIM of 30 January 2003 (Case R 340/2002-3), concerning the opposition of the proprietor of the national figurative mark BLUE JEANS GAS to registration of the Community word mark GAS STATION, THE COURT OF FIRST INSTANCE OF THE EUROPEAN COMMUNITIES (Second Chamber), composed of: J. Piirang, President, A.W.H. Meij and N.J. Forwood, Judges, Registrar: J. Palacio González, Principal Administrator, having regard to the application lodged at the Court Registry on 7 April 2003, having regard to the response of the intervener lodged at the Court Registry on 21 July 2003, having regard to the response of OHIM lodged at the Court Registry on 25 July 2003, further to the hearing on 4 February 2004, gives the following Judgment Background to the dispute On 12 January 1998, the applicant filed an application for a Community trade mark at the Office for Harmonisation in the Internal Market (Trade Marks and Designs) (OHIM) pursuant to Council Regulation (EC) No 40/94 of 20 December 1993 on the Community trade mark (OJ 1994 L 11, p. 1), as amended. The trade mark whose registration was sought is the word sign GAS STATION. The goods in respect of which registration was sought fall within Class 25 of the Nice Agreement concerning the International Classification of Goods and Services for the Purposes of the Registration of Marks of 15 June 1957, as revised and amended, and correspond to the following description: ‘Clothing, footwear, headgear’. The application was published in Community Trade Marks Bulletin No 22/99 of 22 March 1999. On 21 June 1999, the intervener filed a notice of opposition under Article 42 of Regulation No 40/94 against the trade mark applied for in respect of all the goods covered by the application. The intervener relied in particular on its earlier national figurative mark No 677288, registered inter alia for goods falling within Class 25, namely ‘trousers, jackets, jeans, shirts, skirts, heavy jackets, jerseys, sweaters, short coats (“capispalla”), socks, shoes, boots, slippers’, which is reproduced below: By decision of 28 February 2002, the Opposition Division of OHIM upheld the opposition in light of the marked similarity between the signs and the interrelation between the signs and goods when assessing confusion. On 16 April 2002, the applicant filed a notice of appeal at OHIM, under Article 59 of Regulation No 40/94, challenging the decision of the Opposition Division. By decision of 30 January 2003 (‘the contested decision’), a copy of which was sent to the applicant on 10 February 2003, the Board of Appeal dismissed the appeal on the ground that a likelihood of confusion existed given the inherent nature of the intervener's trade mark, the strong similarity of the marks, the identity or similarity of the goods covered and the time at which the relevant public perceives the mark. Procedure and forms of order sought The applicant claims that the Court should: — declare that there is no likelihood of confusion in the present case and annul the contested decision; — in the alternative, declare that there is no likelihood of confusion in the present case in respect of all the goods applied for, with the exception of jeans, or, at the very least, in respect of the goods which the Court considers appropriate, and annul the contested decision to that extent; — order OHIM to pay the costs. OHIM and the intervener contend that the Court should: — dismiss the action; — order the applicant to pay the costs. Law The applicant puts forward two pleas in law, one alleging that the statement of reasons in the contested decision is defective and the other alleging an error of assessment in the analysis of the likelihood of confusion. The applicant explained at the hearing that the words ‘declare that there is no likelihood of confusion’ in its first head of claim and the reference in its application to all its arguments already set out before OHIM were merely standard clauses, and the Court took formal note of this. At the hearing the applicant produced a document designed to prove the existence of numerous Italian trade marks in the clothing sector that include the word ‘gas’; it pleaded Article 48 of the Rules of Procedure of the Court of First Instance and insisted that, following the Court's refusal to allow a second round of pleadings, it had been assured that it could put forward its arguments at the hearing. This document was accepted by the Court as an interim measure, subject to a subsequent decision as to its admissibility. Admissibility of the document produced at the hearing In accordance with settled case-law, the purpose of actions brought before the Court of First Instance is to review the legality of decisions of the Boards of Appeal within the meaning of Article 63 of Regulation No 40/94. Facts which are pleaded before the Court without having previously been brought before the departments of OHIM can affect the legality of such a decision only if OHIM should have taken them into account of its own motion. It follows from the concluding words of Article 74(1), according to which, in proceedings relating to relative grounds for refusal of registration, OHIM is to be restricted in its examination to the facts, evidence and arguments provided by the parties and the relief sought, that OHIM is not required to take into account of its own motion facts which have not been put forward by the parties. Therefore, such facts cannot affect the legality of a decision of the Board of Appeal. It is common ground that the document produced at the hearing, which is intended to prove the existence of numerous Italian trade marks in the clothing sector that include the word ‘gas’, was not put before OHIM. Accordingly, it cannot be taken into account by the Court. Nor can the applicant rely on Article 48(1) and (2) of the Rules of Procedure to justify the late submission of that document. First, the applicant has not put forward any reason that would have legitimated, if appropriate, the submission of new evidence at the stage of the reply. Second, the audi alteram partem rule cannot justify the late submission of that document since the latter cannot be regarded as merely responding to OHIM's and the interveners pleadings. OHIM and the intervener endeavoured exclusively to prove the inherent distinctiveness of the word ‘gas’ without ever referring to any distinctiveness of the earlier mark on the Italian clothing market. Accordingly, the document produced by the applicant at the hearing must be excluded without any need to consider its evidential value or to hear more detailed argument on it from the other parties to the present action. Defective statement of reasons The applicant pleads that the Board of Appeal infringed the obligation to state reasons by asserting without explanation, in paragraph 20 of the contested decision, that the signs at issue present a degree of conceptual association. It states that it is accordingly not in a position to contest that reason. The Court holds that the applicant's criticism derives from an incomplete reading of the contested decision. In paragraph 20 thereof, the Board of Appeal expressly adopts the assessment made by the Opposition Division that the signs at issue ‘present a possibility of conceptual association’. The applicant therefore needed only to refer to that assessment in the Opposition Division's decision, which was notified to it, and, if appropriate, to criticise its reasoning before the Court. For the sake of completeness, in so far as the conceptual association pointed out by the Board of Appeal is based on the component ‘gas’, as is to be supposed from the continuation of paragraph 20 which characterises this component as dominant, the Court notes, first, that the applicant's criticism of the Opposition Division's decision — namely that it is contradictory to accept that the word ‘gas’ means fuel for an internal combustion engine but to observe that it does not mean petrol — is set out in the first indent of paragraph 6 of the contested decision. Second, the Board of Appeal found, in paragraph 24 of the contested decision, that the word ‘gas’ has a specific meaning and that ‘the question of the actual meaning given to it by Italianspeaking consumers (“gas”, “motor fuel”) is ultimately irrelevant’It was therefore simple for the applicant to bring together the findings in paragraph 20 of the contested decision and those in paragraph 24 and, if appropriate, to criticise before the Court the Board of Appeal's opinion that the signs at issue display conceptual similarity whatever the meaning given to the word ‘gas’. Accordingly, this plea must be rejected. Error of assessment in the analysis of the likelihood of confusion Arguments of the parties The applicant argues that it is wrong to compare separately the signs at issue and the goods which they identify. It states that in the present case the Board of Appeal found that the term ‘blue jeans’ was descriptive and concluded therefrom that the word ‘gas’ was the dominant component in the intervener's mark. In the applicant's submission, such a finding is true only for jeans, namely items of clothing made from denim, and is not true when applied to other goods such as sweaters, slippers and boots. Furthermore, in its analysis the Board of Appeal unjustly neglected the word ‘station’ which appears in the mark applied for. As regards visual comparison of the marks at issue, the applicant contends that for all the goods other than jeans the dominant component of the intervener's mark is ‘BLUE JEANS’, which is strongly distinctive. The dominant aspect of the mark applied for is constituted by the two words ‘gas’ and ‘station’. The two marks therefore do not resemble each other at all. When the marks at issue refer to jeans, the term ‘blue jeans’ is descriptive and therefore the dominant component of the intervener's mark is ‘gas’. The dominant aspect of the mark applied for remains ‘gas station’. Since the intervener's mark has a very distinctive graphic aspect, the word which the two marks at issue have in common, namely ‘gas’, is not sufficient to establish a likelihood of confusion. Such an analysis is, in the applicant's submission, confirmed by the approach taken by the Court in its judgment in Case T-110/01 Vedial v OHIM — France Distribution (HUBERT) [2002] ECR II-5275, at paragraph 54. The applicant submits with regard to aural comparison that the two marks at issue are entirely distinct, especially for goods other than jeans. That is all the more true if greater attention is given to the initial parts of the marks as the case-law indicates. As regards conceptual comparison, the marks at issue are totally different in respect of goods other than jeans, because one has the term ‘blue jeans’ as its dominant component, and the other has the term ‘gas station’, which designates a store of gas. Even if it is accepted that the term ‘blue jeans’ is descriptive, the intervener's mark evokes the idea of gas whereas the applicant's mark evokes the idea of storage — of gas in the present case. In the applicant's submission, the Board of Appeal did not draw the appropriate conclusions from its definition of the relevant public, namely the reasonably well informed and reasonably circumspect public in general. However, it made it clear at the hearing that it was not calling this definition into question. The applicant concludes therefrom that the differences between the marks preclude a likelihood of confusion. OHIM and the intervener note first of all that the applicant does not dispute the identity or similarity of the goods at issue. They then submit that the dominant component in each of the opposing marks is unquestionably the word ‘gas’. Both the approach of the Board of Appeal and the result reached by it are correct. Findings of the Court Article 8(1)(b) of Regulation No 40/94 provides that, upon opposition by the proprietor of an earlier trade mark, a trade mark is not to be registered if because of its identity with or similarity to the earlier trade mark and the identity or similarity of the goods or services covered by the trade marks there exists a likelihood of confusion on the part of the public in the territory in which the earlier trade mark is protected. In accordance with settled case-law, the likelihood of confusion as to the commercial origin of the goods or services must be assessed globally in accordance with the perception by the relevant public of the signs and the goods or services at issue and taking into account all the factors characterising the case in point, in particular the interdependence between the similarity of the signs and the similarity of the goods or services designated (see Case T-162/01 Laboratorios RTB v OHIM — Giorgio Beverly Hills (GIORGIO BEVERLY HILLS) [2003] ECR I-2821, paragraphs 29 to 33, and the case-law cited). It must be stated at the outset that the Board of Appeal correctly found, first, that the relevant public in the present case is Italian consumers, given that the earlier mark taken into account is an Italian national mark (paragraph 13 of the contested decision), and second, that that public is made up of average consumers who are reasonably well informed and reasonably observant and circumspect (paragraph 30 of the contested decision) since the goods covered by the marks at issue are everyday consumer goods. Also, the Board of Appeal rightly pointed out that the goods covered by the marks at issue are identical or similar (paragraph 12 of the contested decision). As regards comparison of the opposing signs, in accordance with settled case-law the global assessment of the likelihood of confusion must, as far as concerns the visual, aural or conceptual similarity of the opposing signs, be based on the overall impression given by the signs, bearing in mind, in particular, their distinctive and dominant components (see Case T-292/01 Phillips-Van Heusen v OHIM — Pash Textilvertrieb und Einzelhandel (BASS) [2003] ECR II-4335, paragraph 47, and the case-law cited). The applicant's complaint that the Board of Appeal compared the opposing signs in an abstract manner, without consideration of the goods covered by the marks at issue, is not well founded. The Board of Appeal expressly held, relying on the judgment in Case C-39/97 Canon [1998] ECR I-5507, that ‘the conclusion on the likelihood of confusion rests on consideration of the marked similarity of the signs and the interrelation between the signs and goods when assessing confusion’ (paragraph 12 of the contested decision). The Board of Appeal likewise stated that ‘the capacity of the sign to perform the function of a trade mark must be assessed in relation to the goods indicated in the application’ (paragraph 21 of the contested decision). In its examination, the Board of Appeal rightly held that the dominant component of the earlier mark lies in the word ‘gas’ (paragraphs 20 and 28 of the contested decision). First, the term ‘blue jeans’ is purely descriptive of items of clothing that are made of, or reproduce the look of, denim. For the other items of clothing, this term is not as strongly distinctive as the word ‘gas’ which has no connection with clothing (paragraph 24 of the contested decision). Second, the graphic component ‘BLUE JEANS’ in the figurative sign at issue is minor, since it is written in much smaller letters and appears as a mere addition to the word ‘gas’. The Board of Appeal could likewise hold that the word ‘gas’ constituted the dominant component of the mark applied for inasmuch as the word ‘station’ while having a certain inherent importance, does not alter the meaning of the word ‘gas’(paragraph 27 of the contested decision). The word ‘station’ may refer to a number of different places, be it the stopping point of a means of land transport or the place where motor fuel is sold or stored, and acquires a definitive meaning only through the attribute placed next to it. Accordingly, the word ‘station’ reinforces the meaning of the word ‘gas’ without offering an alternative meaning. Consequently, as regards their dominant component the signs at issue are visually, aurally and conceptually identical. As regards the opposing signs taken as a whole, the Board of Appeal was able to hold, without committing an error of assessment, that the differences between those signs constituted by the secondary graphic component ‘BLUE JEANS’ and the secondary verbal component ‘station’ would not be kept in mind by the relevant public which would retain the component ‘gas’ (paragraphs 27 to 29 of the contested decision). It is to be remembered that the average consumer only rarely has the chance to make a direct comparison between the different marks, but must place his trust in the imperfect picture of them that he keeps in his mind (Case C-342/97 Lloyd Schuhfabrik Meyer [1999] ECR I-3819, paragraph 26). This conclusion is not called into question by the Court's reasoning in the judgment in HUBERT (paragraph 22 above), relied upon by the applicant. In that judgment the Court accorded preponderant weight to a graphic component and to the verbal components which were differentiating as against the verbal component common to the opposing marks, namely the word ‘Hubert’. However, unlike the graphic component in the present case, the graphic component there was particularly important. As has been found above, the component ‘BLUE JEANS’ is secondary, appearing as a mere addition to the component ‘gas’. Consequently, given the identity or similarity of the goods covered by the marks at issue and the similarity of the opposing signs, the conclusion of the Board of Appeal that there exists a likelihood of confusion between the marks on the part of the relevant public must be upheld. Since such a likelihood of confusion exists for all the goods covered, even though it appears even greater for clothing made of denim, the contested decision should not be annulled in so far as it relates to clothing other than clothing made of denim or to other subcategories of goods falling within Class 25. In view of the foregoing, this action must be dismissed. Costs Under Article 87(2) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party's pleadings. Since the applicant has been unsuccessful it must be ordered to pay the costs, as applied for by OHIM and the intervener. On those grounds, THE COURT OF FIRST INSTANCE (Second Chamber) hereby: 1. Dismisses the action; 2. Orders the applicant to pay the costs. Pirrung Meij Forwood Delivered in open court in Luxembourg on 13 July 2004. H. Jung Registrar J. Pirrung President ( *1 ) Language of the case: Italian.

Case T-177/07 Mediaset SpA v European Commission (State aid – Telecommunications – Subsidised purchase of digital decoders – Decision declaring the aid incompatible with the common market and ordering its recovery – Concept of State aid – Exclusion of decoders for the reception of television programmes broadcast by satellite – Advantage – Selective nature – Adverse effect on competition – Duty to state reasons) Summary of the Judgment 1. Procedure – Application initiating proceedings – Formal requirements (Rules of Procedure of the General Court, Art. 44(1)) 2. State aid – Definition – Advantage granted to beneficiaries of State aid (Art. 87(1) EC) 3. State aid – Definition – Advantage granted to beneficiaries of State aid – Indirect advantages – Included (Art. 87(1) EC) 4. State aid – Prohibition – Exceptions – Aid which can benefit from the derogation provided for in Article 87(3)(c) EC – Conditions (Art. 87(3)(c) EC) 5. Acts of the institutions – Statement of reasons – Obligation – Scope – Commission decision on State aid – Characterisation of adverse effect on competition and trade between Member States (Arts 87(1) EC and 253 EC) 6. State aid – Recovery of unlawful aid – Aid granted in breach of the procedural rules of Article 88 EC – Possible legitimate expectation of the beneficiaries – Legal certainty – Protection – Conditions and limits (Art. 88 EC; Council Regulation No 659/1999, Art. 14(1)) 1. The application initiating proceedings, which must, under Article 44(1) of the Rules of Procedure of the General Court, set out the subject-matter of the dispute and the pleas in law on which it is based, may be supported and supplemented, with regard to specific points, by references to extracts of documents appended thereto, but the annexes have only a purely evidential and instrumental function. Accordingly, they cannot serve as a basis for developing a plea set out in summary form in the application by putting forward complaints or arguments which are not contained in that application. An applicant must indicate in the application the specific complaints on which the Court is asked to rule and, at the very least in summary form, the legal and factual particulars on which those complaints are based. (see paras 24-25) 2. A measure consisting of a State subsidy paid to every user of the broadcasting service who purchases or rents equipment for the reception, free-to-air and at no cost to the user or to the content provider, of TV signals transmitted using digital terrestrial technology constitutes an advantage for the purposes of Article 87(1) EC, which is granted to digital terrestrial broadcasters and cable operators as compared with satellite broadcasters. As it is necessary, in order to benefit from such a measure, to satisfy a number of cumulative conditions, including that of purchasing or renting equipment for the reception of digital terrestrial TV signals, it clearly cannot benefit a consumer who decides to purchase or rent equipment exclusively for the reception of digital satellite TV signals. Consequently, such a measure does not meet the requirement of technological neutrality imposed by the Commission for aid measures relating to the digital TV market. Building up an audience is a crucial part of the business for broadcasters of TV programmes. Furthermore, it must be taken into account that such an aid measure creates an incentive for consumers to switch from the analogue to the digital terrestrial mode, while limiting the costs that digital terrestrial TV broadcasters have to bear, enabling those same broadcasters to consolidate their existing position on the market – as compared with the position of new competitors – in terms of brand image and customer retention. The fact that such a measure is very advantageous for consumers, given that it reduces the price of more sophisticated decoders to the price level of basic decoders, has no bearing on the fact that that measure also constitutes an advantage for terrestrial broadcasters and cable operators. Furthermore, the price of a decoder is a decisive factor which a TV viewer takes into account in making his choice. A subsidy granted directly to consumers automatically has the effect of prompting a reduction in the purchase or rental price of equipment for the reception of digital terrestrial TV signals. Such a price reduction is liable to affect the choice of consumers who are mindful of costs. Furthermore, such a measure is selective even though satellite operators may benefit from it by offering ‘hybrid’ decoders, that is to say, decoders which are both terrestrial and satellite decoders. If that were the case, for satellite broadcasters to make ‘hybrid’ decoders available would involve extra cost which would be passed on to consumers in the selling price and would at best be offset by the measure at issue from which those consumers benefit. Accordingly, satellite broadcasters would find themselves in a less favourable position than terrestrial broadcasters and cable operators, who would not have to pass on any additional cost in the selling price of decoders to the consumers benefiting from the measure at issue. (see paras 56-57, 60, 62, 64-65, 68, 95) 3. Article 87 EC prohibits aid granted by a State or through State resources in any form whatsoever, without drawing a distinction as to whether the aid-related advantages are granted directly or indirectly. Thus, an advantage granted directly to certain natural or legal persons who are not necessarily undertakings may constitute an indirect advantage, hence State aid, for other natural or legal persons who are undertakings. A subsidy granted to consumers can therefore be categorised as State aid to traders providing consumer goods or services. (see paras 75-76) 4. In order to be compatible with the common market for the purposes of Article 87(3)(c) EC, aid must pursue an objective in the common interest and must be necessary and proportionate for that purpose. It cannot be considered that the common interest objective of a measure consisting of a State subsidy paid to every user of the broadcasting service who purchases or rents equipment for the reception, free-to-air and at no cost to the user or to the content provider, of TV signals transmitted using digital terrestrial technology, is to address a market failure relating, in particular, to the problem of coordination between operators, which is the cause of a barrier to the development of digital broadcasting. As incumbent broadcasters have to take the fixing of a statutory deadline for switch-off of the analogue mode as an established fact and, as a consequence, to develop new commercial strategies, subsidies for the purchase of digital decoders are not necessary to correct the problem of coordination between the operators on the market, as that problem has already been dealt with through the setting of a mandatory date for digitisation. Furthermore, as the size of the terrestrial TV market in Italy is large, the risk, for commercial operators, of a critical mass of consumers not being reached, owing to a problem of coordination among operators, is not so great that they are unable to cope with it. (see paras 125-126) 5. With regard to the categorisation of a measure as aid, the duty to state reasons requires that the reasons which led the Commission to consider that the measure concerned falls within the scope of Article 87(1) EC be stated. As regards the existence of a distortion of competition in the common market, while the Commission must at the very least refer to the circumstances in which aid was granted in the statement of the reasons for its decision where those circumstances show that the aid is such as to affect trade between Member States and to distort or threaten to distort competition, it is not, by contrast, required to carry out an economic analysis of the actual situation on the relevant markets, of the market share of the undertakings in receipt of the aid, of the position of competing undertakings or of trade flows between Member States. Furthermore, in the case of aid granted illegally, the Commission is not required to demonstrate the actual effect which that aid has had on competition and on trade between Member States. If that were the case, such a requirement would ultimately give Member States which grant unlawful aid an advantage over those which notify the aid at the planning stage. In particular, the Commission merely needs to establish that the aid in question is of such a kind as to affect trade between Member States and distorts or threatens to distort competition. It does not have to define the market in question. (see paras 144-146) 6. Under Article 14(1) of Regulation No 659/1999, relating to the application of Article 88 EC, where negative decisions are taken in cases of unlawful aid, the Commission is to decide that the Member State concerned is to take all necessary measures to recover the aid from the beneficiary. That provision specifies, however, that the Commission is not to require recovery of the aid if this would be contrary to a general principle of Community law. However, undertakings to which aid has been granted may not, in principle, entertain a legitimate expectation that the aid is lawful unless it has been granted in compliance with the procedure. A diligent business operator must normally be in a position to confirm that that procedure has been followed, even if the State granting the aid was responsible for the unlawfulness of the decision to it to such a degree that its revocation appears to be a breach of the principle of good faith. The principle of legal certainty requires that legal rules be clear and precise and aims to ensure that situations and legal relationships governed by Community law remain foreseeable. In the context of the recovery of aid declared incompatible with the common market, no provision requires the Commission to fix the exact amount of the aid to be recovered. It is sufficient for the Commission’s decision to include information enabling the recipient to work out that amount itself, without overmuch difficulty. It follows that the principle of legal certainty cannot be said to have been infringed because it is difficult to establish the exact value of one of the parameters of the method of calculation set out in the contested decision. (see paras 170, 173, 179-181) JUDGMENT OF THE GENERAL COURT (Second Chamber) 15 June 2010 (*) (State aid – Telecommunications – Subsidised purchase of digital decoders – Decision declaring the aid incompatible with the common market and ordering its recovery – Concept of State aid – Exclusion of decoders for the reception of television programmes broadcast by satellite – Advantage – Selective nature – Adverse effect on competition – Obligation to state reasons) In Case T‑177/07, Mediaset SpA, established in Milan (Italy), represented by K. Adamantopoulos, G. Rossi, E. Petritsi and A. Nucara, lawyers, and by D. O’Keeffe and P. Boyle, Solicitors, applicant, v European Commission, represented by B. Martenczuk, G. Conte and E. Righini, acting as Agents, defendant, supported by Sky Italia Srl, established in Rome (Italy), represented initially by F.E. González Díaz and D. Gerard, and subsequently by F.E. González Díaz, lawyers, intervener, APPLICATION for the annulment of Commission Decision 2007/374/EC of 24 January 2007 on State aid C 52/2005 (ex NN 88/2005, ex CP 101/2004) implemented by the Italian Republic for the subsidised purchase of digital decoders (OJ 2007 L 147, p. 1), THE GENERAL COURT (Second Chamber), composed of I. Pelikánová, President, K. Jürimäe (Rapporteur) and S. Soldevila Fragoso, Judges, Registrar: K. Pocheć, Administrator, having regard to the written procedure and further to the hearing on 3 June 2009, gives the following Judgment Background to the dispute 1 Article 4(1) of legge n. 350 – Disposizioni per la formazione del bilancio annuale e pluriennale dello Stato (legge finanziaria 2004) (Law No 350 relating to the provisions for drawing up the annual and pluriannual budget of the [Italian] State) of 24 December 2003 (‘the 2004 Finance Law’) provided: ‘[f]or the year 2004, every user of the broadcasting service who has fulfilled his obligations regarding payment of the relevant subscription fee for the year in progress and who purchases or rents equipment for the reception, free-to-air and at no cost to the user or to the content provider, of television signals transmitted using digital terrestrial technology (T-DVB/C-DVB) and the associated interactive services shall be entitled to a State subsidy of EUR 150. The subsidy shall be awarded within the spending limit of EUR 110 million’. 2 Article 1(211) of legge n. 311 – Disposizioni per la formazione del bilancio annuale e pluriennale dello Stato (legge finanziaria 2005) (Law No 311 relating to the provisions for drawing up the annual and pluriannual budget of the State) of 30 December 2004 (‘the 2005 Finance Law’) refinanced the measure in question with the same spending limit of EUR 110 million, but reduced the subsidy per decoder to EUR 70. 3 That scheme ceased to apply on 1 December 2005. 4 In Italy, the first step in the digitisation of television (‘TV’) signals was the adoption of legge n. 66 – Conversione in legge, con modificazioni, del decreto-legge 23 gennaio 2001, n. 5, recante disposizioni urgenti per il differimento di termini in materia di trasmissioni radiotelevisive analogiche e digitali, nonché per il risanamento di impianti radiotelevisivi (Law No 66, converting into law, with amendments, Decree-Law No 5 of 23 January 2001 making urgent provision for the postponement of deadlines relating to analogue and digital broadcasting, and for the updating of broadcasting installations) of 20 March 2001, under which digitisation was to have been accomplished and transmission in analogue mode to have ceased definitively by December 2006. In that regard, Article 2a(5) of that law provides: ‘By the end of the year 2006, digital technology shall be the sole means used to broadcast programmes and multimedia services on terrestrial frequencies.’ 5 The deadline for the cessation of analogue broadcasting was subsequently postponed twice, initially until 2008, and then again until 30 November 2012. 6 On 11 May 2004, Centro Europa 7 Srl filed a complaint with the Commission of the European Communities in respect of the subsidy granted by the Italian Republic under Article 4(1) of the 2004 Finance Law for the purchase of certain digital terrestrial decoders. By letter of 10 February 2005, Centro Europa 7 provided the Commission with further information and maintained that the Italian Government had refinanced the measure in question by Article 1(211) of the 2005 Finance Law. 7 On 3 May 2005, Sky Italia Srl also filed a complaint in respect of the same provisions of the 2004 Finance Law and the 2005 Finance Law. 8 By letter dated 21 December 2005, the Commission informed the Italian Republic of its decision to initiate the formal investigation procedure laid down in Article 88(2) EC (OJ 2006 C 118, p. 10) (‘the decision to initiate the formal investigation procedure’) in respect of Article 4(1) of the 2004 Finance Law and Article 1(211) of the 2005 Finance Law (taken together, ‘the measure at issue’). In that decision, the Commission called on interested parties to submit their comments on that measure. 9 On 24 January 2007, the Commission adopted Decision 2007/374/EC on State aid C 52/2005 (ex NN 88/2005, ex CP 101/2004) implemented by the Italian Republic for the subsidised purchase of digital decoders (OJ 2007 L 147, p. 1; ‘the contested decision’). 10 First of all, the Commission stated that, in so far as it provided for the grant by the Italian Republic of a subsidy for the purchase, in 2004 and 2005, of certain digital terrestrial decoders, the measure at issue constituted State aid, for the purposes of Article 87(1) EC, to digital terrestrial broadcasters offering pay-TV services, in particular pay-per-view services, and digital cable pay-TV operators. 11 Secondly, the Commission found that none of the derogations provided for in Article 87(3) EC was applicable to the measure at issue. In particular, the Commission decided that the derogation provided for in Article 87(3)(c) EC could not apply because, even though the transition from analogue to digital TV broadcasting was a common interest objective, the measure at issue was not proportionate to the pursuit of that objective and was not capable of preventing unnecessary distortions of competition. That finding was primarily based on the fact that the measure at issue was not technologically neutral, since it did not apply to digital satellite decoders. Nonetheless, the Commission expressed the view that, in so far as the measure at issue could be regarded as aid to producers of decoders, it would be covered by the derogation provided for in Article 87(3)(c) EC, since (i) it promoted technological development in the form of higher-performance decoders with standards available to all producers; (ii) all producers offering that type of decoder, including those established in other Member States, were entitled to the funding; and, lastly, (iii) stimulation of the demand for decoders following the measure at issue was the inevitable effect of any public policy in favour of digitisation, even the most technologically neutral. 12 Consequently, the Commission ordered the recovery of the State aid paid pursuant to the measure at issue, which had been declared incompatible with the common market and granted unlawfully. For that purpose, the Commission offered guidance on methods for calculating the amount of aid. 13 The enacting terms of the contested decision provide as follows: ‘Article 1 The scheme which the Italian Republic has unlawfully implemented for digital terrestrial broadcasters offering pay-TV services and cable pay-TV operators constitutes State aid which is incompatible with the common market. Article 2 1. The Italian Republic shall take all necessary measures to recover from the beneficiaries the aid defined in Article 1. 2. Recovery shall be effected without delay and in accordance with the procedures of national law provided that they allow the immediate and effective implementation of the Decision. The sums to be recovered shall include interest from the date on which the aid was at the disposal of the beneficiaries until the date of its recovery. 3. The interest to be recovered under paragraph 2 shall be calculated in accordance with the procedure laid down in Articles 9 and 11 of Commission Regulation (EC) No 794/2004 of 21 April 2004 implementing Council Regulation (EC) No 659/1999 laying down detailed rules for the application of Article [88 EC] [OJ 2004 L 140, p. 1]. Article 3 The Italian Republic shall inform the Commission, within two months of notification of this Decision, of the measures taken to comply with it. It will provide this information using the questionnaire attached to this Decision. The Italian Republic shall submit within the same period of time referred to in the first paragraph the documents giving evidence that the recovery proceedings have been initiated against the beneficiaries of the unlawfully granted and incompatible aid. Article 4 This Decision is addressed to the Italian Republic.’ 14 By Decision C(2006) 6630 final of 24 January 2007, the Commission declared to be compatible with the common market the aid implemented by the Italian Republic under legge n. 266 – Disposizioni per la formazione del bilancio annuale e pluriennale dello Stato (legge finanziaria 2006) (Law No 226 relating to the provisions for drawing up the annual and pluriannual budget of the State) of 23 December 2005 (‘the 2006 Finance Law’) for the purchase of digital decoders with an open application program interface in 2006 (‘the decision concerning 2006’). Unlike the subsidies covered by the contested decision, the subsidies at issue in the decision concerning 2006 were found to be ‘technologically neutral’ since they could be granted for decoders of all digital platforms (terrestrial, cable and satellite), provided that they were interactive and interoperable, that is to say, provided that they were ‘open’ decoders as opposed to ‘proprietary’ decoders. Procedure and forms of order sought 15 By application lodged at the Registry of the Court on 23 May 2007, the applicant – Mediaset SpA (‘Mediaset’), a digital terrestrial programmes broadcaster – brought an action against the contested decision. 16 By document lodged at the Court Registry on 5 September 2007, Sky Italia requested leave to intervene in the present proceedings in support of the Commission. By order of 10 January 2008, the President of the Second Chamber of the Court granted leave to intervene. 17 Mediaset claims that the Court should: – annul the contested decision; – order the Commission to pay the costs. 18 The Commission, supported by Sky Italia, contends that the Court should: – dismiss the action; – order Mediaset to bear the costs. Admissibility of Annex A8 to the application Arguments of the parties 19 The Commission, supported by Sky Italia, contends that Annex A8 to the application, entitled ‘The Italian Broadcasting Sector: Short summary of the historical, legislative and market context’ (‘Annex A8’), and any references to it should be declared inadmissible and that its contents should not be taken into account by the Court. Annex A8, it is argued, contains numerous arguments and submissions of fact and of law which are not to be found in the application. Consequently, Annex A8 and the references to it in the application are in breach of the requirement, set out in Article 21(1) of the Statute of the Court of Justice and in Article 44(1) of the Rules of Procedure of the General Court, that the subject-matter of the dispute and the pleas in law on which it is based must be set out in the application itself. 20 In response, Mediaset claims that all the pleas in law put forward in support of its action are set out in the application and that, in consequence, the plea that Annex A8 and the references to that annex are inadmissible, as put forward by the Commission, is irrelevant and unfounded. Findings of the Court 21 As a preliminary point, it should be noted that there are five references to Annex A8 in the application: in paragraphs 11 and 109 and in footnotes 57, 94 and 115. 22 As regards the first reference, in paragraph 11 of the application, it should be pointed out that this is made in the introductory paragraph of the second section, which is entitled ‘Factual background’ and which comes before the section entitled ‘Legal grounds of annulment’ (the third section). The purpose of that reference to Annex A8 is to place before the Court an account of the legislative background and the market context, in relation to which the measure at issue should be examined. 23 Consequently, as regards that first reference, the Commission cannot criticise Mediaset for referring to Annex A8. 24 As regards the last four references, which are made in the third section, entitled ‘Legal grounds of annulment’, it should be borne in mind that, even though the body of the application may be supported and supplemented, with regard to specific points, by references to extracts of documents appended thereto, the annexes have a purely evidential and instrumental function (Case T-84/96 Cipeke v Commission [1997] ECR II-2081, paragraph 34). Accordingly, the annexes cannot serve as a basis for developing a plea set out in summary form in the application by putting forward complaints or arguments which are not contained in that application. The applicant must indicate in the application the specific complaints on which the Court is asked to rule and, at the very least in summary form, the legal and factual particulars on which those complaints are based (Case C-52/90 Commission v Denmark [1992] ECR I-2187, paragraph 17; the order in Case T-85/92 De Hoe v Commission [1993] ECR II-523, paragraph 20; and Case T-340/03 France Télécom v Commission [2007] ECR II-107, paragraph 167). 25 In the present case, the Court finds that the last four references are intended, as is apparent from Mediaset’s written pleadings, to illustrate the arguments set out in support of the pleas put forward. 26 Thus, footnote 57 illustrates the statement that ‘the obligation to go digital imposes a burden on the terrestrial broadcasters and the applicant that is not imposed on those operating on other broadcasting platforms’. 27 Likewise, footnote 94 illustrates the statement that ‘[t]he subsidy compensated for the costs in relation to the performance of specific legal obligations, to which only the terrestrial platform was subjected’. 28 Furthermore, as regards the reference in paragraph 109, it is expressly stated that ‘as stated [in Annex A8], the analogue broadcasters have not enjoyed any privileges, neither in relation to frequencies, nor to the market’. 29 Lastly, footnote 115 illustrates the statement that ‘[t]he measure is proportional because it is limited to the extra cost of interoperability and interactivity and to the cost imposed specifically on the Applicant in relation to the performance of its specific legal obligations’. 30 It follows from the above observations that, contrary to the assertions made by the Commission, the last four references to Annex A8 are intended to support the arguments set out in Mediaset’s written pleadings. Furthermore, in its written pleadings, Mediaset has not set out in summary form any plea or argument which it subsequently developed in Annex A8. 31 Consequently, the Commission errs in maintaining that Annex A8 should be regarded as inadmissible and should not be taken into account by the Court. The Commission’s plea must therefore be rejected as unfounded. Admissibility of the annexes to the application which have not been translated into the language of the case Arguments of the parties 32 The Commission notes that a number of annexes (A1, A2, A3, A4, A7, A11, A12 and Al3) have been submitted by Mediaset only in Italian, contrary to Article 35(3) of the Rules of Procedure, under which they should have been accompanied by a translation into the language of the case. 33 Mediaset states in reply that, if the Court so requests, it will provide the relevant annexes to the application in the language of the case, in accordance with Article 35 of the Rules of Procedure. Findings of the Court 34 The first, second and third subparagraphs of Article 35(3) of the Rules of Procedure provide as follows: ‘The language of the case shall be used in the written and oral pleadings of the parties and in supporting documents, and also in the minutes and decisions of the [General] Court. Any supporting documents expressed in another language must be accompanied by a translation into the language of the case. In the case of lengthy documents, translations may be confined to extracts. However, the [General] Court may, of its own motion or at the request of a party, at any time call for a complete or fuller translation.’ 35 Furthermore, the second subparagraph of Article 7(5) of the Instructions to the Registrar of the Court (OJ 2007 L 232, p. 1) provides: ‘Where documents annexed to a pleading or procedural document are not accompanied by a translation into the language of the case, the Registrar shall require the party concerned to make good the irregularity if such a translation appears necessary for the purposes of the efficient conduct of the proceedings.’ 36 In the present case, it should first be pointed out that the Commission did not expressly request that the Court require Mediaset to produce a translation of Annexes A1, A2, A3, A4, A7, A11, A12 and A13 into the language of the case. The Commission merely observed, in a parenthetical remark made in footnote 15 to the defence, that those annexes to the application were submitted by Mediaset only in Italian and were not accompanied by a translation into the language of the case. 37 Furthermore, contrary to the assertions made by the Commission, in the light of the purpose of the Rules of Procedure and the Instructions to the Registrar, it must be held that, in the absence of a request from a party to that effect, it is only if the translation into the language of the case appears necessary for the purposes of the efficient conduct of the proceedings that it is for the Registrar to have it carried out (see, to that effect, Case T-29/01 Puente Martín v Commission [2002] ECR‑SC I‑A‑157 and II‑833, paragraph 40). 38 In the present case, in the absence of a request to that effect on the part of the parties, the Court did not deem it necessary to require the translation of Annexes A1, A2, A3, A4, A7, A11, A12 and A13 into the language of the case. The reasons are as follows: (i) Annexes A1 to A4 were produced pursuant to procedural requirements for the purposes of identifying the parties and their representatives; (ii) Annex A7 reproduces the act which is the subject-matter of the present action for annulment and which was published in the Official Journal of the European Union after the present action had been brought, having been translated into all the official languages of the European Union, including the language of the present case; and (iii) Annexes A11, A12 and A13 reproduce relevant provisions of national law; the substance of which was set out – where the provisions were not quoted in full – in recitals 7, 6 and 10 respectively of the contested decision, so that it can reasonably be presumed that the author of that decision is able to understand the contents. 39 It follows from the above arguments that the Commission errs in criticising Mediaset for not producing a translation of Annexes A1, A2, A3, A4, A7, A11, A12 and A13 into the language of the case. The pleas in law 40 In support of its action, Mediaset relies in the application on four pleas in law, alleging: (i) infringement of Article 87(1) EC; (ii) manifest error of assessment and manifest error of law in assessing the compatibility of the measure at issue with the common market under Article 87(3)(c) EC; (iii) infringement of Article 253 EC; and (iv) infringement of Article 14 of Council Regulation (EC) No 659/1999 of 22 March 1999 laying down detailed rules for the application of Article [88 EC] (OJ 1999 L 83, p. 1) and breach of the principle of the protection of legitimate expectations and the principle of legal certainty. 41 At the hearing, Mediaset put forward a plea alleging, in essence, that the Commission made a manifest error of assessment as regards the determination of the scope of Article 4(1) of the 2004 Finance Law. 42 It is necessary to determine whether that last plea is admissible and then to rule on the merits of the four pleas put forward at the stage of the application. Admissibility of the plea alleging manifest error of assessment as regards the determination of the scope of Article 4(1) of the 2004 Finance Law Arguments of the parties 43 At the hearing, Mediaset expressly challenged the view that, under Article 4(1) of the 2004 Finance Law, digital satellite broadcasters were denied the benefit of the measure at issue. In reply to a question from the Court asking it to state at what stage of the written procedure it had put forward that plea, Mediaset replied by referring to paragraph 69 et seq. and paragraph 76 of its reply. 44 When asked by the Court at the hearing to respond to Mediaset’s challenge, the Commission and Sky Italia maintained that, as the plea had been put forward belatedly, it should be declared inadmissible. Findings of the Court 45 It should be borne in mind that, pursuant to Article 44(1)(c), read in conjunction with Article 48(2) of the Rules of Procedure, an application must state the subject-matter of the proceedings and a summary of the pleas in law on which the application is based and that no new plea in law may be introduced in the course of proceedings unless it is based on matters of law or of fact which come to light in the course of the procedure. 46 In the present case, it is apparent from Mediaset’s statements at the hearing that it did not put that plea forward in the application, but in the reply. Furthermore, Mediaset does not seek to maintain that that plea is based on matters of law or of fact which came to light in the course of the procedure. 47 Consequently, in accordance with the provisions of the Rules of Procedure referred to in paragraph 45 above, the plea alleging manifest error of assessment as regards the determination of the scope of Article 4(1) of the 2004 Finance Law must be rejected as inadmissible. The first plea: infringement of Article 87(1) EC 48 The first plea alleges infringement of Article 87(1) EC inasmuch as the Commission found that the measure at issue constitutes State aid for the purposes of that provision. The plea is divided into four parts which relate respectively to (i) the concept of an indirect beneficiary; (ii) the absence of an economic advantage; (iii) the absence of selectivity in the nature of the measure at issue; and, lastly, (iv) the absence of distortion of competition. The second part of the first plea, relating to the absence of an economic advantage – Arguments of the parties 49 First, Mediaset submits that the measure at issue did not confer on it an economic advantage, such as the creation of a business opportunity. In the contested decision, the Commission claimed incorrectly and without any evidence that that measure enabled broadcasters to avoid bearing the cost of subsidising decoders, a business practice which it described, incorrectly, as common on the market. According to Mediaset, that claim is accurate only as regards subscription-based TV operators on account of the stable contractual relationships which they establish with their subscribers. In the absence of such a stable contractual relationship, digital terrestrial TV broadcasters would have no interest in subsidising the acquisition of interoperable decoders, for they would then be exposed to the problem of free riding, as their competitors would benefit from the subsidy in the same way. Instead, the measure at issue benefited consumers, who are able to acquire decoders which support open technology. 50 Secondly, Mediaset submits that the measure at issue did not secure for it any advantage in terms of better penetration of the pay-TV market or in terms of audience creation. In that respect, it denies that the measure at issue enabled it to create an audience for pay-TV or to access the pay-TV market at a low cost. First, the quality and characteristics of the programmes broadcast determine consumer preferences, not the price of a decoder. Second, the advantages secured by the measure at issue would have benefited any digital terrestrial operator, even a potential one. Lastly, the measure at issue ensures and guarantees the continued existence of the generalist and free-of-charge model of universally accessible analogue TV during the transition to digital TV. 51 Furthermore, Mediaset claims, the Commission disregarded the investments made by Mediaset for digitisation and also in order to cover the costs of launching pay-TV. Likewise, Mediaset submits that the advantages referred to by the Commission could have benefited any digital terrestrial pay-TV operator, especially future new competitors on the market, and that that effect is inherent in any measure in favour of digital TV, even the most technologically neutral. 52 Thirdly, Mediaset maintains that the subsidy represents the extra costs of interactive and interoperable decoders, a fact which the Commission also acknowledged in recital 85 of the contested decision. 53 Mediaset maintains that the arguments put forward by Sky Italia concerning the advantages from which Mediaset allegedly benefited – namely, ‘risk-free’ entry into a new market, commercial endorsement by public authorities and access to low-cost capital – should be held inadmissible or, in any event, rejected as unfounded. 54 The Commission, supported by Sky Italia, contends that this part of the plea should be rejected. – Findings of the Court 55 As a preliminary point, in order to rule on the merits of the second part of the first plea and the other three parts of that plea, it is necessary to examine the scope of Article 4(1) of the 2004 Finance Law and of Article 1(211) of the 2005 Finance Law in order to determine whether the measure at issue could benefit both the digital terrestrial platform and the digital satellite platform. 56 In that regard, it should be pointed out that, under the first sentence of Article 4(1) of the 2004 Finance Law, a State subsidy of EUR 150 (reduced to EUR 70 by the 2005 Finance Law) was to be paid to every user of the broadcasting service who had fulfilled his obligations regarding payment of the relevant subscription fee for the year in progress and who purchased or rented equipment for the reception, free-to-air and at no cost to the user or to the content provider, of TV signals transmitted using digital terrestrial technology and the associated interactive services. 57 Under those provisions, it should be pointed out that – as the Commission rightly stated in recital 7 of the contested decision – in order to benefit from the measure at issue, it was necessary first to satisfy a number of cumulative conditions, including that of purchasing or renting equipment for the reception of digital terrestrial TV signals. 58 Moreover, it should be noted that, in paragraph 122 of the application, Mediaset expressly complained that the Commission produced two decisions – namely, the contested decision and the decision concerning 2006 – which are mutually contradictory as regards the compatibility with the common market of the measure at issue and of the measure provided for under the 2006 Finance Law even though, according to Mediaset, both measures relate to factual circumstances which are essentially similar. In support of that claim, Mediaset maintains that the only reason that the finding of incompatibility made by the Commission in the contested decision was subsequently reversed in the decision concerning 2006 lies in the fact that the Italian legislature had introduced additional wording so that satellite broadcasters were specifically covered. 59 Thus, it is apparent from paragraph 122 of the application that Mediaset does not dispute that, when adopting the 2006 Finance Law, the legislature ultimately considered it necessary for satellite broadcasters to be expressly mentioned in the provisions describing the scope of the measure. 60 It follows from the above findings that the measure at issue clearly could not benefit a consumer who decided to purchase or rent equipment exclusively for the reception of digital satellite TV signals. Consequently, that measure did not meet the requirement of technological neutrality imposed by the Commission for aid measures relating to the digital TV market. 61 First and foremost, it should be pointed out that, contrary to the assertions made by Mediaset, the question whether broadcasters would necessarily have financed the acquisition of decoders in the absence of the measure at issue is irrelevant as regards the assessment of that measure’s categorisation as State aid. 62 What is important in that regard is whether the subsidising of decoders created an advantage for terrestrial broadcasters such as Mediaset. In that connection, it should be pointed out that, in recitals 82 to 95 of the contested decision, the Commission set out in detail all the reasons for its finding that the measure at issue constituted an economic advantage in favour of terrestrial broadcasters. In that regard, the Commission specifically and correctly observed that building up an audience is a crucial part of the business for broadcasters of TV programmes. Furthermore, it should be pointed out that the Commission set out the reasons why, rightly, it considered that the aid measure at issue created an incentive for consumers to switch from the analogue to the digital terrestrial mode, while limiting the costs that digital terrestrial TV broadcasters had to bear, enabling those same broadcasters to consolidate their existing position on the market – as compared with the position of new competitors – in terms of brand image and customer retention. 63 For the same reason, it is necessary to reject Mediaset’s argument that terrestrial broadcasters did not have any interest in subsidising decoders because, as their competitors would have benefited from the subsidy in the same way, they would have been exposed to the problem of free riding. In any event, the fact that Mediaset shares the advantage arising from the subsidy with other broadcasters does not negate the advantageous nature of the measure at issue with regard to Mediaset. 64 Similarly, the fact that the measure at issue is very advantageous for consumers, given that it reduces the price of more sophisticated decoders to the price level of basic decoders, has no bearing on the fact that that measure also constitutes an advantage for terrestrial broadcasters and cable operators. 65 As regards the argument that the characteristics of the programmes broadcast – not the price of a decoder – determine the choice made by TV viewers, it must be held that, although those characteristics may influence the choice made by TV viewers, the fact remains that the price of a decoder is a decisive factor which a TV viewer takes into account in making that choice. In the present case, the subsidy granted directly to consumers automatically had the effect of prompting a reduction in the purchase or rental price of equipment for the reception of digital terrestrial TV signals. Such a price reduction is liable to affect the choice of consumers who are mindful of costs. 66 As regards the argument that the measure at issue ensures and guarantees the continued existence of the generalist and free-of-charge model of TV during digitisation, it should be pointed out that that is not capable of putting in question the classification of the measure at issue as State aid for the purposes of Article 87(1) EC. Such a circumstance could at the very most be a factor which must be taken into account for the purposes of considering the compatibility of the measure at issue with the common market under Article 87(3) EC. 67 For the same reason, it is necessary to reject Mediaset’s argument that the subsidy was necessary because, in normal business circumstances, it would not voluntarily bear the extra cost necessary for the purchase of interoperable decoders. 68 It follows from all of the above considerations that, without there being any need to rule on the admissibility and the merits of the arguments put forward by Sky Italia, the Commission was right to find that the measure at issue enabled cable operators and digital terrestrial broadcasters – of which Mediaset is one – to benefit, as compared with satellite broadcasters, from an advantage for the purposes of Article 87(1) EC and that the second part of the first plea must therefore be rejected as unfounded. The first part of the first plea, relating to the concept of an indirect beneficiary – Arguments of the parties 69 Mediaset submits that the Commission was wrong to find – basing its decision on Case C-156/98 Germany v Commission [2000] ECR I‑6857 and Case C-382/99 Netherlands v Commission [2002] ECR I‑5163 – that the measure at issue, of which the direct beneficiaries are the final consumers, constitutes an advantage for the purposes of Article 87(1) EC from which certain operators benefit indirectly. 70 First, Mediaset argues that those two judgments are irrelevant in the present case. The treatment of indirect beneficiaries should be different where the direct benefit is conferred on individual consumers rather than on undertakings. Since the direct and primary beneficiaries of the measure at issue are not pursuing an economic activity, that measure automatically falls outside the scope of Article 87(1) EC. 71 Secondly, Mediaset argues that it is not at all evident why the Commission chose arbitrarily to narrow down the concept of indirect beneficiaries to include only digital terrestrial broadcasters offering pay-TV services and cable pay-TV operators. In particular, Mediaset maintains that digital terrestrial broadcasters and cable operators in general are capable of benefiting indirectly from the measure at issue. Furthermore, Mediaset maintains that the Commission arbitrarily excluded decoder manufacturers from the category of beneficiaries of the measure at issue. 72 At the stage of the reply, Mediaset states that it does not deny that there can be indirect beneficiaries of State aid, but that it disputes the way in which the conditions for the application of the concept of indirect beneficiary were applied in the contested decision. 73 The Commission contends, first, that Article 87(1) EC does not lay down any requirement concerning the way in which the aid must be granted. Secondly, the provisions of Article 87(2)(a) EC would be entirely superfluous if, as Mediaset claims, aid granted in the first place to consumers could never be regarded as State aid for the purposes of Article 87(1) EC. Thirdly, Mediaset’s view is inconsistent with the judgment in Netherlands v Commission, paragraph 69 above, which confirms that both the direct beneficiary and the indirect beneficiary can be regarded as recipients of State aid for the purposes of Article 87(1) EC. Fourthly, the Commission contends that, if Mediaset’s reasoning were to be followed and if, accordingly, aid to consumers could never constitute State aid, State aid rules could easily be circumvented by granting consumers subsidies conditional on the purchase of specific goods or services. Fifthly, the Commission disputes Mediaset’s claim that it arbitrarily chose to restrict the concept of indirect beneficiaries and to target only terrestrial broadcasters and cable operators offering pay-TV services. – Findings of the Court 74 It is common ground that the measure at issue did not directly benefit operators on the digital TV market such as Mediaset. 75 It should be borne in mind, however, that Article 87 EC prohibits aid granted by a State or through State resources in any form whatsoever, without drawing a distinction as to whether the aid-related advantages are granted directly or indirectly. The case-law has thus acknowledged that an advantage granted directly to certain natural or legal persons who are not necessarily undertakings may constitute an indirect advantage, hence State aid, for other natural or legal persons who are undertakings (judgment of 4 March 2009 in Case T-424/05 Italy v Commission, not published in the ECR, paragraph 108). 76 Mediaset’s argument that a subsidy granted to consumers cannot be categorised as State aid to traders providing consumer goods or services is also inconsistent with Article 87(2)(a) EC, under which aid having a social character, granted to individual consumers, is compatible with the common market provided that it is granted without discrimination related to the origin of the products concerned. As the Commission contends, if Mediaset’s argument were to be accepted, that provision would be superfluous. 77 Lastly, the complaint made by Mediaset regarding the lack of clarity as to why the Commission narrowed down the concept of indirect beneficiaries to digital terrestrial broadcasters offering pay-TV services and cable pay-TV operators must be rejected as ineffective. Even if, as Mediaset claims, the Commission should have considered all digital terrestrial broadcasters and cable operators to be capable of benefiting indirectly from the measure at issue, it must be held that that in no way alters the fact that, as was pointed out in paragraphs 55 to 60 above, satellite broadcasters could not benefit from the measure at issue. 78 For the same reason, the complaint alleging that the Commission arbitrarily excluded decoder manufacturers from the category of beneficiaries of the measure at issue must be rejected as ineffective. 79 It follows from the above considerations that the Commission was right to categorise Mediaset as an indirect beneficiary of the measure at issue. The first part of the first plea must therefore be rejected as unfounded. The third part of the first plea, relating to the absence of selectivity in the nature of the measure at issue – Arguments of the parties 80 Mediaset claims that the Commission erred in law in categorising the measure at issue as selective because of its allegedly discriminatory nature. The Commission confused the concept of selectivity with the alleged discrimination and thus failed properly to establish that the selectivity criterion had been fulfilled. 81 The Commission contends that there is no evidence to support this claim on the part of Mediaset. The selectivity of the advantage conferred by the measure at issue on digital terrestrial broadcasters of pay-TV services and cable pay-TV operators is demonstrated by the fact that that advantage is enjoyed by no other undertaking and, specifically, by no satellite broadcasters. Accordingly, the third part of the first plea is also unfounded. – Findings of the Court 82 It should be stated at the outset that, at the hearing, in reply to a question from the Court asking it to clarify the arguments put forward in support of the third part of the first plea, Mediaset stated that, unlike selectivity, which constitutes a fundamental element for the purposes of categorising a measure as State aid for the purposes of Article 87(1) EC, discrimination is not referred to in that provision. Mediaset added that the Commission had confused discrimination and selectivity and that, when it stated that there was discrimination, its position was not technologically neutral. 83 It should be borne in mind that, under Article 44(1)(c) of the Rules of Procedure, all applications are to specify the subject-matter of the dispute and to include a brief statement of the pleas in law on which the application is based. According to case-law, that statement must be sufficiently clear and precise to enable the defendant to prepare its defence and the Court to rule on the application, if necessary, without any further information (Case T‑387/94 Asia Motor France and Others v Commission [1996] ECR II‑961, paragraph 106, and Case T‑113/96 Dubois et Fils v Council and Commission [1998] ECR II‑125, paragraph 29). In order to guarantee legal certainty and the sound administration of justice it is necessary, if an argument is to be admissible, for the basic legal and factual particulars relied upon to be stated, at least in summary form, coherently and intelligibly in the application itself (see, to that effect, order of the Court in Case T‑110/98 RJB Mining v Commission [2000] ECR II-2971, paragraph 23 and the case-law cited, and Case T-195/00 Travelex Global and Financial Services and Interpayment Services v Commission [2003] ECR II‑1677, paragraph 26). 84 In the present case, the arguments put forward by Mediaset in support of the third part of the first plea, both in its written pleadings and at the hearing, do not meet the requirements of clarity and precision laid down in Article 44(1)(c) of the Rules of Procedure. At no time does Mediaset explain how the fact that aid is applied in a discriminatory manner – in the sense that it benefits, as the Court has stated with regard to the measure at issue in paragraphs 57 and 60 above, only certain groups of undertakings – does not permit the inference that it is selective for the purposes of Article 87(1) EC. 85 The third part of the first plea must therefore be rejected as inadmissible. The fourth part of the first plea, relating to the absence of distortion of competition – Arguments of the parties 86 In the first place, Mediaset maintains that the Commission made a manifest error of assessment in concluding that the measure at issue unduly distorts competition in the common market. 87 First, Mediaset submits that any satellite operator, including Sky Italia, could also have benefited from the subsidy by offering ‘hybrid’ decoders, that is to say, decoders which are both terrestrial and satellite decoders. The subsidy would then have covered the additional costs for the incorporation of the necessary technology to permit the reception of terrestrial TV. In any event, the fact that Sky Italia’s market performance remained outstanding shows that the subsidies did not materially affect its performance. 88 Secondly, Mediaset claims, account must be taken, in assessing the absence of distortion of competition, of the fact that the rate of value added tax (‘VAT’) applicable to satellite broadcasting platforms is more favourable than that applicable to terrestrial broadcasting platforms. Accordingly, the measure at issue offsets the economic advantage which the application of a reduced rate of VAT confers upon satellite broadcasting platforms. In order to substantiate that argument, Mediaset refers to a complaint relating to infringement of Community law and another complaint relating to State aid filed with the Commission on 13 March 2007. Mediaset claims that the Court should reject as inadmissible the objection of inadmissibility raised by Sky Italia as regards the argument relating to the tax benefit for satellite broadcasters, on the ground that the Commission, in support of which Sky Italia is intervening, did not itself raise that objection. 89 Thirdly, Mediaset submits that, by imposing competitive constraints on the satellite platform, the measure at issue served by contrast to enhance competition. Furthermore, the measure at issue enabled consumers to benefit, for the same price, from decoders giving access to a much richer offer. Lastly, the exclusion of proprietary technologies is inherent in the common interest objective of favouring open standards and does not distort competition. The only distortion of competition between the satellite and terrestrial platforms is that which places terrestrial broadcasters at a disadvantage as a result of Sky Italia’s decision to prevent third parties from having access to its encryption technology. 90 Fourthly, Mediaset complains that the Commission adopted two decisions – namely, the contested decision and the decision concerning 2006 – which are mutually contradictory as regards the compatibility with the common market of the measure at issue and of that provided for under the 2006 Finance Law, even though they were adopted in factual circumstances which are essentially similar. In support of that argument, Mediaset maintains that the only reason that the finding of incompatibility made by the Commission in the contested decision was subsequently reversed in the decision concerning 2006 lies in the fact that the Italian legislature introduced additional wording so that satellite broadcasters are specifically covered. 91 Fifthly, at the stage of the reply, Mediaset – basing its argument on Commission Decision C(2007) 4286 final of 25 September 2007 on aid (N 103/2007) for the acquisition of digital decoders and for the adaptation of antennas in Soria (‘the Soria Decision’) – also complains that the Commission adopted the contested decision in an arbitrary manner. Mediaset states that, in recital 16 of the Soria Decision, the Commission declared the measure under examination compatible with the common market on the ground that technological neutrality was respected because ‘the subsidised decoders may support not only the reception of DTT, but also cable, satellite and/or IPTV broadcasting’. According to Mediaset, the measure under examination in the Soria Decision provided that its application was conditional on the fact that the DTT decoders would be interactive and interoperable and could therefore also receive the signals of other platforms, as in the present case. 92 In the second place, the measure at issue does not breach the principle of equal treatment of digital broadcasters. The difference in treatment between digital platforms is justified by the fact that they are in different situations. In any event, a possible breach of that principle would be objectively justified in view of the true characteristics of the relevant market at the time and the promotion of open standards. According to Mediaset, the satellite platform was not expressly included, precisely because there was no satellite offering based on an open standard and no likelihood of such an offering being forthcoming within the short period during which the measure applied. Furthermore, Mediaset maintains that the satellite platform was characterised by the presence of a de facto monopolist – namely, Sky Italia – which was able to raise relevant barriers to market entry. Lastly, Mediaset submits that, after the amendment made by the 2006 Financial Law to allow the subsidising of all interoperable decoders, Sky Italia did not retain the decoders which were capable of benefiting from the subsidy. 93 In the third place, Mediaset maintains that, since it is far from obvious from the contested decision whether the problem which rendered the measure incompatible was the issue of technological neutrality or the alleged low-cost access to the relevant market, the Commission was in breach of the principle of legal certainty. In support of that argument, Mediaset refers to the arguments set out in the context of the fourth plea in law. 94 The Commission, supported by Sky Italia, contends, first, that Mediaset has not adduced evidence of the manifest error of assessment which it allegedly made in finding that the measure at issue distorts competition by favouring digital terrestrial broadcasters. Secondly, Mediaset errs in claiming that the difference in treatment between digital platforms is justified by the fact that they are in different situations. Mediaset also errs in claiming that there was no satellite offering based on an open standard at the time when the measure at issue was adopted. Thirdly, in the contested decision, the Commission found the measure at issue incompatible on the ground that it did not comply with the principle of technological neutrality. Consequently, the Commission confirmed its consistent position that the compatibility with the common market of State aid to digitisation is conditional upon compliance with the principle of technological neutrality. – Findings of the Court 95 First, as regards the argument that Sky Italia could benefit from the measure at issue by offering ‘hybrid’ decoders, it should be pointed out that such an argument emphasises the selective nature of that measure. For satellite broadcasters such as Sky Italia to make ‘hybrid’ decoders available would involve extra cost which would be passed on to consumers in the selling price and would at best be offset by the measure at issue from which those consumers benefit. Accordingly, satellite broadcasters would find themselves in a less favourable position than terrestrial broadcasters and cable operators, who would not have to pass on any additional cost in the selling price of decoders to the consumers benefiting from the measure at issue. The argument must therefore be rejected as unfounded. 96 Nor is it relevant that, after the amendments made to the 2006 Financial Law to allow all interoperable decoders to be subsidised, Sky Italia did not switch from proprietary technology decoders to decoders that could be subsidised. As the Commission stated in recital 110 of the contested decision, that strategy could depend on many factors, such as previous investments by the company, or opting to await the Commission’s decision on the compatibility of that new measure. 97 Secondly, as regards the argument that the imposition of competitive constraints on the satellite platform generated more competition, the reasoning on which that argument is based reveals that Mediaset acknowledges the competition between terrestrial and satellite platforms and that that competition is affected by the measure at issue. 98 Furthermore, as regards Mediaset’s arguments relating to various circumstances which distort competition in favour of the satellite platform, the fact remains that such arguments are irrelevant for the purposes of assessing whether the measure at issue, in turn, distorts or threatens to distort competition in the market in question. 99 Thirdly, Mediaset’s assertion that the contested decision and the decision concerning 2006 were adopted in similar circumstances is manifestly incorrect. As the Court pointed out in paragraphs 57 and 60 above, satellite decoders were excluded from the benefit of the measure at issue. By contrast, as is apparent from paragraph 122 of the application, the 2006 Finance Law also applied to satellite decoders. 100 Fourthly, the Court considers that it cannot uphold the argument that, in the light of the Soria Decision, the contested decision is arbitrary and according to which the conditions for applying the measure under examination in the Soria Decision were the same as for the measure at issue. 101 Admittedly, the wording used by the Commission in recital 16 of the Soria Decision, as quoted in paragraph 91 above, may have misled Mediaset as regards the scope of the measure under examination in that decision. 102 Clearly, however, as contended by the Commission, both the wording of recital 58 of the Soria Decision and the contents of the letter appended to the rejoinder dispel any ambiguity in that regard. 103 As is apparent from recital 58 of the Soria Decision, the Commission expressly stated that the measure under examination in that decision enabled consumers to acquire any type of decoder, thanks to a subsidy which was independent of the technological platform that the consumer might wish to use, be it terrestrial, cable, satellite or (broadband) internet. The Commission expressly concluded, therefore, that the measure was consistent with the principle of technological neutrality. 104 Furthermore, as contended by the Commission and undisputed by Mediaset, the Commission established, before adopting the Soria Decision, that the measure under examination complied with the criterion of technological neutrality. Thus, it emerges from the letter appended to the rejoinder that, in reply to a request to that effect from the Commission, the Spanish authorities had expressly confirmed, by letter of 23 July 2007, that the broadcasting platform was not one of the criteria for the grant of the subsidy, with the result that it was ‘possible to subsidise decoders for digital terrestrial TV, broadcasting by cable [or by] satellite …’. 105 In the light of the above findings, it must be held that, by contrast with the measure at issue, the measure under examination in the Soria Decision was able to benefit all digital TV broadcasting technologies. Consequently, as the facts on which the contested decision is based and those underpinning the Soria Decision are manifestly different, Mediaset cannot purport to show that the contested decision is arbitrary by comparing the findings made by the Commission in those decisions. The argument that the contested decision is arbitrary in the light of the Soria Decision must therefore be rejected as unfounded. 106 Fifthly, the following considerations apply as regards the argument that there is no breach of the principle of equal treatment of digital broadcasters and that, in any event, such a breach would be objectively justified. 107 First, as regards Mediaset’s claim that the satellite platform was not expressly included in the scope of the measure at issue precisely because there was no satellite offering based on an open standard and no likelihood of such an offering being forthcoming within the short period during which the measure applied, it should be pointed out that – as contended by the Commission – the Commission stated in recital 164 of the contested decision that it was only during 2004 and up to the beginning of 2005 that Sky Italia launched its conversion to a technology with closed standards, a point which Mediaset did not dispute. The Commission was fully entitled, therefore, to conclude in the same recital that Sky Italia would have made a different choice if the measure at issue had also covered the satellite platform. 108 Second, Mediaset’s claim that the satellite platform was characterised by the presence of a de facto monopolist – namely, Sky Italia – which was able to raise relevant barriers to market entry, is clearly irrelevant for the purposes of assessing whether the measure at issue, in turn, distorts or threatens to distort competition in the market in question. 109 Sixthly, as regards Mediaset’s argument alleging that the Commission acted in breach of the principle of legal certainty, it is apparent from the contested decision that this argument is manifestly unfounded. It is clear from the contested decision, in particular from recitals 104, 135 and 140, that the incompatibility of the measure at issue is closely linked to the breach of the principle of technological neutrality. It should also be noted – and Mediaset does not dispute this point – that it is apparent from recital 36 of the contested decision that, in the decision to initiate the formal investigation procedure, the Commission expressed its doubts as to whether there was indeed no breach of the principle of technological neutrality on the part of the measure at issue. 110 It follows from all of the above considerations that the fourth part of the first plea must be rejected as unfounded. 111 In consequence, in the light of the findings made in paragraphs 68, 79, 85 and 110 above, the first plea must be rejected as unfounded in its entirety. The second plea: manifest error of assessment and manifest error of law in assessing the compatibility of the measure at issue with the common market under Article 87(3)(c) EC Admissibility of the arguments set out in paragraphs 93 to 96 of the application – Arguments of the parties 112 The Commission, supported by Sky Italia, contends that the arguments set out by Mediaset in paragraphs 93 to 96 of the application lack clarity. Mediaset merely makes a general reference to its analysis relating to the absence of aid. Moreover, the list of factors which, according to Mediaset, the Commission failed to consider, relate to the question whether State aid existed, not to its compatibility with the common market. Furthermore, Mediaset provides no explanation concerning the factors listed and does not state how the arguments relate to the assessment to be carried out under Article 87(3)(c) EC. For those reasons, the arguments put forward by Mediaset in paragraphs 93 to 96 of the application must be dismissed as inadmissible. 113 Mediaset submits that, whilst the analyses differ according to whether they relate to the existence of the aid or its compatibility, the fact remains that they are technically linked. Accordingly, the arguments relating to aid support the grounds for annulment relating to compatibility without their admissibility being affected. – Findings of the Court 114 In the first place, in paragraphs 93 to 96 of the application, Mediaset claims that the Commission made a manifest error of assessment in the application of Article 87(3)(c) EC. In that regard, Mediaset refers to its analysis regarding the absence of aid. Moreover, it submits that, in the contested decision, the Commission did not analyse the economic context of the measure at issue. The Commission did not point out, first, that the measure at issue provided for subsidies to promote a technology fostered by the European Union, namely an open technology allowing interoperability and interactivity; or, secondly, that the subsidies represented the additional costs of that technology; or, thirdly, that the subsidies were consistent with EU recommendations; or, fourthly, that the subsidies did not confer an economic advantage. Lastly, the Commission did not take into account the fact that the actual distortion of competition on the market was due to a policy favouring closed standards; or that a difference existed between closed and open standards; or the fact that the subsidy offset the costs associated with the performance of legal obligations. 115 In the second place, far from containing arguments to support the second plea, the explanations in paragraphs 93 to 96 of the application, which are set out in Section 3.2(a), entitled ‘The defendant engaged in a manifest error of assessment’, seek to introduce arguments in support of the three parts of the second plea, which are set out in Section 3.2(b), entitled ‘The defendant exceeded the scope of its discretion and engaged in a manifest error of appraisal of the facts and of evaluation of the situation in reaching the conclusion that the measure [at issue] was not compatible with Article 87(3)(c) EC’. 116 Accordingly, in paragraph 96 of the application, which comes before Section 3.2(b), Mediaset claims that by failing to appraise the economic context correctly, the Commission committed a manifest error of assessment of the measure at issue and consequently committed a manifest error in concluding that that measure was incompatible with the common market. 117 It follows from the above observations that the plea of inadmissibility raised by the Commission in relation to the alleged arguments set out in paragraphs 93 to 96 of the application must be rejected as unfounded. The first part of the second plea: error in concluding that the measure at issue does not address market failures – Arguments of the parties 118 Mediaset claims, on the basis of the the following four reasons, that the Commission committed a manifest error of assessment and insufficiently examined the relevant market in concluding that the measure at issue was incompatible with Article 87(3)(c) EC. 119 First, Mediaset disputes the conclusion drawn in the contested decision according to which the existence of a mandatory date for digitisation rendered the measure at issue inappropriate. That conclusion is not only at odds with the Commission’s previous decisions regarding digital terrestrial TV, but also shows that the Commission failed adequately to appreciate the existence of the market failure linked to the problem of coordination between the operators on the market. 120 Secondly, Mediaset submits that the measure at issue represented compensation for the digitisation costs which consumers would have had to bear in order to obtain an interoperable and interactive, open-technology decoder. 121 Thirdly, Mediaset claims that the contested decision failed to recognise the existence of externalities as a market failure. In that regard, in the contested decision, the Commission arbitrarily and without any objective justification concluded that it is normal for terrestrial broadcasters to subsidise open-technology decoders and thus incur the costs of free riding. However, Mediaset had no interest in subsidising the decoders to the benefit of competitors since it could easily have continued to reap the benefits of the analogue market. 122 Moreover, the Commission failed to take into account the fact that the measure at issue did not distort competition: rather, it promoted the use of open standards and interactivity in accordance with EU recommendations. Furthermore, referring to Annex A8, Mediaset submits that the Commission has failed to understand the relevant regulatory background and market evolution. Lastly, Mediaset claims that, in the contested decision, the Commission also failed to take into consideration the costs linked to the regulatory uncertainties which still exist in relation to the allocation of frequencies and submits that the Commission erred in claiming in recital 157 of the contested decision that analogue licences were granted without competitive bidding or time-limits. 123 Fourthly, Mediaset alleges that the Commission has failed to substantiate why the measure at issue did not promote innovation, although it acknowledges that that measure allowed the price for interactive decoders to be reduced and brought into line with the price of basic decoders. 124 The Commission contends that Mediaset’s reasoning is manifestly wrong and based on a ‘distorted’ reading of the contested decision. The Commission explicitly accepted that the measure at issue could be aimed at a common interest objective, namely the switchover to digital broadcasting and to open and interactive standards in that context. Moreover, the fact that the measure at issue could address certain market failures was not categorically excluded. However, none of those considerations could justify exclusion of the satellite platform from the scope of the subsidy. – Findings of the Court 125 First, calling in question the Commission’s assessment that subsidies for the purchase of digital decoders were not necessary to correct the problem of coordination between the operators on the market, as that problem had already been dealt with through the setting of a mandatory date for digitisation, Mediaset alleges infringement of Article 87(3)(c) EC. In order to be compatible with the common market for the purposes of Article 87(3)(c) EC, aid must pursue an objective in the common interest and must be necessary and proportionate for that purpose. The common interest objective purportedly pursued by the measure at issue is to address a market failure relating, in particular, to the problem of coordination between operators, which is the cause of a barrier to the development of digital broadcasting. Without there being any need to examine whether, as Mediaset claims, the Commission adopted a different position in the contested decision from that applied in previous decisions on digital terrestrial TV, the Court considers that, in the present case, the mandatory nature of the date laid down for digitisation is such as to resolve the problem of coordination among operators and, accordingly, the subsidy for the purchase of digital decoders was unnecessary. 126 As the Commission states in recital 146 of the contested decision, incumbent broadcasters had to take the fixing of a statutory deadline for switch-off of the analogue mode as an established fact and, as a consequence, had to develop new commercial strategies. In any event, as was stated in recital 147 of the contested decision, owing to the size of the terrestrial TV market in Italy, the risk of a critical mass of consumers not being reached, owing to a problem of coordination among operators, was not so great that commercial operators were unable to cope with it. Mediaset’s argument must therefore be rejected. 127 Secondly, as regards the argument that the measure at issue offset costs to consumers, it should be pointed out that – as the Commission states in recital 148 of the contested decision – although such an argument justifies aid to consumers, it does not justify the discrimination between the different platforms, in so far as there is no need to guide consumers towards one digital platform in particular, as is the case with the measure at issue. The argument must therefore be rejected as unfounded. 128 Thirdly, Mediaset’s claim that the Commission failed in the contested decision to recognise the existence of externalities as a market failure is incorrect. In recital 160 of the contested decision, the Commission expressly accepts the existence of the externalities involved in digitisation and the possible free-riding issues. However, as stated by the Commission in the same recital, such circumstances cannot justify the fact that the measure at issue is selectively aimed at terrestrial TV and excludes the satellite platform. Accordingly, the argument must be rejected as unfounded. 129 Fourthly, Mediaset’s argument that the Commission has failed to substantiate why the measure at issue did not promote innovation must be rejected for the same reasons. It is true that the Commission expressly acknowledged, in recital 162 of the contested decision, that the measure at issue brought the price of interactive decoders into line with that of simpler models without interactive services. However, even though the measure at issue, through the use of interactive and interoperable decoders, promotes innovation, the fact remains that such promotion cannot, as is apparent from paragraphs 57 and 60 above, justify the exclusion of the satellite platform from the benefit of the measure at issue. 130 It follows from all of the above considerations that the first part of the second plea must be rejected as unfounded. The second part of the second plea: error in concluding that the measure at issue was neither a necessary nor a proportionate instrument for addressing the market failures – Arguments of the parties 131 Mediaset claims that the Commission made a manifest error of assessment in concluding that the measure at issue was neither a necessary nor a proportionate instrument for addressing the market failures. With regard to the proportionality of the measure in particular, Mediaset submits that the measure was limited to the extra cost of interoperability and interactivity and to the specific costs incurred by Mediaset in the performance of its legal obligations, and that the measure was of limited duration and ceased to apply on 1 December 2005. 132 The Commission contends that Mediaset’s arguments must be rejected as unfounded since they do not take account of the principle of technological neutrality. – Findings of the Court 133 Even if Mediaset were correct in claiming that the measure at issue was necessary and proportionate to address the market failures, the fact remains that such a factor could not justify the exclusion of satellite broadcasters from the benefit of that measure. 134 Given that it is precisely the absence of technological neutrality that led the Commission to find that the aid was incompatible with the common market, the arguments put forward in support of the second part of the second plea must be rejected. 135 It follows from all of the above considerations that the second plea must be rejected as unfounded. The third plea: infringement of Article 253 EC Arguments of the parties 136 Mediaset submits that the contested decision does not contain an adequate statement of reasons and that it therefore infringes Article 253 EC as regards both the existence of State aid and its compatibility with the common market. 137 As regards the existence of aid, Mediaset complains inter alia that the Commission did not explain the true source of the distortion or the threat of distortion of competition in the common market. First, the Commission did not correctly identify at the outset the relevant market or the market situation. Secondly, the Commission failed to examine in the contested decision the question whether the distortion was real or likely. Furthermore, the Commission failed to give an adequate statement of reasons for excluding decoder manufacturers from the category of beneficiaries of the measure at issue. Lastly, it failed in particular to give sufficient reasoning regarding the alleged creation of an audience and the alleged low-cost penetration of the pay-TV market. 138 As regards the analysis of the compatibility of the measure at issue with the common market, the contested decision does not state whether the problem is the alleged failure to comply with the technological neutrality criterion or the alleged low-cost pay-TV penetration. 139 The Commission, supported by Sky Italia, contends that its decision contains an adequate statement of reasons and is consistent with the requirements of Article 253 EC. Findings of the Court 140 It should be borne in mind first that, according to settled case-law, a plea based on infringement of Article 253 EC is a separate plea from one based on a manifest error of assessment. While the former, which alleges absence of reasons or inadequacy of the reasons stated, goes to an issue of infringement of essential procedural requirements and, involving a matter of public policy, must be raised by the Court of its own motion, the latter, which goes to the substantive legality of a decision, is concerned with the infringement of a rule of law relating to the application of the Treaty and can be examined by the Court only if raised by Mediaset. The obligation to state reasons is thus a separate question from that of the merits of those reasons (Case C‑367/95 P Commission v Sytraval and Brink’s France [1998] ECR I‑1719, paragraph 67). 141 Secondly, according to settled case-law, the statement of reasons must disclose in a clear and unequivocal fashion the reasoning followed by the institution which adopted the measure, so as to enable the persons concerned to ascertain the reasons for it so that they can defend their rights and ascertain whether or not the measure is well founded and to enable the Court to exercise its power of review (Commission v Sytraval and Brink’s France, paragraph 140 above, paragraph 63; Joined Cases T‑228/99 and T‑233/99 Westdeutsche Landesbank Girozentrale and Land Nordrhein-Westfalen v Commission [2003] ECR II‑435, paragraph 278; and Case T‑109/01 Fleuren Compost v Commission [2004] ECR II‑127, paragraph 119). 142 Furthermore, it is not necessary for the statement of reasons to go into all the relevant facts and points of law, since the question whether the statement of reasons meets the requirements of Article 253 EC must be assessed with regard not only to its wording but also to its context and to all the legal rules governing the matter in question (Case C-17/99 France v Commission [2001] ECR I-2481, paragraph 36; Joined Cases T‑298/97, T-312/97, T-313/97, T-315/97, T-600/97 to T-607/97, T‑1/98, T-3/98 to T-6/98 and T-23/98 Alzetta and Others v Commission [2000] ECR II-2319, paragraph 175; and Westdeutsche Landesbank Girozentrale and Land Nordrhein-Westfalen v Commission, paragraph 141 above, paragraph 279). 143 In particular, the Commission is not obliged to adopt a position on all the arguments relied on by the parties concerned and it is sufficient if it sets out the facts and the legal considerations having decisive importance in the context of the decision (Case T-459/93 Siemens v Commission [1995] ECR II-1675, paragraph 31, and Westdeutsche Landesbank Girozentrale and Land Nordrhein-Westfalen v Commission, paragraph 141 above, paragraph 280). Thus, the Court of Justice has already held that the Commission was not required to define its position on matters which were manifestly irrelevant or insignificant or plainly of secondary importance (Commission v Sytraval and Brink’s France, paragraph 140 above, paragraph 64). 144 Thirdly, with regard to the categorisation of a measure as aid, the obligation to state reasons requires that the reasons which led the Commission to consider that the measure concerned falls within the scope of Article 87(1) EC be stated (Westdeutsche Landesbank Girozentrale and Land Nordrhein-Westfalen v Commission, paragraph 141 above, paragraph 281). 145 Fourthly, as regards the existence of a distortion of competition in the common market, it should be borne in mind that, according to settled case-law, while the Commission must at the very least refer to the circumstances in which aid was granted in the statement of the reasons for its decision where those circumstances show that the aid is such as to affect trade between Member States and to distort or threaten to distort competition, it is not required to carry out an economic analysis of the actual situation on the relevant markets, of the market share of the undertakings in receipt of the aid, of the position of competing undertakings or of trade flows between Member States. Furthermore, in the case of aid granted illegally, the Commission is not required to demonstrate the actual effect which that aid has had on competition and on trade between Member States. If that were the case, such a requirement would ultimately give Member States which grant unlawful aid an advantage over those which notify the aid at the planning stage (see, to that effect, Case T‑55/99 CETM v Commission [2000] ECR II‑3207, paragraphs 100, 102 and 103; Case T‑152/99 HAMSA v Commission [2002] ECR II‑3049, paragraph 225; and Case T‑198/01 Technische Glaswerke Ilmenau v Commission [2004] ECR II‑2717, paragraph 215). 146 In particular, the Commission merely needs to establish that the aid in question is of such a kind as to affect trade between Member States and distorts or threatens to distort competition. It does not have to define the market in question (see judgment of the Court of 6 September 2006 in Joined Cases T-304/04 and T-316/04 Italy and Wam v Commission, not published in the ECR, paragraph 64, and Case T-25/07 Iride and Iride Energia v Commission [2009] ECR II-0000, paragraph 109 and the case-law cited). 147 It is in the light of that case-law that it must be determined whether, in the present case, the Commission provided an adequate statement of reasons for the contested decision. 148 In the first place, as to the argument that the contested decision contains an inadequate statement of reasons in terms of showing that there is a distortion or threat of distortion of competition, it should be pointed out that, in recitals 102 to 114 of the contested decision, the Commission examines the effect of the measure at issue on competition and on trade between the Member States. 149 First, as regards the effect of the measure at issue on competition, it should be noted that, in recitals 102 to 111 of the contested decision, the Commission examined the effect of the measure at issue on competition as regards broadcasters. Thus the Commission stated, in recital 105 of the contested decision, that it wished to maintain the position it had expressed in the decision to initiate the formal investigation procedure, to the effect that the advantage granted to broadcasters and operators of terrestrial networks was detrimental to broadcasters using different platforms. 150 In order to support its position in that regard and thus establish, in accordance with Article 87(1) EC, that the measure at issue threatens to distort competition by granting a selective advantage, the Commission stated in recital 106 of the contested decision that there is a certain degree of substitutability between the pay-TV digital terrestrial offer and the pay-TV offer available on satellite. In those circumstances, it concluded that once ‘the digital terrestrial platform has successfully launched and established pay-TV services – also thanks to the subsidised decoders – it will be able to compete with similar services provided on alternative platforms’. 151 Moreover, it should be pointed out that, in recital 107 of the contested decision, the Commission made sure that it supported its finding by relying on developments in other Member States. 152 Furthermore, in recital 109 of the contested decision, the Commission stated that the Autorità garante della concorrenza e del mercato (National Competition Authority) had itself taken the view that broadcasters using different types of platforms could be regarded as potential competitors on the Italian pay-TV market. 153 In addition, in recital 111 of the contested decision, the Commission, first, relied on a study which indirectly confirms that access to the pay-TV market at the reduced cost is distorting competition and, secondly, stated that the figures provided by Sky Italia also tended to support the view that there is a degree of competition on the pay-TV market. 154 Lastly, it should be pointed out that, in recital 108 of the contested decision, the Commission emphasised quite specifically the fact that the measure at issue came at a critical time, that is to say, at a time when many analogue terrestrial TV viewers were faced with the transition to digital TV and had to choose between investing in equipment for receiving satellite transmissions or terrestrial transmissions. 155 It follows from all of the above considerations that the Commission was not in breach of its obligation to state reasons regarding the effects of the measure at issue on competition. 156 Secondly, as regards the effect of the measure at issue on trade between Member States, it is apparent from recitals 113 and 114 of the contested decision that the Commission found that the broadcasting and network services markets are open to international competition and that, by selectively favouring certain broadcasters or network operators, competition is distorted at the expense of economic operators which might come from other Member States. The Commission concluded, therefore, that the measure at issue affects trade between Member States. 157 In the light of the case-law referred to in paragraphs 145 and 146 above, the Commission must be regarded as having provided an adequate statement of reasons in the contested decision as regards the question whether the measure at issue is likely to affect trade between Member States. 158 Moreover, even supposing that Mediaset sought, more generally, to claim that there had been infringement of Article 253 EC as regards the Commission’s categorisation, in the contested decision, of the measure at issue as State aid for the purposes of Article 87(1) EC, it should be pointed out that, in that decision, the Commission examined compliance with all the conditions laid down in Article 87(1) EC. First, in recital 80 of the contested decision, it examined whether the measure at issue involved the use of State resources. Secondly, in recitals 81 to 101 of the contested decision, it examined whether the measure at issue conferred a selective economic advantage on the recipients. Thirdly, in recitals 102 to 112 of the contested decision, it ascertained whether the measure at issue distorted or threatened to distort competition. Fourthly and lastly, in recitals 113 and 114 of the contested decision, the Commission assessed whether the measure at issue was capable of affecting trade between Member States. 159 In the second place, Mediaset complains that the Commission did not state in the contested decision whether the reason why it declared the measure at issue to be incompatible with the common market was linked to failure to respect the technological neutrality criterion or the alleged low-cost pay-TV penetration. In that regard, suffice it to note that, as the Court has already held in paragraph 109 above, it is clear from the contested decision – in particular, from recitals 104, 135 and 140 – that the incompatibility of the measure at issue is closely linked to the breach of the principle of technological neutrality and that, in the decision to initiate the formal investigation procedure, the Commission had expressed its doubts as to the need for the measure at issue to breach the principle of technological neutrality. Consequently, the present argument must also be rejected as unfounded. 160 In the third place, concerning the position of decoder manufacturers, the Commission provided a statement of reasons for the contested decision to the requisite legal standard. As regards the existence of aid, after reiterating the doubts which it had entertained at the time of initiating the formal investigation procedure, the Commission found in recitals 120 to 123 of the contested decision that distortion of competition at the level of decoder manufacturers could not be entirely ruled out. However, it added that, in any event, the measure at issue was compatible with the common market with regard to those manufacturers. In that regard, the Commission maintained in recital 168 of the contested decision that the measure at issue should be regarded as necessary and proportionate for attaining a common interest objective, given that all the decoder manufacturers, including those located in other Member States, could gain from it. 161 Consequently, it must be held that the Commission provided an adequate statement of reasons as regards the findings in the contested decision that the measure at issue was covered by Article 87(1) EC and that it was incompatible with the EC Treaty. 162 It follows from all of the above considerations that the contested decision complies with the requirements of Article 253 EC. The third plea must therefore be rejected as unfounded. The fourth plea: infringement of Article 14 of Regulation No 659/1999 and breach of the principle of the protection of legitimate expectations and the principle of legal certainty Arguments of the parties 163 Mediaset submits that the contested decision infringes Article 14 of Regulation No 659/1999 inasmuch as, under that provision, the Commission is not to require recovery of the aid if this would be contrary to a general principle of Community law. 164 In the first place, the contested decision is said to breach the principle of the protection of legitimate expectations since exceptional circumstances led Mediaset to believe that the measure did not constitute State aid. 165 In that regard, Mediaset states, first, that it legitimately believed that the measure at issue was consistent with the Commission’s policy of promoting digitisation, since the Commission stated in paragraph 3.4.2 of Commission Communication COM(2004) 541 final of 30 July 2004 on interoperability of digital interactive TV services (‘the Communication’) that direct subsidies to consumers were a possible means by which a Member State could provide an incentive for the purchase of interactive and interoperable decoders, and particularly since the Commission made express reference in the Communication to the Italian subsidies. 166 Secondly, Mediaset argues, since the concept of indirect beneficiaries of State aid was not yet clearly defined in the case-law, a diligent operator could not legitimately be expected to believe that aid to consumers would render it not only an indirect beneficiary of such aid, but also the sole beneficiary, to the exclusion of all other potential indirect beneficiaries. Mediaset submits in that regard that all other potential beneficiaries should also have been regarded as indirect beneficiaries, with all the relevant implications that such a finding would have in terms of recovery. 167 Secondly, the contested decision is also in breach of the principle of legal certainty, since the method of calculation proposed in recitals 191 to 205 of the contested decision as a means of quantifying the amount of aid to be recovered is not effective, transparent or appropriate. First, it is difficult, if not impossible, to establish the exact value of one of the parameters of that method: namely, the number of additional viewers who acquired pay-TV services solely because of the adoption of the measure at issue. In that regard, the Commission has failed to prove that customers bought the subsidised decoders to access the pay-TV services. Secondly, quantifying the aid and the interest on that aid is extremely difficult. In that regard, the Commission should at least have examined the proposed model and perhaps even analysed it in comparison with other possible models, particularly since none of the parties involved in the proceedings could provide any quantification of the alleged aid. 168 The Commission, supported by Sky Italia, contends that the arguments put forward by Mediaset regarding the method of quantification of the aid relate more to the implementation of the decision than to its lawfulness. Consequently, they must be rejected as inadmissible. Furthermore, the contested decision complies with the general principles of Community law of the protection of legitimate expectations and of legal certainty. As a consequence, the Commission was required, pursuant to Article 14 of Regulation No 659/1999, to order recovery of the aid measure at issue. Findings of the Court 169 First, it should be borne in mind that the the removal of unlawful State aid by means of recovery is the logical consequence of a finding that it is unlawful. The aim of obliging the State concerned to abolish aid found by the Commission to be incompatible with the common market is to restore the previous situation (see Joined Cases T-116/01 and T-118/01 P & O European Ferries (Vizcaya) and Diputación Foral de Vizcaya v Commission [2003] ECR II-2957, paragraph 223 and the case-law cited), causing the recipient to forfeit the advantage which it had enjoyed over its competitors (see Case C-310/99 Italy v Commission [2002] ECR I-2289, paragraph 99, and Case C-277/00 Germany v Commission [2004] ECR I‑3925, paragraph 75 and the case-law cited). 170 Secondly, it should be pointed out that, under Article 14(1) of Regulation No 659/1999, where negative decisions are taken in cases of unlawful aid, the Commission is to decide that the Member State concerned is to take all necessary measures to recover the aid from the beneficiary. That provision specifies, however, that the Commission is not to require recovery of the aid if this would be contrary to a general principle of Community law. 171 In the present case, Mediaset maintains that recovery of the aid would be contrary to the principle of the protection of legitimate expectations and the principle of legal certainty. 172 In the first place, as regards the alleged breach of the principle of the protection of legitimate expectations, it should be borne in mind that, according to settled case-law, the right to rely on the principle of the protection of legitimate expectations, which is a fundamental principle, extends to any individual who is in a situation in which it is clear that, by giving him precise assurances, the authorities have led him to entertain legitimate expectations. Regardless of the form in which it is communicated, information that is precise, unconditional and consistent which comes from an authorised and reliable source constitutes such assurance (Joined Cases T-66/96 and T-221/97 Mellett v Court of Justice [1998] ECR-SC I-A-449 and II-1305, paragraphs 104 and 107). However, a person may not plead breach of the principle unless he has been given precise assurances by the administration (Case T-290/97 Mehibas Dordtselaan v Commission [2000] ECR II-15, paragraph 59, and Case T-273/01 Innova Privat-Akademie v Commission [2003] ECR II‑1093, paragraph 26). 173 Also, so far as State aid is concerned, it is settled case-law that, in view of the mandatory nature of the review of State aid by the Commission under Article 88 EC, undertakings to which aid has been granted may not, in principle, entertain a legitimate expectation that the aid is lawful unless it has been granted in compliance with the procedure. A diligent business operator must normally be in a position to confirm that that procedure has been followed, even if the State in question was responsible for the unlawfulness of the decision to grant aid to such a degree that its revocation appears to be a breach of the principle of good faith (see Joined Cases T-239/04 and T‑323/04 Italy and Brandt Italia v Commission [2007] ECR II‑3265, paragraph 154 and the case-law cited). 174 However, Mediaset maintains that, in the present case, its legitimate expectation that the measure at issue was lawful was based on two exceptional circumstances. 175 First, it relies on paragraph 3.4.2 of the Communication, which expressly refers to the measure at issue and states that Member States may grant consumer subsidies. 176 However, contrary to the assertions made by Mediaset, the reference in paragraph 3.4.2 of the Communication does not constitute a guarantee on the part of the Commission as regards the lawfulness of the measure at issue. On the contrary, given that the Commission expressly states in that paragraph that ‘such consumer subsidies need to be technologically neutral and must be notified and conform to State Aid rules’, the Communication could not have led a diligent operator to entertain legitimate expectations as regards the compatibility of the measure at issue with the rules applicable to State aid. A diligent business operator should have known not only that the measure at issue was not technologically neutral, but also that it had not been notified to the Commission and had not been authorised. 177 Secondly, Mediaset’s argument that the indirect form of the aid also constitutes an exceptional circumstance which could have given rise to a legitimate expectation must also be rejected. Like any diligent operator, Mediaset should have known that the indirect nature of the aid has no bearing on its recovery. In that regard, it should be pointed out in particular that, contrary to Mediaset’s claims, aid to consumers is a well-established form of aid, as is apparent from Article 87(2)(a) EC, which must be notified and authorised like all the other forms of aid and the potential recipients of which are indirect. 178 The argument relating to breach of the principle of the protection of legitimate expectations must therefore be rejected as unfounded. 179 In the second place, as regards the alleged breach of the principle of legal certainty, it should be pointed out that that principle requires that legal rules be clear and precise and aims to ensure that situations and legal relationships governed by Community law remain foreseeable (Case C-199/03 Ireland v Commission [2005] ECR I-8027, paragraph 69). 180 That principle is said to have been infringed because, first, it is difficult, if not impossible, to establish the exact value of one of the parameters of the method of calculation set out in the contested decision – namely, the number of additional viewers who acquired pay-TV services because of the measure at issue – and, secondly, quantifying the aid and the interest on that aid is extremely difficult. 181 However, it should be borne in mind that, according to settled case-law, no provision requires the Commission, when ordering the recovery of aid declared incompatible with the common market, to fix the exact amount of the aid to be recovered. It is sufficient for the Commission’s decision to include information enabling the recipient to work out that amount itself, without overmuch difficulty (Case C-415/03 Commission v Greece [2005] ECR I-3875, paragraph 39; Case C-441/06 Commission v France [2007] ECR I-8887, paragraph 29; and judgment of the Court of Justice of 14 February 2008 in Case C‑419/06 Commission v Greece, not published in the ECR, paragraph 44). 182 Furthermore, according to settled case-law, in the absence of pertinent provisions of Community law, the recovery of aid which has been declared incompatible with the common market is to be carried out in accordance with the rules and procedures laid down by national law. Disputes arising in connection with the enforcement of recovery are a matter for the national court alone (see, to that effect, Case T-354/99 Kuwait Petroleum (Nederland) v Commission [2006] ECR II-1475, paragraph 68 and the case-law cited). 183 Lastly, it should be added that the obligation on a Member State to calculate the exact amount of aid to be recovered forms part of the more general reciprocal obligation incumbent upon the Commission and the Member States to cooperate in good faith in the implementation of Treaty rules concerning State aid (Netherlands v Commission, paragraph 69 above, paragraph 91). 184 It is apparent from the case-law referred to in paragraphs 181 to 183 above that it is for the national court, if a case is brought before it, to rule on the amount of State aid which the Commission has ordered to be recovered, if necessary after referring a question to the Court of Justice for a preliminary ruling. 185 Mediaset’s argument alleging breach of the principle of legal certainty must therefore be rejected as unfounded. 186 It follows from the findings made in paragraphs 178 and 185 above that the fourth plea must be rejected as unfounded. 187 In conclusion, as none of the pleas put forward in support of the present action is well founded, the action must be dismissed in its entirety. Costs 188 Under Article 87(2) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party’s pleadings. Since the applicant has been unsuccessful, it must be ordered to pay the costs, in accordance with the form of order sought by the Commission and Sky Italia. On those grounds, THE GENERAL COURT (Second Chamber) hereby: 1. Dismisses the action; 2. Orders Mediaset SpA to bear its own costs and to pay those of the European Commission and Sky Italia Srl. Pelikánová Jürimäe Soldevila Fragoso Delivered in open court in Luxembourg on 15 June 2010. [Signatures] Table of contents Background to the dispute Procedure and forms of order sought Admissibility of Annex A8 to the application Arguments of the parties Findings of the Court Admissibility of the annexes to the application which have not been translated into the language of the case Arguments of the parties Findings of the Court The pleas in law Admissibility of the plea alleging manifest error of assessment as regards the determination of the scope of Article 4(1) of the 2004 Finance Law Arguments of the parties Findings of the Court The first plea: infringement of Article 87(1) EC The second part of the first plea, relating to the absence of an economic advantage – Arguments of the parties – Findings of the Court The first part of the first plea, relating to the concept of an indirect beneficiary – Arguments of the parties – Findings of the Court The third part of the first plea, relating to the absence of selectivity in the nature of the measure at issue – Arguments of the parties – Findings of the Court The fourth part of the first plea, relating to the absence of distortion of competition – Arguments of the parties – Findings of the Court The second plea: manifest error of assessment and manifest error of law in assessing the compatibility of the measure at issue with the common market under Article 87(3)(c) EC Admissibility of the arguments set out in paragraphs 93 to 96 of the application – Arguments of the parties – Findings of the Court The first part of the second plea: error in concluding that the measure at issue does not address market failures – Arguments of the parties – Findings of the Court The second part of the second plea: error in concluding that the measure at issue was neither a necessary nor a proportionate instrument for addressing the market failures – Arguments of the parties – Findings of the Court The third plea: infringement of Article 253 EC Arguments of the parties Findings of the Court The fourth plea: infringement of Article 14 of Regulation No 659/1999 and breach of the principle of the protection of legitimate expectations and the principle of legal certainty Arguments of the parties Findings of the Court Costs * Language of the case: English.

Arrêt de la Cour Case C-307/01 Peter d'Ambrumenil and Dispute Resolution Services Ltd v Commissioners of Customs & Excise (Reference for a preliminary ruling from the VAT and Duties Tribunal, London (United Kingdom)) «(Sixth VAT Directive – Exemption for medical care provided in the exercise of the medical and paramedical professions)» Opinion of Advocate General Stix-Hackl delivered on 30 January 2003 Judgment of the Court (Fifth Chamber), 20 November 2003 Summary of the Judgment Tax provisions – Harmonisation of laws – Turnover taxes – Common system of value added tax – Exemptions provided for by the Sixth Directive – Exemption for medical care provided in the exercise of the medical and paramedical professions – Scope (Art. 13A(1)(c) of Council Directive 77/388) Article 13A(1)(c) of Sixth Directive 77/388, relating to the exemption from value added tax of certain medical services, does not exempt all the services which may be effected in the exercise of the medical and paramedical professions, but only provision of medical care.In that regard, it is the purpose of a medical service which determines whether it should be exempt from VAT. Therefore, if the context in which such a service is effected enables it to be established that its principal purpose is not the protection, including the maintenance or restoration, of health but rather the provision of advice required prior to the taking of a decision with legal consequences, the exemption does not apply to the service.Thus, Article 13A(1)(c) is to be interpreted as meaning that the exemption from VAT under that provision applies to medical services consisting of:─ conducting medical examinations of individuals for employers or insurance companies,─ the taking of blood or other bodily samples to test for the presence of viruses, infections or other diseases on behalf of employers or insurers, or─ certification of medical fitness, for example, as to fitness to travel,where those services are intended principally to protect the health of the person concerned.On the other hand, the said exemption does not apply to the following services, performed in the exercise of the medical profession:─ giving certificates as to a person's medical condition for purposes such as entitlement to a war pension,─ medical examinations conducted with a view to the preparation of an expert medical report regarding issues of liability and the quantification of damages for individuals contemplating personal injury litigation,─ the preparation of medical reports following examinations referred to in the previous indent and medical reports based on medical notes without conducting a medical examination,─ medical examinations conducted with a view to the preparation of expert medical reports regarding professional medical negligence for individuals contemplating litigation,─ the preparation of medical reports following examinations referred to in the previous indent and medical reports based on medical notes without conducting a medical examination.see paras 53, 60, 68-69, operative part 1-2 JUDGMENT OF THE COURT (Fifth Chamber) 20 November 2003 (1) ((Sixth VAT Directive – Exemption for medical care provided in the exercise of the medical and paramedical professions)) In Case C-307/01, REFERENCE to the Court under Article 234 EC by the VAT and Duties Tribunal, London (United Kingdom), for a preliminary ruling in the proceedings pending before that tribunal between Peter d'Ambrumenil, Dispute Resolution Services Ltd and Commissioners of Customs and Excise, on the interpretation of Article 13A(1)(c) of Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes ─ Common system of value added tax: uniform basis of assessment (OJ 1977 L 145, p. 1), THE COURT (Fifth Chamber),, composed of: A. Rosas (Rapporteur), acting for the President of the Fifth Chamber, D.A.O. Edward and A. La Pergola, Judges, Advocate General: C. Stix-Hackl, Registrar: L. Hewlett, Principal Administrator, after considering the written observations submitted on behalf of: ─ Dr d'Ambrumenil and Dispute Resolution Services Ltd, by Dr d'Ambrumenil, and by M. Conlon QC, ─ the United Kingdom Government, by J.E. Collins, acting as Agent, and by N. Paines QC, ─ the Commission of the European Communities, by R. Lyal, acting as Agent, having regard to the Report for the Hearing, after hearing the oral observations of Dr d'Ambrumenil and of Dispute Resolution Services Ltd, of the United Kingdom Government and of the Commission, at the hearing on 20 November 2002, after hearing the Opinion of the Advocate General at the sitting on 30 January 2003, gives the following Judgment By decision of 6 June 2001, received at the Court on 6 August 2001, the VAT and Duties Tribunal, London, referred to the Court for a preliminary ruling under Article 234 EC a question on the interpretation of Article 13A(1)(c) of Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes ─ Common system of value added tax: uniform basis of assessment (OJ 1977 L 145, p. 1, hereinafter the Sixth Directive). That question was raised in the course of a dispute between Peter d'Ambrumenil, who is a doctor, the company Dispute Resolution Services Ltd (hereinafter DRS) and the Commissioners of Customs and Excise, the competent authority in the United Kingdom in relation to value added tax (hereinafter VAT), on the tax treatment, with regard to that tax, of various supplies of services provided either jointly by the first two above-named parties, or by one of them. Legal background Community law Under Article 2(1) of the Sixth Directive, VAT is chargeable on the supply of goods or services effected for consideration within the territory of the country by a taxable person acting as such. Article 4 of the Sixth Directive provides: 1. Taxable person shall mean any person who independently carries out in any place any economic activity specified in paragraph 2, whatever the purpose or results of that activity. 2. The economic activities referred to in paragraph 1 shall comprise all activities of producers, traders and persons supplying services including mining and agricultural activities and activities of the professions. The exploitation of tangible or intangible property for the purpose of obtaining income therefrom on a continuing basis shall also be considered an economic activity. ... Article 13A(1) provides: 1. Without prejudice to other Community provisions, Member States shall exempt the following under conditions which they shall lay down for the purpose of ensuring the correct and straightforward application of such exemptions and of preventing any possible evasion, avoidance or abuse: ... (b) hospital and medical care and closely related activities undertaken by bodies governed by public law or, under social conditions comparable to those applicable to bodies governed by public law, by hospitals, centres for medical treatment or diagnosis and other duly recognised establishments of a similar nature; (c) the provision of medical care in the exercise of the medical and paramedical professions as defined by the Member State concerned; .... In Case C-384/98 D. v W. [2000] ECR I-6795 the Court held that Article 13A(1)(c) of the Sixth Directive is to be interpreted as meaning that it does not apply to medical services consisting, not in providing care to persons by diagnosing and treating a disease or any other health disorder, but in establishing the genetic affinity of individuals through biological tests. National legislation Under item 1(a) in Group 7 in Schedule 9 to the Value Added Tax Act 1994 (hereinafter the VATA 1994), read in conjunction with Section 31 of that Act, the supply of services by a person registered or enrolled in the register of medical practitioners is exempt from VAT. Note 2 to that Group states: Paragraph ... (a) ... of item 1 include[s] supplies of services made by a person who is not registered or enrolled in any of the registers ... specified in [that paragraph] where the services are wholly performed or directly supervised by a person who is so registered or enrolled. The main proceedings and the question referred The first appellant in the main proceedings, Dr d'Ambrumenil, qualified in medicine in 1975. After having worked for the National Health Service as a general practitioner from 1978 to 1987, he established himself in private practice and continued to practise medicine in his private consulting rooms. In the course of his professional activities, Dr d'Ambrumenil has acted as an expert medical witness before various courts and given evidence in a large number of cases concerning, particularly, medical negligence, personal injury and disciplinary proceedings. He also acts as a professional arbitrator and mediator. The second appellant in the main proceedings, DRS, is a company formed by Dr d'Ambrumenil in 1994. A substantial part of Dr d'Ambrumenil's professional activities have been carried on by DRS since 1997 when he ceased to practise medicine privately. The activities mentioned consist of the supply of services which require expertise which is both legal and medical, in particular arbitration and mediation services. By decision notified to Dr d'Ambrumenil on 29 September 1997, the Commissioners of Customs and Excise concluded that several services provided either jointly by the two appellants in the main proceedings, or by one of them, fell within the scope of item 1 in Group 7 in Schedule 9 to the VATA 1994 and were therefore exempt from VAT. Dr d'Ambrumenil appealed against that decision to the VAT and Duties Tribunal, London, which ordered DRS to be joined as party to the proceedings. By a preliminary decision given on 16 March 1999, the Tribunal proposed referring to the Court of Justice for a preliminary ruling a question on the interpretation to be given to the exemption provided for by Article 13A(1)(c) of the Sixth Directive in the light of the arguments which had been presented to it by the parties. The reference to the Court of that question was subsequently stayed pending the judgment in D. v W. , cited above. According to the order for reference, and in particular from the preliminary decision attached thereto, the parties to the main proceedings agree that certain supplies of services by Dr d'Ambrumenil, in his own name or on behalf of DRS, are subject to VAT. However, in relation to other services provided by them, the appellants in the main proceedings dispute the view of the Commissioners of Customs and Excise which classifies those services as provision of medical care within the meaning of Article 13A(1)(c) of the Sixth Directive. According to the appellants, such services, even though they involve medical knowledge and experience, are not covered by the exemption under that provision, which concerns only medical interventions in order to diagnose, treat and, if possible, cure an illness or health problem. In its preliminary decision, the VAT and Duties Tribunal expressed an opinion favourable to the position taken by the Commissioners of Customs and Excise, according to which the services at issue in the main proceedings are exempt services under Article 13A(1)(c) of the Sixth Directive. None the less, it considered that, in spite of the clarification supplied by the judgment in D. v W. as to whether VAT was payable on the services of a doctor who carries out a paternity test and makes a report thereon, the Court's interpretation was still required in order to decide on the tax treatment of the services referred to in the main proceedings. In these circumstances the VAT and Duties Tribunal, London, decided to stay proceedings and to refer the following question to the Court for a preliminary ruling : Is Article 13A(1)(c) of [the Sixth Directive] to be interpreted as covering the following activities when performed in the exercise of the medical profession as defined by the Member State: (a) conducting medical examinations of individuals for employers or insurance companies, (b) the taking of blood or other bodily samples to test for the presence of viruses, infections or other diseases on behalf of employers or insurers, (c) certification of medical fitness, for example, as to fitness to travel, (d) giving certificates as to a person's medical condition for purposes such as entitlement to a war pension, (e) medical examinations conducted with a view to the preparation of expert medical reports regarding issues of liability and the quantification of damages for individuals contemplating personal injury litigation, (f) the preparation of medical reports (i) following the examinations referred to in (e) and (ii) based on medical notes without conducting a medical examination, (g) medical examinations conducted with a view to the preparation of expert medical reports regarding professional medical negligence for individuals contemplating litigation, and (h) the preparation of medical reports (i) following the examinations referred to in (g) and (ii) based on medical notes without conducting a medical examination? The question referred By its question, the VAT and Duties Tribunal is asking the Court to provide it with the criteria for the construction of Article 13A(1)(c) of the Sixth Directive to enable it to determine the tax treatment, with regard to VAT, of various services which can be provided in the exercise of the medical profession. More specifically, the referring court wishes to know whether the exemption under that provision applies to the various activities described in the question referred. Observations submitted to the Court The appellants in the main proceedings maintain that the services described in the question referred do not come within the field of application of the exemption from VAT provided for by Article 13A(1)(c) of the Sixth Directive. That outcome follows clearly from the judgments in Case 353/85 Commission v United Kingdom [1988] ECR 817, and in D . v W. The Court confirmed in Commission v United Kingdom , cited above, that the expression soins à la personne used in the French text of Article 13A(1)(c) of the Sixth Directive has a different meaning and a narrower scope than the expression soins médicaux used in the French text of subparagraph (b) thereof. Even if the expression medical care is used both in Article 13A(1)(b) and (c) in the English language version of the Sixth Directive, the Court rejected the argument based on that fact by the United Kingdom Government to establish that the scope of the exemptions provided in the two provisions was parallel. The appellants also point out that in D. v W. the Court held that medical services consisting, not in providing care to persons by diagnosing and treating a disease or any other health disorder, but in establishing the genetic affinity of individuals through biological tests, are outside the application of the exemption provided for by Article 13A(1)(c) of the Sixth Directive. They submit also that in Case C-76/99 Commission v France [2001] ECR I-249 the Court accorded decisive importance to the therapeutic aim for which the services in question were rendered by the laboratories. According to the appellants, the words of the relevant exemption require, first, that the services be performed in the exercise of the medical and paramedical professions and that, secondly, such services involve the provision of medical care. In the main proceedings, there is no doubt that the first requirement is satisfied. The said services are supplied by Dr d'Ambrumenil in his capacity as a doctor. However, the second requirement is not satisfied, because such services do not involve the provision of any medical care. The appellants submit that, if the expression medical care should be understood as referring to all services that are provided in the course of the exercise of the medical profession, the second requirement would be without purpose. Article 13A(1)(c) of the Sixth Directive would simply have exempted services supplied by doctors in their professional capacity. In that context, they draw the Court's attention to the fact that the wording of that provision is different from that of subparagraph (e), which exempts services supplied by dental technicians in their professional capacity. The words medical care necessarily connote an activity designed to protect human health and involve care of a patient, which is consistent with a purposive construction of Article 13A of the Sixth Directive. The exemption is designed to facilitate the protection of human health, which includes diagnosis and examination for the purpose of ascertaining whether a person is suffering from a medical condition with a view to treating it if that is possible. It does not include diagnosis and examination if done for some other purpose, such as that of determining the premium payable on an insurance policy. The appellants submit that none of the services described in the order for reference are provided for the purpose of protecting a person's health or curing or treating any medical condition. Medical examinations and the taking of blood or other bodily samples carried out to test for the presence of viruses, infections or other diseases for employers or insurance companies have no therapeutic purpose. They are carried out for the purposes of determining a person's suitability for employment or the premium payable under an insurance contract. Examinations carried out in order to certify a person's fitness to travel are carried out simply in order to determine whether the person can travel or not, and not for the purpose of treating any health problem. Similarly, certifying a person's medical condition for the purpose of entitlement to a war pension is simply for the purposes of determining whether that person is entitled to such a pension or not. Medical examinations carried out and reports prepared for the purposes of litigation likewise cannot, according to the appellants, be described as medical care. They are only directed at determining the compensation, if any, to which the person concerned is entitled. The United Kingdom Government submits that Article 13A(1)(c) of the Sixth Directive is to be interpreted as covering the services described in the question referred when performed in the exercise of the medical profession as defined by the Member State. The Government points out that this case raises issues which overlap with those in Case C-212/01 Unterpertinger . All the services in question in the two cases are provided by medically skilled persons in order to give an opinion on a person's state of health. The difference between the present case and Unterpertinger is that this case does not involve the services of an expert appointed by a court. According to the United Kingdom Government, the activities to which the question referred relates include typical functions of the medical profession, such as performing a medical examination to determine the state of health of a person ─ which means, in effect, to make a medical diagnosis. Those functions plainly fall within the scope of the exemption in Article 13A(l)(c) of the Sixth Directive. As in the Unterpertinger case, the issue raised by the national tribunal is whether that conclusion is altered either because of the purpose for which the diagnosis and/or the examination are requested or because of the identity of the person commissioning them. The United Kingdom Government submits that no sensible distinction can be drawn upon either of those bases. The Government points out that, at paragraphs 21 and 23 of the judgment in Commission v France , cited above, the Court held that while VAT exemptions are to be construed strictly, Article 13A(1)(b) of the Sixth Directive is not to be construed unduly narrowly, since the exemption is designed to ensure that the benefits of medical and hospital care are not hindered by the increased costs of such care that would follow if they were subject to VAT. According to the United Kingdom Government, a similar purpose underlies Article 13A(l)(c). The United Kingdom Government submits, further, that the interpretation of the words medical care must take into account the fact that the activities performed in the exercise of the medical and paramedical professions are wide-ranging, and extend beyond simply treating sick patients. It is appropriate to refer in that regard to the description of the functions of the medical profession in Council Directive 93/16/EEC of 5 April 1993 to facilitate the free movement of doctors and the mutual recognition of their diplomas, certificates and other evidence of formal qualifications (OJ 1993 L 165, p. 1). The Court indicated in Case C-349/96 Card Protection Plan [1999] ECR I-973 (hereinafter CPP ), paragraph 18, that the terms used in the Sixth Directive can be construed by taking into account their meaning in other Community directives. In the submission of the United Kingdom, the definition of medical care for the purposes of the Sixth Directive must at all events include giving advice such as that referred to in Directive 93/16. In the Government's submission, between the providing of medical treatment stricto sensu and the giving of general advice on health lie a range of other activities which are central to the activity of the medical profession but are not directly concerned with treating diagnosed illnesses. Such activities include, for example, prophylactic medicine, such as vaccination and immunisation, various forms of medical intervention concerned with human fertility and childbearing, and cosmetic surgery. The United Kingdom Government observes that, as is evident from Directive 93/16, an important aspect of the prevention of illness and the protection of general health is the performance of periodic health checks on individuals in order to detect the early stages of disease or confirm their absence. The VAT treatment of such an examination could not sensibly differ according to its result or whether or not it led to medical treatment stricto sensu . Furthermore, the increased cost of such examinations if they were subject to VAT would be contrary to the purpose referred to by the Court in paragraph 23 of its judgment in Commission v France , cited above. The United Kingdom Government examines also the relevance for the reply to the question referred of certain judgments of the Court relied upon by the appellants before the national tribunal. It submits that the proceedings which gave rise to the judgment in Commission v United Kingdom , cited above, did not concern services but the question whether the exemption provided for by Article 13A(1)(c) of the Sixth Directive covers supplies of goods. Furthermore, the description in paragraph 33 of that judgment of the services of doctors exempted under that article was not intended to be exhaustive. The Court cannot have intended, by referring to services supplied outside hospitals and within the framework of a confidential relationship between doctor and patient, to deprive of the benefit of the exemption consultations invoiced to a hospital by an outside doctor who had provided services in that hospital. The existence of a particular degree of confidence between the doctor and the patient could not be the criterion for the application of the exemption. The United Kingdom Government points out that the judgment in Case 122/87 Commission v Italy [1988] ECR 2685, in which the Court held that the exemption under Article 13A(1)(c) of the Sixth Directive does not cover veterinary treatment, says nothing about the field of application of that article to human health. Case C-145/96 von Hoffmann [1997] ECR I-4857, concerning the application of VAT to an arbitrator's services, raised entirely different questions from those raised by this case. With regard to the judgment in D. v W. , cited above, the United Kingdom Government submits that the Court was concerned to stress that Article 13A(1)(c) of the Sixth Directive relates to medical activities in the area of human health and that the activity in point in that case had nothing to do with human health. The formulation in paragraph 18 of that judgment could exclude from the exemption under that provision certain functions carried out every day by doctors or members of the paramedical professions. It submits, however, that it is unlikely that the Court intended to exclude from exemption activities such as vaccination performed by doctors or the advisory functions in connection with the prevention of disease and the protection of health referred to in the preamble to Directive 93/16. At all events, the Government avers that the activities at issue in the main proceedings ─ unlike those which gave rise to the judgment in D. v W. ─ are concerned with the diagnosis of diseases or health disorders. Paragraph 18 of that judgment confirms that medical diagnosis does fall within the exemption under Article 13A(1)(c) of the Sixth Directive. The United Kingdom Government argues that all of the activities described in the decision to refer involve making a medical diagnosis for the purpose of being communicated to a third party, such as an employer or an insurance company, at the request of either that third party or the patient himself. Furthermore, the question referred states that certain activities do not involve a physical examination of the patient, but only the consideration of medical notes. The United Kingdom Government contends that the exemption must cover the activity of using medical skill in all cases, since the preparation of the report which contains the diagnosis is inseparable from the conduct of the examination of a person or the consideration of notes relating to his state of health. The United Kingdom Government also submits that no sensible or workable distinction can be drawn between services falling within and outside the exemption on the basis of the reasons for which a medical diagnosis is sought. It would clearly not be right for the tax treatment of the service to vary either according to the results of the medical examination or according to the reason for which the service was sought. It is plainly in the public interest that people should not be deterred from participating in, for example, cancer screening programmes; to subject such services to VAT on the grounds that the participants were in fact in good health would be contrary to the purpose of the exemption concerned. Similarly, according to the United Kingdom Government, whether the service is ordered by the patient or some other person cannot affect the tax treatment of medical care. Parents commonly commission medical care for their children and employers arrange medical care for their staff, particularly in the form of medical check-ups. There is no reason why these services should be burdened with VAT on the ground that they have been commissioned by someone other than the patient. Again, any such distinction could easily be circumvented. The United Kingdom Government goes on to lay emphasis on the fact that, although a number of the exemptions in Articles 13A and 13B of the Sixth Directive are dependent on the identity of the supplier or the recipient of goods or services, no condition as to the identity of the recipient of the service has been introduced into Article 13A(1)(c) of that directive. The Court has in the past excluded the introduction of restrictions upon the identity of the supplier or recipient of an exempt service, where no such restriction is found in the relevant exempting provisions themselves (Case C-281/91 Muys' en De Winter's Bouw- en Aannemingsbedrijf [1993] ECR I-5405, paragraph 13, and Case C-2/95 SDC [1997] ECR I-3017, paragraph 32). The United Kingdom Government observes that the intrinsic nature of a service falling within Article 13A(1)(c) does not alter according to who commissions it. To hold that it applies only to services commissioned by the patient himself would be, in the words of the Court in paragraph 56 of the judgment in SDC , cited above, to restrict the exemption in a way which is not supported by the wording of the provision in question. The Commission agrees in part with the submissions made by the Commissioners of Customs and Excise before the national tribunal and in part with those made by the appellants. Having recalled the Court's case-law on the interpretation of the exemptions contained in Article 13 of the Sixth Directive, in particular with regard to Article 13A(1)(c), the Commission acknowledges that the identity of the person who requests a medical examination is not decisive in determining the tax treatment of that service. By contrast, it does not agree with the emphasis laid by the Commissioners of Customs and Excise on the use of medical knowledge. The Commission submits, as do the appellants, that the meaning of medical care is narrower than the activity of the medical profession in general. For that reason, Directive 93/16 does not appear to be of any assistance in answering the question referred. The Commission points out that medical practitioners do not enjoy a general exemption from VAT and that, in principle, they are taxable persons under Article 4(2) of the Sixth Directive in the same way as other professionals who provide services. It is only the provision of medical care which is exempted. The Commission contends that the national tribunal was right to say in its preliminary decision of 16 March 1999 that medical care is the provision of services in a doctor/patient relationship directed in general to the physical and mental health of that person. That definition corresponds to the notion of therapeutic aim referred to in the Court's case-law. In the light of those criteria, the Commission submits that medical examinations and the preparation of reports on the state of health of an alleged victim of personal injury or medical error do not constitute medical care, at least where the service provider is not the victim's own physician. Such examinations are directed, instead, at determining the cause and extent of an injury. They have no direct relationship to the medical treatment of that injury. Consequently, the taxation of such services has no negative impact on access to health care. According to the Commission, the same may be said in relation to the preparation of certificates concerning, for example, fitness to travel, or certificates concerning a person's medical condition for purposes such as entitlement to a war pension. Such services have no relation to the treatment of a medical condition or indeed the provision of health advice. The Commission points out, in that regard, that the Commissioners of Customs and Excise accepted that the provision of certain types of certificates was a taxable supply for VAT purposes. The Commission admits nevertheless that, in certain cases, certificates of fitness to travel or to participate in sports are given by the person's usual physician in the course of a routine consultation such as a periodic medical check-up or as an adjunct to ongoing medical care. In such circumstances, the Commission maintains that the provision of the medical certificate must be regarded as merely ancillary to the main purpose of the service, which is the medical care of the person concerned. Although it does not appear that Dr d'Ambrumenil's activities, as described in the decision to refer, satisfy those conditions, a question of fact of that kind is a matter for the national tribunal. In so far as medical examinations and the taking of blood or other samples at the request of employers or insurers are concerned, the Commission submits that services of that type, which are elements in the decision-making process of the employer or insurer, should be considered as subject to VAT, in particular where they are carried out by a doctor chosen by the employer or insurer. They are not intended to further the medical care of the person concerned and imposing VAT on them has no impact on access to medical care. Nevertheless, where the person concerned is at liberty to have the examinations carried out by his own physician, the Commission considers it possible that they may be regarded as forming part of the ongoing medical care of the patient. As for periodic medical checks carried out at the request of an employer or an insurer, the Commission maintains that they promote the proper health care of those concerned. Therefore, while such checks are carried out in the interest of the employer or insurer, they have a therapeutic purpose and thus fall within the terms of Article 13A(1)(c). Those checks, as well as the taking of blood and other samples in connection therewith, enable the persons concerned to discuss their state of health with the doctor and to receive the appropriate advice. There is, in that situation, a relationship of doctor and patient which may not arise in the case of examinations requested solely for the purpose of determining aptitude for employment or assessing an insurance risk. The Court's reply According to the Court's case-law, the exemptions envisaged in Article 13 of the Sixth Directive are to be interpreted strictly since they constitute exceptions to the general principle that VAT is to be levied on all services supplied for consideration by a taxable person (see, in particular, SDC , cited above, paragraph 20, and Case C-141/00 Kügler [2002] ECR I-6833, paragraph 28). Those exemptions constitute independent concepts of Community law whose purpose is to avoid divergences in the application of the VAT system from one Member State to another ( CPP , cited above, paragraph 15, and Commission v France , cited above, paragraph 21). As the Commission has correctly observed, Article 13A(1)(c) does not exempt all the services which may be effected in the exercise of the medical and paramedical professions, but only provision of medical care, which constitutes an independent concept of Community law. It follows that services effected in the exercise of those professions remain subject to the general rule making them subject to VAT set out in Article 2(1) of the Sixth Directive, if they do not correspond to the concept of the provision of medical care, or to the terms of any other exemption provided for by that directive. Even if other services provided by doctors may share the characteristics of activities in the public interest, it follows from the Court's case-law that Article 13A of the Sixth Directive does not exempt from VAT every activity performed in the public interest, but only those which are listed and described in great detail (Case C-149/97 Institute of the Motor Industry [1998] ECR I-7053, paragraph 18, and D. v W. , paragraph 20). The United Kingdom Government's argument seeking to extend the scope of the exemption under Article 13A(1)(c) to all the activities normally included in the functions of doctors and to which Directive 93/16 refers should therefore be rejected. The objectives pursued by that directive, which is intended to facilitate the free movement of doctors and the mutual recognition of their diplomas, certificates and other evidence of formal qualifications, require that the activities of doctors be therein described in such a way as to cover all of their activities in the various Member States, whereas the definition of the activities covered by that exemption, which creates an exception to the principle of subjection to VAT, fulfils different objectives. It should be noted, furthermore, that the fact that the same persons may provide both services exempted from VAT and services subject to that tax does not constitute an anomaly in the context of the system of deduction put in place by the Sixth Directive, since Articles 17(5) and 19 thereof specifically govern that situation. In relation to the concept of provision of medical care, the Court has already held in paragraph 18 of its judgment in D. v W. , and restated in paragraph 38 of its judgment in Kügler , cited above, that that concept does not lend itself to an interpretation which includes medical interventions carried out for a purpose other than that of diagnosing, treating and, in so far as possible, curing diseases or health disorders. While it follows from that case-law that the provision of medical care must have a therapeutic aim, it does not necessarily follow therefrom that the therapeutic purpose of a service must be confined within an especially narrow compass (see, to that effect, Commission v France , paragraph 23). Paragraph 40 of the judgment in Kügler shows that medical services effected for prophylactic purposes may benefit from the exemption under Article 13A(1)(c). Even in cases where it is clear that the persons who are the subject of examinations or other medical interventions of a prophylactic nature are not suffering from any disease or health disorder, the inclusion of those services within the meaning of provision of medical care is consistent with the objective of reducing the cost of health care, which is common to both the exemption under Article 13A(1)(b) and that under (c) of that paragraph (see Commission v France , paragraph 23, and Kügler , paragraph 29). On the other hand, medical services effected for a purpose other than that of protecting, including maintaining or restoring, human health may not, according to the Court's case-law, benefit from the exemption under Article 13A(1)(c) of the Sixth Directive. Having regard to their purpose, to make those services subject to VAT is not contrary to the objective of reducing the cost of health care and of making it more accessible to individuals. As the Advocate General correctly pointed out in paragraphs 66 to 68 of her Opinion, it is the purpose of a medical service which determines whether it should be exempt from VAT. Therefore, if the context in which a medical service is effected enables it to be established that its principal purpose is not the protection, including the maintenance or restoration, of health but rather the provision of advice required prior to the taking of a decision with legal consequences, the exemption under Article 13A(1)(c) does not apply to the service. Where a service consists of making an expert medical report, it is clear that, although the performance of that service solicits the medical skills of the provider and may involve activities which are typical of the medical profession, such as the physical examination of the patient or the analysis of his medical history, the principal purpose of such a service is not the protection, including the maintenance or restoration, of the health of the person to whom the report relates. Such a service, whose purpose is to provide a reply to questions set out in the request for the report, is effected in order to enable a third party to take a decision which has legal consequences for the person concerned or other persons. While it is true that an expert medical report may also be requested by the person concerned and may indirectly contribute to the protection of the health of such person, by detecting a new problem or by correcting a previous diagnosis, the principal purpose pursued by every service of that type remains that of fulfilling a legal or contractual condition in another's decision-making process. Such a service cannot benefit from the exemption under Article 13A(1)(c). It follows that supplies of services such as those described in paragraphs (d) to (h) of the question referred, although effected in the exercise of the medical profession, do not constitute the provision of medical care within the meaning of Article 13A(1)(c). The purpose of such services is to provide expert reports concerning a person's state of health and covering, in particular, the injuries or disabilities by which he or she is affected, in order to treat administrative applications, such as applications for the payment of a war pension, or for the purposes of court proceedings for compensation, such as claims for damages for medical negligence. In relation to services consisting in the provision of medical certificates of fitness, for example certificates of fitness to travel as mentioned in paragraph (c) of the question referred, it is necessary to take into consideration the context in which those services are performed in order to establish their principal purpose. Where fitness certificates are required by a third party as a condition precedent to the exercise by the person concerned of a particular professional activity or the practice of certain activities requiring a sound physical condition, the principal purpose of the service effected by the doctor is to provide the third party with a necessary element for taking a decision. Such medical services are not intended principally to protect the health of the persons who wish to carry on certain activities and cannot therefore be exempt under Article 13A(1)(c). None the less, where the purpose of a certificate relating to physical fitness is to make clear to a third party that a person's state of health imposes limitations on certain activities or requires that they are carried on under particular conditions, the protection of the health of the person concerned may be regarded as the principal purpose of that service. Therefore, the exemption under Article 13A(1)(c) may apply to such a service. Considerations similar to those set out in paragraphs 63 to 65 of this judgment apply in relation to the services described in paragraphs (a) and (b) of the question referred. Where medical examinations and the taking of blood or other bodily samples are carried out with the aim of enabling an employer to take decisions on the recruitment of, or on the duties to be performed by, a worker or to enable an insurance company to fix the premium to be paid by an insured person, the services in question are intended principally to provide that employer or that insurance company with evidence on which to take its decision. Such services do not therefore come within the meaning of provision of medical care exempted under Article 13A(1)(c). By contrast, regular medical checks at the behest of certain employers and certain insurance companies may satisfy the conditions for exemption under Article 13A(1)(c), provided that such checks are intended principally to enable the prevention or detection of illness or the monitoring of the health of workers or insured persons. The fact that such medical checks take place at a third party's request, and may also serve the employers' or insurance companies' own interests, does not preclude health protection being regarded as the principal aim of such checks. In view of the foregoing, the reply to the question referred must be that Article 13A(1)(c) of the Sixth Directive is to be interpreted as meaning that the exemption from VAT under that provision applies to medical services consisting of: ─ conducting medical examinations of individuals for employers or insurance companies, ─ the taking of blood or other bodily samples to test for the presence of viruses, infections or other diseases on behalf of employers or insurers, or ─ certification of medical fitness, for example, as to fitness to travel, where those services are intended principally to protect the health of the person concerned. The said exemption does not apply to the following services, performed in the exercise of the medical profession: ─ giving certificates as to a person's medical condition for purposes such as entitlement to a war pension, ─ medical examinations conducted with a view to the preparation of an expert medical report regarding issues of liability and the quantification of damages for individuals contemplating personal injury litigation, ─ the preparation of medical reports following examinations referred to in the previous indent and medical reports based on medical notes without conducting a medical examination, ─ medical examinations conducted with a view to the preparation of expert medical reports regarding professional medical negligence for individuals contemplating litigation, ─ the preparation of medical reports following examinations referred to in the previous indent and medical reports based on medical notes without conducting a medical examination. Costs The costs incurred by the United Kingdom Government and by the Commission, which have submitted observations to the Court, are not recoverable. Since these proceedings are, for the parties to the main action, a step in the proceedings pending before the national tribunal, the decision on costs is a matter for that tribunal. On those grounds, THE COURT (Fifth Chamber), in answer to the question referred to it by the VAT and Duties Tribunal, London, by decision of 6 June 2001, hereby rules: 1. Article 13A(1)(c) of Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes ─ Common system of value added tax: uniform basis of assessment, is to be interpreted as meaning that the exemption from VAT under that provision applies to medical services consisting of: ─ conducting medical examinations of individuals for employers or insurance companies, ─ the taking of blood or other bodily samples to test for the presence of viruses, infections or other diseases on behalf of employers or insurers, or ─ certification of medical fitness, for example, as to fitness to travel, where those services are intended principally to protect the health of the person concerned. 2. The said exemption does not apply to the following services, performed in the exercise of the medical profession: ─ giving certificates as to a person's medical condition for purposes such as entitlement to a war pension, ─ medical examinations conducted with a view to the preparation of an expert medical report regarding issues of liability and the quantification of damages for individuals contemplating personal injury litigation, ─ the preparation of medical reports following examinations referred to in the previous indent and medical reports based on medical notes without conducting a medical examination, ─ medical examinations conducted with a view to the preparation of expert medical reports regarding professional medical negligence for individuals contemplating litigation, ─ the preparation of medical reports following examinations referred to in the previous indent and medical reports based on medical notes without conducting a medical examination. Rosas Edward La Pergola Delivered in open court in Luxembourg on 20 November 2003. R. Grass V. Skouris Registrar President 1 – Language of the case: English.

COURT OF APPEAL FOR ONTARIO CITATION: Labadie (Re), 2019 ONCA 75 DATE: 20190204 DOCKET: C65479 Feldman, Lauwers and Nordheimer JJ.A. IN THE MATTER OF: Nicole Labadie AN APPEAL UNDER PART XX.1 OF THE CODE Stephen Gehl, for the appellant Jeremy Tatum, for the respondent Attorney General of Ontario Julie Zamprogna Balles, for the respondent Southwest Centre for Forensic Mental Health Care Heard and released orally: January 28, 2019 On appeal from the disposition of the Ontario Review Board dated February 1, 2018. APPEAL BOOK ENDORSEMENT [1] The appellant’s position on this appeal is that the Ontario Review Board’s decision that the appellant continued to pose a significant threat to the safety of the community was unreasonable and therefore she should have been discharged absolutely even though she asked the Board for a conditional discharge. The only remedy she seeks on this appeal is an absolute discharge. [2] The basis for the argument that the finding of significant threat was unreasonable is the evidence that the appellant was functioning for almost a year in full compliance with the order for conditional discharge made by the trial judge. While that was true, the doctor did not have full information about the appellant and remained concerned about the serious nature of the index offence, the appellant’s history of substance abuse and her continuing experience of symptoms of her mental condition. [3] In any event, all parties made a joint submission to the Board that significant threat was accepted and not an issue for the Board. [4] In our view, on the evidence and given the joint submission, the decision of the Board that the appellant continued to pose a significant threat was a reasonable one. [5] Counsel advised that the next annual review is scheduled for February 5, 2019, where the Board will have the opportunity to address the issues on the current state of the evidence, and the proper disposition. The latter issue was not raised before us. “K. Feldman J.A.” “P. Lauwers J.A.” “I.V.B. Nordheimer J.A.”

COURT OF APPEAL FOR ONTARIO CITATION: Kowalsky v. Asselin-Kowalsky, 2018 ONCA 492 DATE: 20180528 DOCKET: M49037 (C64491) Doherty and LaForme JJ.A. and Himel J. ( ad hoc ) BETWEEN Mark Kowalsky Applicant (Respondent in Appeal) Responding Party (Moving Party on Motion) and Denise Asselin-Kowalsky Respondent (Appellant in Appeal) Moving Party (Responding Party on Motion) Kim S. Kieller and Ainsley Hunter, for the moving party, Mark Kowalsky Patrick Kraemer, for the responding party, Denise Asselin-Kowalsky Heard: May 25, 2018 APPEAL BOOK ENDORSEMENT [1] The orders under appeal are final orders. This court has jurisdiction. The real question is whether this court should exercise its discretion and delist the appeal pending the outcome of outstanding matters in the Superior Court: Gray v. Gray , 2017 ONCA 100. [2] There are arguments for and against proceeding with the appeal (scheduled for June 7, 2018), as opposed to sending the matter back to the trial court. It may be that even if the appeal proceeds and the appellant is successful, the matter will still have to go back to the Superior Court for determination of issues such as spousal support and child support. [3] On balance, and for the reasons identified by Rouleau J.A., we think the appeal court is the appropriate forum in which to address at least the fundamental issue on appeal – should the order made in the absence of the appellant stand? [4] The appeal should proceed as scheduled. [5] The responding party is entitled to costs on a partial indemnity basis. The issues on the motion were straightforward. Much of the preparation will also apply to the appeal. Costs of the motion fixed at $3,000, inclusive of taxes and disbursements.

Order of the President of the Court of First Instance of 30 March 2007 – Makhteshim-Agan Holding and Others v Commission (Cases T-393/06 R I, T-393/06 R II and T-393/06 R III) Applications for interim measures – Applications for interim measures and for suspension of operation – Directive 91/414/EEC – Inadmissibility 1. Applications for interim measures – Conditions of admissibility – Admissibility of main application – Irrelevance – Limits (Art. 242 EC; Rules of Procedure of the Court of First Instance, Art. 104(1); Council Directive 91/414, Art. 8(2)) (see paras 39-49) 2. Actions for failure to act – Formal notice to the institution (Art. 232 EC) (see paras 53-59) Re: APPLICATIONS for suspension of operation of a decision alleged to be contained in a letter from the Commission dated 12 October 2006 concerning the evaluation of the active substance azinphos-methyl, in accordance with Council Directive 91/414/EEC of 15 July 1991 concerning the placing of plant protection products on the market (OJ 1991 L 230, p. 1), and for other interim measures. Operative part Cases T‑393/06 R I, T‑393/06 R II and T‑393/06 R III are joined for the purposes of the present order. The applications for interim measures are dismissed. Costs are reserved.

Mr Justice Lawrence Collins: I The Law Society and its powers of intervention The Law Society is a corporate body which represents the solicitors of England and Wales. The Law Society's regulatory functions under the Solicitors Act 1974 ("the 1974 Act") are exercisable against solicitors regardless of whether or not those solicitors are members of the Law Society, and are exercised by the Law Society as a public body and in the public interest. Under section 35 of the 1974 Act, the Law Society has power to intervene into solicitors' practices. Every year, there are between 50 and 100 such interventions. The grounds for an intervention are set out in Part I of Schedule 1 to the 1974 Act. Typically, interventions will occur when the Council of the Law Society has reason to suspect dishonesty on the part of the solicitor concerned (or his employees) or where there has been failure by the solicitor to comply with the Solicitors' Accounts Rules 1998. Interventions are also necessary in other circumstances, such as when a solicitor is incapacitated by age or illness, is made bankrupt, is imprisoned, has been struck off or suspended from practice, abandons his practice, is practising uncertificated, has previously been the subject of an intervention on grounds of suspected dishonesty and within 18 months is found practising as a sole solicitor, or when the personal representative of a deceased solicitor practising alone prior to death is guilty of undue delay in connection with the solicitor's practice. The powers exercisable on intervention are set out in Part II of Schedule 1 to the 1974 Act. By paragraph 5(1) the court may, on the application of the Law Society, order that no payment shall be made without the leave of the court by any person of any money held on behalf of the solicitor or his firm. By paragraph 6: "(1) … if the Council pass a resolution to the effect that any sums of money to which this paragraph applies, and the right to recover or receive them, shall vest in the Society, all such sums shall vest accordingly (whether they were received by the person holding them before or after the Council's resolution) and shall be held by the Society on trust to exercise in relation to them the powers conferred by this Part of this Schedule and subject thereto upon trust for the persons beneficially entitled to them. (2) This paragraph applies... (a) where the powers conferred by this paragraph are exercisable by virtue of paragraph 1, to all sums of money held by or on behalf of the solicitor or his firm in connection with his practice or with any trust of which he is or formerly was a trustee; (b) where they are exercisable by virtue of paragraph 2, to all sums of money in any client account; and (c) where they are exercisable by virtue of paragraph 3, to all sums of money held by or on behalf of the solicitor or his firm in connection with the trust or other matter to which the complaint relates." By paragraph 9, the Law Society may require production of the solicitor's practice documents. The powers to vest monies in the Law Society and to obtain possession of practice documents can be exercised in combination: Sritharan v Law Society [2005] EWCA Civ 476, [2005] 1 WLR 2708, at [46]. If the Law Society takes possession of any sum of money to which paragraph 6 applies, it must pay it into a special account in the name of the Law Society or in the name of a person it has nominated on its behalf or in a client account of a solicitor nominated on its behalf. The monies in the hands of the nominated person or solicitor are held on trust on the same terms as the Law Society holds it on trust, that is (paragraph 7(1)) "on trust to exercise in relation to them the powers conferred by [Part II of Schedule 1] and subject thereto on trust for the persons beneficially entitled to them". These powers are exercisable notwithstanding any lien on the money or documents concerned or any right to their possession: paragraph 12. Under paragraph 13, the costs incurred by the Law Society for the purposes of Schedule 1, including the costs of any person exercising the powers in Part II of Schedule 1 on behalf of the Law Society, are to be paid by the solicitor (or his personal representatives, if appropriate) and are recoverable as a debt owing to the Law Society. By paragraph 16 of Schedule 1: "The Society may do all things which are reasonably necessary for the purpose of facilitating the exercise of its powers under this Schedule." This is an ancillary power which is confined to facilitating the exercise of the express powers conferred by the Schedule: Rose v Dodd [2005] EWCA Civ 957, at [29]; see also Dooley v Law Society, November 27, 2001, unreptd, at [13]. Intervention does not give the Law Society the power to take over the practice and to carry it on or to close it down. The Law Society does not become the administrator of the practice, nor a receiver or manager. The focus of the legislation is on precautionary and preventive powers. The ownership of the assets (apart from practice monies) and the goodwill of the practice remain with the solicitor and can be disposed of notwithstanding the intervention; but the solicitor's practising certificate is automatically suspended under section 15(1A) of the Act where the intervention is on grounds of suspected dishonesty or breach of the Solicitors' Accounts Rules or the solicitor has been committed to prison: Rose v Dodd [2005] EWCA Civ 957 at [24], [27]. The right to recover sums due from former clients to the solicitor remains vested in the solicitor. The solicitor alone can commence and pursue recovery proceedings, and the Law Society has no duty to pursue such proceedings. But any recovery effected by the solicitor would vest automatically in the Law Society subject to the statutory trust: Dooley v. Law Society, supra, at [9], [10]. The Law Society is required to serve on the solicitor or his firm, and on any other person having possession of sums of money to which paragraph 6 applies, a certified copy of the Council's resolution and a notice prohibiting payment out of any such sums of money: paragraph 6(3). A payment out at a time when such payment is prohibited by a notice by a person on whom the notice has been served constitutes an offence: paragraph 6(6). The intervention process is compliant with Article 1 of the First Protocol to the European Convention on Human Rights, in that, although it does constitute an interference with a solicitor's peaceful enjoyment of his property, the interference is necessary in proper cases in the public interest: Holder v The Law Society [2003] EWCA Civ 39, [2003] 1 WLR 1059. II The Compensation Fund The Compensation Fund is established under section 36 of the 1974 Act, funded by annual contributions paid by practising solicitors (Schedule 2, paragraphs 2 and 6(a)), out of which grants may be made by the Law Society for the purpose of relieving loss or hardship caused by dishonesty or failure to account. The Compensation Fund is not a legal entity, and the fund is held and administered by the Law Society. Such a fund was first established under the Solicitors Act 1941, the purpose being then to relieve or mitigate losses sustained by any person in consequence of dishonesty on the part of a solicitor. The Council of the Law Society may make a grant out of the Compensation Fund where it is satisfied that: (1) a person has suffered or is likely to suffer loss in consequence of dishonesty on the part of a solicitor, or of an employee of a solicitor, in connection with the solicitor's practice or purported practice or in connection with any trust of which that solicitor is or formerly was a trustee; or (2) a person has suffered or is likely to suffer hardship in consequence of failure on the part of a solicitor to account for money which has come into his hands in connection with his practice or purported practice or in connection with any trust of which he is or formerly was a trustee; or (3) a solicitor has suffered or is likely to suffer loss or hardship by reason of his liability to any of his or his firm's clients in consequence of some act or default of any of his partners or employees in circumstances where but for the liability of that solicitor a grant might have been made out of the Compensation Fund to some other person. The purpose of the grant must be to relieve the loss or hardship of which the Council was satisfied in order to consider making the grant. It is possible for the Compensation Fund to make a grant under (c) above in the form of a loan: section 36(3). The Council has to give reasons for a refusal of a grant: section 36(7). The Compensation Fund Rules 1995, together with the guidelines published by the Law Society, give an indication of how the Law Society is likely to exercise its discretion when faced with an application for a grant. In particular: (1) Applications should be delivered to the Law Society within 6 months after the loss or likelihood of loss or failure to account first came or reasonably should have come to the knowledge of the applicant. This period of time can be extended in exceptional circumstances by the Council: Rule 6. (2) The Compensation Fund is reliant upon the applicant for full and frank disclosure of all material dealings between the applicant and the solicitor in cases where the solicitor's records are so bad that it is very difficult for the Law Society to establish with any degree of certainty what the state of the account was between the applicant and the solicitor. The Council may require an application to be supported by a statutory declaration and accompanied by any relevant documents. The failure to provide such documentation or co-operate with the Council's enquiries may be taken into account when consideration is given to the application: Rule 7. (3) The Council may require an applicant to pursue an alternative civil remedy prior to the making of a grant; Rule 8. The Fund is a fund of last resort and grants may be refused where the loss is an insured loss or is capable of being made good by recourse to another person: Guideline 1(c). The Council does not usually make a grant where the application is based on the failure of a solicitor to comply with an undertaking. The purpose of the Fund is not to underwrite solicitors' undertakings: Guideline (3)(g). (4) There is a cap of £1,000,000 on any grant made out of the Compensation Fund in respect of any individual transaction or matter: Rule 11. (5) Where a grant is made, the Council may also consider an application for a further grant in respect of the reasonable costs properly incurred by the applicant with either his solicitor or other professional adviser exclusively and necessarily in connection with the preparation, submission and proof of the application: Rule 9. (6) Where a grant is made, the Council may also consider an application for a further grant in lieu of lost interest on the principal grant. Such interest is normally calculated in accordance with rates prescribed from time to time by the Council: Rule 10. (7) It is possible for the Council to make a payment of an interim grant, in cases of severe hardship, prior to completion of full investigation of the entire application, but only if it is satisfied that loss of an amount at least equal to the amount paid out by way of interim grant has been suffered: Guideline 5. Paragraph 1 of Schedule 2 provides that the Compensation Fund is held on trust by the Law Society, "for the purposes" set out in section 36 of the Act and in Schedule 2. In R v Law Society, ex p Mortgage Express [1997] 2 All ER 348 Lord Bingham CJ said (at 359) that the Law Society would be in breach of trust were it to make a grant out of the Compensation Fund when the statutory criteria set out in section 36(2) were not satisfied. But it is clear from that decision that the trust is not an ordinary private law trust, but is a fund in relation to which (once the applicant qualifies for a grant) the Law Society has to exercise discretion or judgment in accordance with public law principles. Lord Bingham CJ said (at 360): "Any discretion … must be exercised reasonably, fairly, in good faith, so far as possible consistently and with regard to the objects of the legislation. But there is nothing to prevent the Law Society formulating and following policies which satisfy these criteria, provided they do not fetter their discretion by applying such policies inflexibly and without recognising that exceptional cases may call for exceptional exercises of discretion." Applicants do not have a right to compensation which they are entitled to enforce; all they have is a right to seek a favourable exercise of discretion: ibid. See also R v Law Society, ex p Reigate Projects Ltd [1993] 1 WLR 1531, at 1543-1544; R v Law Society, ex p Ingman Foods Oy Ab [1997] 2 All ER 666; R v The Law Society, ex. p. Nielsen, December 3, 1998, unreptd.; The Mortgage Corporation v Law Society, December 15, 2000, unreptd. at [13], [14]. The powers of intervention on grounds of "reason to suspect dishonesty" enable the Law Society to exercise control over those solicitors whose conduct might give rise to claims against the Compensation Fund, claims which ultimately have to be met by the profession as a whole: Sritharan v Law Society [2005] EWCA Civ 476, [2005] 1 WLR 2708 at [18]; Pine v Law Society [2002] EWCA Civ 175, [2002] 1 WLR 2189 at [12]. The Compensation Fund pays the cost of interventions where the ground for intervention is reason to suspect dishonesty: Schedule 2, paragraph 7(e). This is because interventions on grounds of dishonesty are in the interests of the profession as a whole, in that they may prevent further dishonesty on the part of the intervened in solicitor, which would, otherwise, result in further claims on the Compensation Fund from the victims of that dishonesty: Law Society v KPMG Peat Marwick [2000] 1 All ER 515, affd [2000] 1 WLR 1921. A consequence of the Law Society's exercise of its two basic powers of intervention (document possession and money vesting), in suspected dishonesty cases, is protection of the Compensation Fund. To the extent that the Compensation Fund has made a grant to a person entitled to client account monies, it will be subrogated under section 36(4) to the right to receive any money that person would have received from the Law Society. Such recoveries will then be carried back to the credit of the Compensation Fund pursuant to Schedule 2, paragraph 6(f). In practice, the Compensation Fund is subrogated to a significant number (in some cases, the overwhelming majority) of such persons' rights to such money in any given intervention. This is because, following an intervention, a significant number of persons usually make claims upon, and receive grants from, the Compensation Fund. III The problem and the applications to the court The same factors that prompt the Law Society to intervene into a practice frequently make the Law Society's task following intervention extremely difficult. In particular, it is often the case upon intervention that the solicitor's records (such as accounting records, client files and client ledgers) are in disarray, incomplete, or sometimes partially or completely non-existent, whether through dishonesty, incompetence, incapacity, abandonment or otherwise. Such problems may be long standing. Moreover, there are often significant discrepancies between the sums of money recovered following an intervention and the money that should have been present in the solicitor's client accounts. In cases where there are such shortfalls, the Law Society must then determine how best to deal with the shortfall, in terms of distributions to be made of the funds recovered on intervention. A solicitor stands in a fiduciary relationship to his clients: Nocton v Lord Ashburton [1914] AC 932; Moody v Cox & Hatt [1917] 2 Ch 71; Brown v IRC [1965] AC 244; Boardman v Phipps [1967] 2 AC 46; Clark Boyce v Mouat [1994] 1 AC 428; Bristol & West Building Society v Mothew [1998] Ch 1; Hilton v Barker Booth & Eastwood [2005] UKHL 8, [2005] 1 WLR 567. Money on client account has often been said to be held on trust for the client: In re a Solicitor [1952] Ch 328; Target Holdings Ltd v Redfern [1996] 1 AC 421, 436; Twinsectra Ltd v Yardley [2002] UKHL 12, [2002] 2 AC 164, at [12] where Lord Hoffmann said: "Money on a solicitor's account is held on trust. The only question is the terms of that trust." The solicitor's duties are underpinned by a regulatory regime whereby (a) the Solicitors' Accounts Rules require client money to be held in separate client bank accounts, prescribe the records which must be kept and the circumstances in which the solicitor is permitted to draw on client money and guard against the mixing of client money and office money; (b) clients have the right to apply to court (inter alia) for delivery of a cash account, a list of money held for the client and payment over of that money: CPR, r 67.2. In intervention cases, the Law Society frequently inherits a disordered and chaotic situation, and must seek to understand, as best it can, such records as there are with the available resources it has, in order to distribute the monies it has removed from a solicitor's control to the clients or other persons who appear to the Law Society in all of these circumstances to be entitled to it. It emerged, in the course of proceedings by Mr Halley against the Law Society (Halley v Law Society [2003] EWCA Civ 97, [2003] WTLR 845), that there might have been inadvertent breaches of trust by the Law Society in its dealing with money vested in it upon intervention. In particular, the Law Society became concerned that insufficient efforts had been made pro-actively to identify, contact and account to clients (and others) for whom money was held. On intervention, current clients were generally told that there had been an intervention and who the intervening agent was, and told to apply to the Compensation Fund if they considered that they were owed monies (i.e. rather than being repaid money held for them in trust). The concentration upon current clients and the reactive nature of the process of expecting clients to apply to the Compensation Fund meant that there had been apparent failures to contact or account to clients for whom the solicitor had been holding money. There was also concern about the transfers being made into the Compensation Fund from money which was held on statutory trust in purported exercise of the Compensation Fund's rights of subrogation. As a result a continuing review was instigated. It was found that in some dishonesty intervention cases (usually where there was a shortfall on client account) the money received from the intervention agents was paid direct into the Compensation Fund without waiting for aggregate grants from the Compensation Fund to exceed the amount received, probably because it was assumed that grants would in due course exceed that amount. In addition, funds in long-standing statutory trust accounts had been transferred into the Compensation Fund as part of a concern to clear old balances held. As a result of detailed investigations a total of £2.7 million was in June 2004 repaid by the Compensation Fund to be held on statutory trust. The money represented repayment of erroneous transfers into the Compensation Fund since February 1999. Subsequently the intervention processes have been reviewed and improved, and there has been a detailed analysis of all the trust accounts which the Law Society holds in order to ensure that so far as possible beneficiaries were accounted to where they could be identified and traced, and there has been put in place a system of evidence gathering to enable to Law Society to discharge its duties as statutory trustee. Detailed instructions to intervention agents were issued and revised from time to time. As a result of the new processes, instead of beneficiaries being required unnecessarily to apply to the Compensation Fund, intervention agents and/or the Law Society have been able to distribute funds to beneficiaries where the client account has been reconciled and verified as intact, and almost £15.8 million was distributed in this way in relation to interventions effected between April 2002 and April 2004. But there are significant problems relating to client accounts which impact on the ability of the Law Society to identify and trace beneficiaries and distribute funds. For example (i) there may be a shortfall of funds on client account; (ii) there may be no proper records detailing amounts held or on whose behalf they are held (since dishonest solicitors sometimes deliberately destroy all records); (iii) documents, files or other records may be missing; (iv) there may be a lack of accounting material to enable the Law Society to reconcile the accounts at the date of intervention or subsequently; (v) there may be false accounting entries concealing misappropriation, and, consequently, the beneficiaries; (vi) books may purport to balance but the solicitor's "clients" who have been providing funds to the solicitor may themselves be involved in fraud, money laundering, theft or false accounting and may not be the true beneficial owners of the funds; (vii) the intervened solicitor may not cooperate; (viii) the firm's staff may not cooperate because they have not been paid; and (ix) there may be a generally chaotic situation, involving angry and upset clients, utilities being cut off and equipment being repossessed. These problems make it difficult, and sometimes impossible, for the Law Society as statutory trustee to establish who is beneficially entitled to the funds on client account. Where there are problems, some clients will receive in effect their full beneficial entitlement by way of payments from the Compensation Fund, and in those cases the Compensation Fund has rights of subrogation under section 36(4) of the 1974 Act, and as a consequence distribution may be possible to the Compensation Fund (like any other beneficiary) from money held on statutory trust. But before any money can be paid to the Compensation Fund it is necessary to determine how much of that money belonged to the recipient of the grant. The consequence is that there are the following problems. In the past when clients came forward to claim funds, unless the accounts were clearly intact, they were generally told to apply to the Compensation Fund, whereas in fact they were entitled to their share of the money held on statutory trust and should not have had to apply to the discretionary Compensation Fund. As a result it is possible that clients who were entitled to money but were refused a discretionary grant would have been left uncompensated (e.g. as a result of the expiry of the time limit for applications to the Compensation Fund). As a consequence of what is described as the aggregated basis, excessive sums were transferred from the statutory trust to the Compensation Fund. For example a client may have been paid 100% by the Compensation Fund, in a case where the client account was deficient by 50%, and yet the whole amount was transferred to the Compensation Fund from the statutory trust where the amount payable from the money held on statutory trust to the client would only have been 50%. The problem would be compounded if only some of the clients had been paid by the Compensation Fund. In addition the Compensation Fund was wrongly treated as having a subrogated claim in respect of interest and costs paid to the client. It is accepted that the approach was mistaken. Section 36 of the 1974 Act does give the Compensation Fund a right of subrogation, in respect of the full amount of the grants made, but in exercising that right the Compensation Fund can have no greater claim against the client account than the client would have had. The client would only be entitled to recover from the client account his or her remaining share of the monies in that account and such interest as has accrued on that share (not any shortfall, nor interest on the shortfall). Further, the client could not claim against the client account for the costs of making a claim on the Compensation Fund (which the Compensation Fund reimburses in exercise of its discretion). Where the statutory trust account is incomplete, the Law Society now recognises that, before making any distribution (including pursuant to a right of subrogation) the Law Society as trustee needs to have, so far as possible, identified precisely whose money has been lost or, where this has not been possible, to have arrived at a proper scheme of distribution for the remaining trust funds. As a result of these problems, the Law Society has reviewed and rewritten intervention agent's instructions. It has established a new unit, the Post Intervention Unit ("PIU"), to ensure that clients are properly accounted to for their funds, and to correct past errors. The Law Society has separated decision making in relation to Compensation Fund grants and decisions about payments from monies held on statutory trust to the Compensation Fund. It has investigated possible overpayments to the Compensation Fund from statutory trusts, resulting in repayments of almost £3 million. The PIU has created a template to record all relevant information in respect of each statutory trust to enable an informed decision to be made by the Law Society as statutory trustee about distribution. The template acts as a guide to Law Society officers to enable them methodically to acquire all relevant evidence in relation to each statutory trust. Very few people appear to have complained that they have not received what they would have been entitled to, and only two cases have been brought before the High Court of which the Society is aware, in respect of the Law Society's conduct under paragraph 6, post intervention. The first involved an unsuccessful claim by a broker involved in dishonesty: Halley v Law Society [2003] EWCA Civ 97, [2003] WTLR 845. The second involved proceedings brought by the Law Society for directions, and again the court was not critical of the Law Society: Law Society v Soulimov, May 27, 2002, unreported. Two cases were also pursued by claimants arising from an intervention into a firm called J.R. Sierzant & Co, but the amounts involved totalled less than £10,000 and the matters were dealt with in the County Court. Because of the difficulties inherent in identifying persons entitled to any given amount of money, no payments have been made to the Compensation Fund by way of subrogation since 2001, except in cases where the client account was intact (or what is known as a top up grant was made) and therefore full distribution was possible. As at November 30, 2004, the total sums amounted to some £44 million. There were over 950 statutory trust accounts, although some of them were very small, and 85% of the funds were held in 161 of the accounts. By October 31, 2005 the amount locked up in the statutory trusts had increased to £52.55 million (of which 35% represent funds to which the Compensation Fund might be entitled by way of subrogation). It is undesirable for the Compensation Fund and the profession to have uncertainty, not least because this may affect the size of the Compensation Fund and the level of contributions which may be required from the profession in each year to maintain it. The Law Society has applied to the court for directions relating to the exercise of its powers as statutory trustee, and in particular as to whether its duties are the same as those of a trustee under a private trust, or are affected by the statutory nature of the trust and its status in public law. The court plainly has jurisdiction. If the trust is to be treated as a private law trust the court obviously has jurisdiction to lend assistance in the form of guidance concerning specific questions that arise in the execution of the trust, and in particular whether some proposed action is within the trustees' powers, or is a proper exercise of the trustees' powers. Should the Law Society be exercising public statutory functions under statutory trusts and not private law trusts, then the Law Society brings these matters before the court in order to demonstrate how it has been reaching decisions to date and resolving difficulties to date and how it would propose to do so going forward. If statutory power to seek directions were required (which I do not think it is) paragraph 16 of Schedule 1 would provide it. IV The applications and the issues A. Four test cases In order to check how the newly designed processes were operating and to identify any issues arising, the template system was tested by reference to a sample group of 60 statutory trusts, arising from 60 different interventions. From this sample of 60, four specific cases were identified to bring before the court because they raise particular problematic issues. (1) Ahmed & Co Mr Sheikh Rahim Ahmed practised in Wembley. His practice involved a large amount of immigration work. An inspection of Mr Ahmed's books of accounts and documents began in October 2000. Mr Ahmed told the Forensic Investigation Unit that he was practising alone, not in partnership, with eleven members of staff. The Law Society's Compliance Board Adjudication Panel ('the Panel') resolved to intervene into Ahmed & Co on December 20, 2001 and intervention notices were served on January 3, 2002. The intervention was on grounds of (a) suspected dishonesty on the part of Mr Ahmed and (b) failure to comply with the Solicitors' Accounts Rules and/or the Solicitors' Practice Rules. The Panel's resolution included a resolution under paragraph 6. The sum of £75,662.03 was frozen in the general client account and designated deposit accounts held by Ahmed & Co. When compared with other interventions, the accounting records of Ahmed & Co were, in fact, very good. The amounts shown as due in the solicitor's accounting records tallied with the amounts recovered from the Ahmed & Co bank accounts. The accounts were up to date to the end of December 2001, a few days before the intervention, and when updated they reconciled. On the basis of all the available information, there did not appear to be any deficit. The Compensation Fund paid out grants to a substantial number of Ahmed & Co former clients and/or others beneficially entitled to money in the client accounts. Its subrogated claims amounted to about £38,000 (inclusive of interest), which was paid to it on December 22, 2004. As a result of such good records and, most importantly, the fact that there was not a shortfall in funds as at the date of intervention, the Law Society decided that it was possible, in this case, to distribute to those entitled whom it was possible to locate and contact. Just over £10,000 of the trust fund remains undistributed. The Part 8 Claim in respect of this intervention was issued on January 17, 2005 with the Court's permission without any defendants. Mr Ahmed was served several times at different addresses with the claim form and evidence in support of the claim. The papers first served on Mr Ahmed at 54 High Road, Willesden Green, under cover of a letter dated January 19, 2005, were returned. Service was effected at a different address found in Law Society records, 48 Hazel Road, London, by letter dated July 1, 2005. Nothing was heard from Mr Ahmed. However, Mr Ahmed and others involved in the firm have been struck off the Roll of Solicitors. (2) Biebuyck Solicitors Anthony Biebuyck had been a sole practitioner since 1993, practising in Chelmsford. He had a general practice, for the purposes of which he employed 14 staff, including an assistant solicitor. There was an inspection of Mr Biebuyck's books of account and other documents carried out in August 2002. Following this, the Law Society intervened into Biebuyck Solicitors on grounds of (a) suspected dishonesty and (b) failure to comply with the Solicitors' Accounts Rules. The Professional Regulation Adjudication Panel's resolution included a resolution under paragraph 6. Intervention notices dated 14th October 2002 were served on Barclays Bank Plc and the Royal Bank of Scotland. £180,267.54 was frozen in the practice's general client accounts on October 15, 2002. A further £32,547.71 was recovered after the intervention. Mr Biebuyck was struck off the Roll of Solicitors on October 30, 2003. The records were up to date to 2 months before the intervention, but the client accounts were not intact at the time of the intervention. Not all of the money that should have been in the accounts was present, and many of the client files were missing, hampering attempts to understand and reconcile, if at all possible, the discrepancies. The shortfall identified is the sum of £130,311.83. There are some examples of ledger debit entries for some clients, which if netted off would lessen the shortfall. The Compensation Fund has submitted subrogated claims to £364,100.13 principal. This sum is clearly well above the amount of money (just over £200,000) currently held by the Law Society, highlighting the deficit existing in this case. It is also an indicator that the majority of persons potentially entitled to funds have probably made a claim on and received a grant from the Compensation Fund (which is now subrogated to their entitlements). The possibility was contemplated of an interim distribution of the sum of £166,050.56 to the Compensation Fund from the funds, which sum must on any view (that is, on the basis that the existing uncertainties are resolved unfavourably as far as its potential entitlement is concerned) be due to the Compensation Fund. In this case, it has not yet, in fact, been made. The Part 8 Claim in respect of this intervention was issued on January 17, 2005 with the Court's permission without any defendants. Mr Biebuyck was served, under cover of a letter dated January 19, 2005, with the claim form and evidence in support, and replied by e-mail on January 20, 2005 confirming that, whilst he was willing to help if he could, he did not want to be represented in the proceedings. (3) Dixon & Co Anne Christine Dixon had a general practice as a sole practitioner in Oxford Street, London. She also practised in partnership under the name of Dixon Emberton. However, this partnership was not the subject of an intervention. An inspection of Ms Dixon's books of accounts and other documents was commenced in November 2001. Ms Dixon told the Forensic Investigation Unit that she had been practising alone since 1987 and that she had been severely affected by the death of her partner and office colleague and, as a result, had allowed matters relating to the proper running of her practice to drift. The sole ground for intervention into Dixon & Co was failure to comply with the Solicitors' Accounts Rules. The Professional Regulation Adjudication Panel also resolved that all monies within paragraph 6(2)(a) would be vested in the Law Society. Intervention notices were served dated March 5, 2002, and sums totalling £31,120.75 were recovered from the Dixon & Co general client accounts. The records were written up to six days before the intervention, and the practice bookkeeper then wrote them up to the intervention date. The client accounts were not intact at the time of the intervention. In fact, a considerable shortfall in funds has been identified, in the order of £251,000. Corresponding with this shortfall is a very large debit balance in the name of one client, a Mr H, who was sued to judgment by the Law Society for the money he was overpaid from the Dixon & Co client accounts. However, whilst a judgment has been obtained, Mr H has declared himself bankrupt and there do not currently appear to be any assets against which the judgment can effectively be enforced. After the intervention, Ms Dixon remitted to the Law Society sums totalling £14,563 to seek to reduce the shortfall in funds somewhat. The shortfall identified takes into account these additional sums. The Compensation Fund has submitted subrogated claims amounting to £288,275.74 principal. A sum that is clearly substantially more than the funds (£45,683.75) available for distribution. This does indicate that many persons have made claims against the Compensation Fund and that the Compensation Fund grants have, in many cases, alleviated the problems of the deficient client accounts for the client/person entitled to the funds in the account, leaving the Compensation Fund to bear the loss (in that it is unable, through its subrogated claims, to recover all of the money it has paid out by way of grants). However, some discrepancies appeared, in the course of investigation, between the Compensation Fund's subrogated claims as calculated by the Compensation Fund itself and as calculated by the Law Society in its capacity under paragraph 6. These discrepancies have been the subject of ongoing investigation and resolution. The Part 8 claim form for this claim was issued, without defendants with the permission of the court, on July 4, 2005. Ms Dixon was served with a copy of the claim form and accompanying evidence in support under cover of letter dated July 5, 2005. Ms Dixon responded with some comments on the evidence on July 14, 2005. She indicated that she did not wish to be joined to these proceedings, but indicated that she may write again with further comments. (4) Zoi & Co/Lancaster Bailey Farooq Zoi practised under the name of Zoi & Co and under the name of Lancaster Bailey in Plaistow and Edgware Road. He had previously operated in partnership, but at the time of the intervention was a sole practitioner. His was a general practice employing 20 un-admitted staff. The Law Society carried out an inspection into Mr Zoi's books of accounts and other documents between October 2000 and June 2001. The Professional Regulation Adjudication Panel resolved to intervene into any practices or the remainder of any practices, which Mr Zoi conducted as a principal, on the grounds of (a) suspected dishonesty and (b) failure to comply with the Solicitors' Accounts Rules. The resolution included a resolution under paragraph 6. An intervention notice dated June 14, 2002 was served on Barclays Bank and a total sum of £37,002.47 was frozen in the client accounts of Lancaster Bailey and Zoi & Co. The accounting records recovered at the time of the intervention were (compared with the other three cases) very unreliable. They were significantly out-of-date and much of the underlying material, such as client files, was missing. The accounts had only been written up to 18 months before the intervention, and it was not possible to reconcile the accounts from the client ledger list. However, once served with these proceedings, Mr Zoi produced a client ledger list for May 2002, the month before the intervention, which appeared to reconcile to the bank statements for that month. The additional material has been the subject of analysis by the accounting department working for Russell-Cooke, the solicitors for the Law Society, albeit with an element of caution given the manner in which the additional material was produced. The Compensation Fund has thus far made subrogated claims amounting to £21,669.40, and there are some applications made for grants to be paid out of the Fund still pending. The new information produced by Mr Zoi does not alter the approach in his case. It may result, subject to further verification if possible, in additional sums being distributed to other clients, if they can be located, shown in the client ledger list for May 2002 produced by Mr Zoi. The amount remaining undistributed, even if the information can be verified and relied upon, will be £6,075.11. The claim form for this case was issued, again without defendants but with the permission of the Court, on July 4, 2005. Mr Zoi was served by way of letter dated July 5, 2005 with the claim form and supporting evidence. He has been involved in proceedings with the Law Society, appearing at the Solicitors Disciplinary Tribunal in August 2005. He confirmed by way of e-mail dated July 26, 2005 that he does not wish to be joined to the proceedings. B. The issues The Law Society has identified the following issues: (1) What, on a proper construction, is the nature of any obligations imposed upon or powers vested in the Law Society under section 35 and paragraph 6? The Law Society's submission is that references to trusts in paragraph 6 should be construed as references to statutory public law trusts, as opposed to private law trusts. (2) If considered to be a private law trustee, is the Law Society entitled to take into account the issue of proportionality, as between cost incurred and results achieved, when identifying beneficial entitlement and beneficiaries of the trust funds vested in it under paragraph 6, and in discharging any obligation as a private law trustee to identify, ascertain and contact beneficiaries of the trust? (3) Is the Law Society entitled to verify accounting records from a sample of client files, as opposed to every client file that has been uplifted at the time of intervention, the sample being selected on a case by case basis, reasonably and proportionately appropriate to the facts of each particular case? (4) Where it is not reasonably and proportionately possible to reconcile and verify the client account monies with a client ledger list or lists as at the date of intervention, may the Law Society compile a best list of entitlement to the funds (known as "the Best List") from the material (including accounts records, primary accounts material such as bank statements, client files, client ledger lists and Compensation Fund information) reasonably and proportionately available to it? (5) May the Law Society net off debit and credit ledgers in the name of the same client, so that that client's entitlement, if any, to the funds vested in the Law Society is calculated using the aggregate balance over all of his or her ledgers, where the Law Society has taken reasonable and proportionate steps to verify that the debit ledger represents money withdrawn from the client account for or on behalf of the client whose name appears on the ledger? (6) May the Law Society re-allocate transactions posted to a suspense ledger to named ledgers where, following reasonable and proportionate inquiries into those transactions, there is sufficient information, applying a reasonable and proportionate approach, to indicate that it is correct to do so? (7) May the Law Society rely on the balances shown on ledgers and the debit postings made to those ledgers, save where there is evidence which puts the Law Society on notice that particular balances may be wrong and that particular debit postings may not be reliable as an indication of the solicitor's use of a particular client's money? If so, the Law Society then need only conduct reasonable and proportionate enquiries, before coming to a view as to what is to be regarded as the correct balance on any particular ledger. Where there is evidence that a debit transaction out of the client account was made for or on behalf of the client or with the client's money, to whose ledger the debit was posted, should that debit posting remain posted to the ledger, notwithstanding the fact that the debit was or may have been unauthorised by the client? (8) May the Law Society, in its capacity as statutory trustee under paragraph 6, rely on the verification exercise carried out by the Compensation Fund, to identify what subrogated claims the Compensation Fund has to the funds vested in the Law Society under paragraph 6, and only investigate such claims where the amount of any particular claim exceeds that which the Law Society, in its capacity under paragraph 6, believed, prior to intimation of the claim by the Compensation Fund, could be claimed in respect of that particular client? (9) Where there is no evidence of a bill, or other written notification of the costs incurred, having been sent to the client or paying party, are sums of money on a client ledger, which might represent payments made on account of costs or be equivalent to the costs incurred on behalf of that client, to be held for the client and not for the solicitor? In determining whether the sums of money should be held for the client or the solicitor, need the Law Society only conduct reasonable and proportionate enquiries? (10) May the Law Society determine entitlement to the funds vested in it, having regard to any shortfall in the client account(s) at the date of intervention, and the most reasonable and proportionate manner of allocating the shortfall as between all of the clients who had money deposited in the client account(s) prior to the intervention, taking note of principles of private trust law governing allocation of deficiencies in trust funds? (11) Is the Law Society's advertising campaign, which has regard to section 27 of the Trustee Act 1925, a rational approach in seeking to determine entitlement to funds vested in the Law Society under paragraph 6, alternatively, if held to be a private law trustee, is it a proper discharge of the Law Society's obligation to ascertain beneficial entitlement to the trust funds? (12) Should the Law Society make reasonable and proportionate attempts to contact persons entitled to the funds vested in the Law Society under paragraph 6, including a current general approach, but without fettering discretion, and dependent upon the given facts, of contacting persons with an apparent entitlement over about £75 where current contact details are known or considering tracing persons with a ledger balance over £500 where current contact details are not known? (13) May the Law Society retain, from the undistributed surplus of funds, money as reimbursement for its costs incurred properly and reasonably in determining entitlement to the funds and effecting a distribution of the funds to those entitled thereto? Accordingly, the Law Society seeks a number of orders and declarations in relation to these interventions, which include (depending on the problems encountered in relation to each of the practices): (1) An order approving the process adopted by the Law Society to create a best list of beneficiaries of the trust and their entitlements to trust money ("the Best List") as a proper discharge of its obligation as a trustee to ascertain the beneficiaries of its trust. (2) An order directing that the Law Society may in creating the Best List, in the cases of clients with both verified credit and debit balances, net the same off against each other. (3) An order approving the process adopted by the Law Society to create the list of beneficiaries of the trust (including the process of verification of a sample of client files as opposed to every single client file) as a proper discharge of its obligation as a trustee to ascertain the beneficiaries of its trust. (4) A declaration as to the beneficial entitlement of the solicitor to trust money on account of unbilled work carried out for some of the clients whose ledgers are included in the Best List. (5) An order approving that distribution to the beneficiaries of the trust be approached based on the Best List of beneficiaries and their respective entitlements to trust money. (6) An order approving that distribution to the Compensation Fund be approached based on its subrogated rights to trust money as set out in the Law Society's distribution list. (7) Given that there is a shortfall in trust money as compared to the entitlement to trust money recorded in the Best List, an order approving distribution, allocating the identified shortfall on a pro rata basis, to all beneficiaries, including the Compensation Fund by way of subrogation, without retention of any trust money or other security, save for the undertaking given by each claimant to repay any overpayment of trust money made to the claimant, as set out in the claim form filled in by the claimant. (8) An order approving an approach to distribution to the Compensation Fund based on its subrogated rights to trust money and, in so far as is necessary, the determination of the existence and/or extent of those subrogated rights. (9) An order approving the process adopted by the Law Society to contact and obtain information from beneficiaries, in order to distribute to them their share of the trust money, as a proper discharge of its obligation as a trustee to notify beneficiaries of the trust and to seek to make a distribution of trust money to them. (10) An order approving distribution (without retention of any trust money or other security, save for the undertaking given by each claimant to repay any overpayment of trust money made to the claimant, as set out in the claim form filled in by the claimant) in which the trust money is allocated between all beneficiaries, including the Compensation Fund by way of subrogation, on a last in last out basis applying the rule in Clayton's Case, and in which, in the absence of evidence identifying all of the beneficiaries to the trust money on the foregoing basis, all those beneficiaries identified recover their full entitlement to trust money. (11) An order directing that any money remaining, after a distribution to beneficiaries has been effected so far as is reasonably possible, can be retained by the Law Society as reimbursement for its costs and expenses in administering the trust. The Law Society accepts that, if the court holds that the Law Society, whilst bound by statutory duties, is not a private law trustee, there may be no need to continue to determine the majority of the other matters. But the Law Society submits that it would still be necessary or desirable to consider the specific issues arising in these test cases for the following reasons: (a) given the complexity of the points in issue, the Law Society needs to be confident that the court has considered its approach; (b) consideration of these matters should serve to demonstrate to the court some of the very considerable difficulties encountered by the Law Society in administering these funds, even where, as in the test cases, very considerable resources have been devoted to them and reinforce the points made in support of the Law Society's primary submission that there are difficulties inherent in construing paragraph 6 as creating private law trusts; (c) consideration of these matters enables the court to have a factual matrix against which to make the decision as to how best to construe paragraph 6. In summary the Law Society in its capacity as statutory trustee argues that the trust is subject to public law for these reasons. First, monies held on trust under paragraph 6 are expressly subject to the powers conferred by Part II of Schedule 1, and the fact that the trust may be subject to such powers is inconsistent with a private trust. Second, the Law Society's position as statutory trustee is analogous to that of a trustee in bankruptcy in that a trust is created in circumstances where there is often financial chaos and the trustee has no idea who all the beneficiaries are or how the trust will be divided. Third, the expression "trust" is not a term of art and its meaning depends on the context. Fourth, it would be highly inconvenient if the trust were a private law trust: it might fail for uncertainty of beneficiaries; it might fail for evidential uncertainty owing to the often uncertain or incomplete nature of the solicitors' records in these cases. Consequently, paragraph 6 creates two stages. Stage one creates a statutory purpose trust whereby monies are held to exercise in relation to them the powers conferred by Schedule 1, including determining entitlement to the funds. Stage two creates a secondary statutory trust for those who have been determined to be entitled in stage one. In its capacity as trustee of the Compensation Fund, the Law Society puts forward for the assistance of the court the contrary arguments. They are in summary these: the fact that a trust does not fulfil all the traditional criteria does not mean that it is not a private law trust. The relevant feature of a trust is that there is a separation of legal title and beneficial interest. The fact that the interest cannot be ascertained until claims are established and verified does not prevent the court from recognising the trust. Parliament would not have intended that private law trust duties over client account monies should be converted to public law duties on intervention. This is further confirmed by the absence of any express obligation to distribute or power to recover costs. If it had been intended to remove the pre-existing private trust there would be clear wording to that effect. The legislative history provides no evidence that Parliament intended to impose a public law trust. A private trust analysis is not unworkable. Proportionality is relevant in private law. Conceptual and evidential uncertainty relate solely to express trusts. There is no absolute need to inform beneficiaries of claims. It would be sufficient for the statutory trustee to take out insurance in respect of any liability from late-emerging beneficiaries or alternatively to provide undertakings to replace any overpayment. The statutory trustee's duty to act reasonably and proportionately would be fulfilled in these circumstances by the compilation of a Best List. V The paragraph 6 trust The Solicitors Act 1974 was a consolidating Act. The wording now contained in Section 35 and Schedule 1 was first introduced in the Solicitors (Amendment) Act 1974, section 8 and Schedule 1. The origins of the intervention jurisdiction were in the Solicitors Act 1941, by which the Compensation Fund was established. The Compensation Fund was established to make discretionary grants in dishonesty cases, and by section 2(2) it was to be "held by the Society in trust for the purposes" provided in section 2 and the First Schedule, and any rules made under section 2. The power to intervene was confined to dishonesty cases, and to a power to require production of documents and a power to ask the court to prohibit payments by the solicitor's bank without the court's permission: Schedule 1, paragraphs 4 and 5. The power to intervene was subsequently extended to cases where a solicitor had been struck off or suspended: Solicitors (Amendment) Act 1956, section 9. No provision was made by that Act for the funding of interventions on this ground. Those provisions were consolidated in the Solicitors Act 1957, which by sections 31 and 32 introduced separate Schedules for intervention (Schedule 1) and the Compensation Fund (Schedule 2). Schedule 1, paragraph 7, provided for the Law Society to apply to the court for an order prohibiting payments from bank accounts of the solicitor or his firm. By Schedule 2, paragraph 1, the Compensation Fund was to be held on trust by the Law Society, and by paragraph 7(e), it was provided that the costs of interventions on the grounds of dishonesty should (as before) be borne by the Compensation Fund. The Solicitors Act 1965 extended the circumstances in which the intervention powers could be exercised (to encompass also undue delay, bankruptcy etc, and deceased solicitors' practices in certain circumstances). It also extended the nature of the powers, giving the Law Society for the first time a power to resolve to take control of monies: all the powers were set out in Schedule 1 which was substituted for Schedule 1 to the 1957 Act. Schedule 1 to the 1965 Act enabled the Law Society to require production of documents and (for the first time) to take control of monies: (1) By paragraph 7, the court was given the power, on the application of the Law Society, to order that no payment be made by a bank from any account in the name of the solicitor or his firm without leave of the court. (2) By paragraph 10, the Law Society was given the new power, exercisable on a resolution of the Council, to take control of all sums of money due from the solicitor to clients, or held by the solicitor for clients, or subject to a trust of which the solicitor was trustee. (3) By paragraph 12, the Law Society was able to pay such monies into special accounts and "may operate on, and otherwise deal with, such special …accounts as the solicitor or his firm might have operated on, or otherwise dealt with, the said banking account." (4) By paragraph 13(1), the Law Society was able to serve a notice on the solicitor or other persons directing the transfer of monies in accordance with the directions of the Society "provided that …no such directions shall be given by the Society except with the approval of the person to whom the said moneys belong, being in the case of a trust the trustee, and, where the solicitor is the sole trustee or a co-trustee thereof only with one or more of his partners, clerks or servants, the person beneficially entitled to such moneys". By paragraph 13(2), the Law Society was given express power to apply to the Court for directions "where the Society is unable to ascertain the person to whom the said monies belong or where the Society otherwise thinks it expedient so to do." (5) By paragraph 17, the Law Society was given express power to make regulations with respect to the procedure to be followed in giving effect to the provisions of, inter alia, paragraphs 10, 12 and 13(1), and with respect to any matters incidental, ancillary or supplemental to those provisions. The Solicitors (Amendment) Act 1974 replaced the existing powers, by repealing section 31 of the 1957 Act, the substituted Schedule 1 thereto and the relevant provisions of the 1965 Act. In Schedule 1 the 1974 Act set out both the circumstances in which the powers could be exercised (which were extended to include failure to comply with accounts rules or indemnity rules) and also the powers themselves. There was no change to the position whereby the Compensation Fund continued to fund dishonesty interventions. The Solicitors (Amendment) Act 1974, Schedule 1, paragraph 6(1) (which is reproduced in the 1974 Act, Schedule 1, paragraph 6(1)) introduced the trust concept for the first time in the context of interventions. A review of the potentially admissible materials from 1973-4 (including minutes of the relevant Standing Committee) has revealed nothing that sheds light on the meaning of the word "trust" in paragraph 6 of Schedule 1 to the 1974 Act (or on that word in the Solicitors (Amendment) Act 1974)). There are a number of differences between the trust created by the Act under Section 36 and Schedule 2 and that created under Section 35 and Schedule 1. First, paragraph 3 of Schedule 2 contains a specific power to invest the Compensation Fund. There is no such specific power in relation to the trusts created under paragraph 6. I accept the Law Society's point that this is consistent with the view that the Compensation Fund is a trust fund which it is expected that the Law Society will hold onto, maintain and administer, as paragraph 1 of Schedule 2 states, and from which grants will be made from time to time in the exercise of the Law Society's discretion: but the trusts created by paragraph 6 are expected to be transient, short term trusts, in respect of which it is envisaged that the Law Society will distribute the funds to those entitled to it as soon as it is in a position to do so following the intervention. Second, there is provision made for the Law Society to protect itself against too many claimants against the Compensation Fund. Paragraph 5 of Schedule 2 permits the Compensation Fund to insure the Fund for such purposes and on such terms as the Council may deem expedient. In fact, this has not been done since it would prove to be too expensive. There is no such provision made in respect of the funds vested in the Law Society under paragraph 6. There is no explicit guidance in the Act as to how the Law Society should handle a situation, following intervention, when the client accounts prove to be deficient and there are insufficient funds to meet all of the claims made (notwithstanding the fact that this is, unfortunately, a very common situation). Third, grants are made out of the Compensation Fund according to the exercise of its discretion, which it exercises specifically and explicitly to compensate the most deserving of applicants: cf R v Law Society, ex p Mortgage Express [1997] 2 All ER 348, 360. By contrast, on an intervention, the Law Society holds the money on trust for the purpose of the exercise of its powers, and according to the beneficial interests in it. "It has no general discretion to pay it to the most deserving of beneficiaries": Halley v Law Society [2003] EWCA Civ 97, [2003] WTLR 845, at [41]. The wording of the trust created by Schedule 2 is more obviously in line with the creation of a statutory purpose trust than that of the wording of the trust created by paragraph 6. Paragraph 1 of Schedule 2 states "the fund … shall be held by the Society on trust for the purposes provided for in Section 36 and this Schedule", whereas paragraph 6 states "all such sums…shall be held … on trust to exercise in relation to them the powers conferred by this Part of this Schedule and subject thereto upon trust for the persons beneficially entitled to them." If the paragraph 6 trust were a private law trust, then it would import the duties of a private law trustee. Those duties would include the following: first, a trustee has to ascertain the identity of the beneficiaries, and to ascertain their beneficial entitlement. Second, a trustee is obliged to inform a beneficiary of full age and capacity of his interest in and rights under the trust: Lewin on Trusts (17th ed. 2000, Mowbray et al), para 23-03. Third, a trustee is obliged to give beneficiaries a full and accurate record of the stewardship and management of the trust, and is required to keep and render proper, clear and accurate financial accounts: Lewin on Trusts, para 23-05. Fourth, a trustee has to distribute to the correct beneficiaries of a trust fund, and that obligation is a strict obligation: Lewin on Trusts, para 26-03. This principle is onerous and places a trustee in a demanding position, in terms of correctly distributing to the right beneficiaries of the trust. The Law Society argues that in practice the imposition of private law trust principles on the Law Society might render the scheme created by Schedule 1 unworkable. The reality is that the Law Society is in a fundamentally different position from that of a private law trustee. When (unlike a private law trustee) the Law Society is required to try to reconstruct from (often extremely poor or possibly fraudulent) records who might be entitled to the client account monies, and how much of the monies those persons might be entitled to receive in any distribution, it is unworkable to impose upon the Law Society a strict obligation to distribute to the "right" beneficiaries only. Such a conclusion overlooks the reality that seeking to ascertain who are the "right" beneficiaries involves numerous decisions and the exercise of discretion on the part of the Law Society. Normally a trustee would be under a duty to look to trust records which would ordinarily exist in a private law trust to inform the trustee about the state of the trust, the identity of the trust property and trust beneficiaries etc. The Law Society is in a very different position. It must look to the solicitors' accounting records, but it must do so in a situation where the very reason why it has become a trustee of the client account monies, in the first place, is usually linked to some deficiency in those accounting records. If the Law Society is not able to take those decisions, and exercise its discretion, in a manner which will only be overturned if it has acted in an irrational and unreasonable manner etc, it becomes almost impossible to administer the funds vested in it upon each intervention. To obtain any kind of certainty, the Law Society may well have to burden the court with frequent applications for directions and approval of the decisions it had taken or was proposing to take. I am satisfied that the Law Society's position, that its duties in relation to the paragraph 6 trust are grounded in public law, is correct. This is so for the following reasons. There is no doubt that the duties of the Law Society in relation to the Compensation Fund are duties grounded in public law. Grants are made out of the Compensation Fund according to the exercise of its discretion, which it exercises specifically and explicitly to compensate the most deserving of applicants: cf R v Law Society, ex p Mortgage Express [1997] 2 All ER 348, 360. The wording of the trust created by Schedule 2 is more obviously in line with the creation of a statutory purpose trust than that of the wording of the trust created by paragraph 6. Paragraph 1 of Schedule 2 states "the fund … shall be held by the Society on trust for the purposes provided for in Section 36 and this Schedule." In Law Society v Soulimov, May 27, 2002, unreported, it was assumed that paragraph 6 involved a private law trust. Mr Soulimov demanded payment of money (which he alleged was his) from the client account vested in the Law Society following intervention into Mr Simms' practice. The Law Society was concerned as to the propriety of paying the money out, because of the quality of the evidence it had, and commenced an application for directions from the court, as a private law trustee would. In the application, the Law Society took a neutral role and surrendered its discretion to the court. In that case the primary question now before the court was not the subject of argument. In regulating the profession, the Law Society performs a public duty: Law Society v KPMG Peat Marwick [2000] 1 All ER 515, [33], affd [2000] 1 WLR 1921 at [16], [19] and [23]. In Swain v Law Society [1983] 1 AC 598, at 607-608, Lord Diplock said that the Law Society has both a private capacity and a public capacity. When acting in its private capacity it was subject to private law, but "It is quite otherwise when the Society is acting in its public capacity .. The Council in exercising its powers under the Act to make rules and regulations and the Society in discharging functions vested in it by the Act … are acting in a public capacity and what they do in that capacity is governed by public law; and although the legal consequences of doing it may result in creating rights enforceable in private law, those rights are not necessarily the same as those that would flow in private law from doing a similar act otherwise than in the exercise of statutory powers" (at 608) Similarly Lightman J said in Law Society v Dooley, supra, at [12] that the approach of the Law Society – namely, to allow the solicitor supervised access to these documents for the purposes of the solicitor recovering unpaid costs due to him at the time of the intervention (notwithstanding the fact that the costs of such supervision might make costs recovery economically unattractive or unviable) - reflected a fair and reasonable balance in accord with the Law Society's public law duties as a public body to protect the interests of the solicitor's former clients. The starting point is the construction of paragraph 6 in Schedule 1. The wording does not give an answer, and, as has been seen there is no relevant legislative history. But Parliament must be taken to have known that the Law Society might well be acquiring depleted funds, that it might not know where the beneficial interest lay, and might not know who the potential beneficiaries might be. The Law Society had to look to the solicitor's accounting records, in a situation where the very reason why it has become a trustee of the client account monies, in the first place, would often be linked to some deficiency in those accounting records. The use of the word "trust" does not conclude the matter. The word "trust" is defined in the Act as follows (at section 87(1)): " 'trust' includes an implied or constructive trust and a trust where the trustee has a beneficial interest in the trust property, and also includes the duties incident to the office of a personal representative, and 'trustee' shall be construed accordingly." This definition is not exhaustive and is of no assistance in relation to the present question. The same word "trust" is used in both Schedule 2 and Schedule 1 to impose different obligations on the Law Society and "trusts" of differing natures, which indicates that the word is not a term of art, but means different things even within the same Act. There is no doubt that when the word "trust" is used in a statute it does not necessarily mean a classic private trust. Thus in Tito v Waddell (No. 2) [1977] 1 Ch 106 the relevant Ordinance described the resident commissioner as being paid compensation to hold on trust on behalf of the former owner or owners of a native or natives of the colony subject to such directions as the Secretary of State may from time to time give. Sir Robert Megarry V-C said (at 211) that, when the word "trust" was used one has to look to see whether in the circumstances of the case, a sufficient intention to create a true trust is manifested: "One cannot seize upon the word 'trust' and say that this shows that there must therefore be a true trust" (at 227). In Ayerst v C& K (Construction) Ltd [1976] AC 167 it was held that an order winding up a company divested the company of the beneficial ownership of its assets for the purposes of its unrelieved losses and capital allowances being used by a successor company. In the context of the question whether the company still retained legal ownership of its assets, Lord Diplock discussed the analogous position of the assets of a bankrupt, the legal title to which vests in the trustee in bankruptcy. Lord Diplock referred (at 178) to the example of a trustee in bankruptcy as a "trust" imposed by statute which clearly did not have all the indicia of a private law trust. One of the reasons for this was that, in the course of administration of the bankrupt's estate, prior to the submission of all the proofs from the creditors of the bankrupt, the trustee had no way of knowing all of the beneficiaries for whom he was administering the estate, and the shares in which he would distribute the estate. Lord Diplock went on to say that the label "statutory trust" can be understood as characterising a trust that does not bear all the indicia of a trust as would be recognised by a Court of Chancery apart from the statute. He said (at 180) that all that may be meant by the use of the word "trust" was giving property the essential characteristic which distinguishes trust property from other property; namely, it cannot be used or disposed of by the legal owner for his own benefit but must be used or disposed of for the benefit of others. Accordingly, it does not follow that, when the word "trust" is used, that brings with it the full range of trust obligations attendant upon a traditional private law trust, particularly so when the trust is imposed by statute and is in the context of the exercise of a public function. The meaning of a word depends on its context. Thus in Brooks v Brooks [1996] AC 375, where the question was the meaning of the word "settlement" in the Matrimonial Causes Act 1973. Lord Nicholls said (at 391): "In English law 'settlement' is not a term of art, with one specific and precise meaning. Its meaning depends on the context in which it is being used." In my judgment the background to the need for the powers and the structure of Part II of Schedule 1 make it clear that the paragraph 6 trust was not intended to be, and could not have been intended to be, an ordinary private law trust. The Law Society inherits, like a trustee in bankruptcy, a situation not of its own making including records which are often in a chaotic state, in which it does not know initially where all the funds lie, and then, having recovered the funds, does not know who the claimants to the funds are. It has, nonetheless, to determine entitlement to the funds and distribute to those identified as claimants to the funds. It would be difficult if the Law Society were, in that context, to be burdened with overly excessive or onerous duties as a private law trustee under paragraph 6. I accept the Law Society's submission that the trust created under paragraph 6 can be labelled a statutory trust. Similarly, the term "beneficiaries" can be used, in the sense of statutory beneficiaries entitled under paragraph 6 to a share of the funds vested in the Law Society (as opposed to beneficiaries of a private law trust). This approach is also supported by the consideration that the Law Society needs to be able to act efficiently in circumstances where there may be many clients involved (cf. R v Takeover Panel, ex p Datafin plc [1987] 1 QB 815, 840), and it is not likely that it could have been envisaged that the Law Society would constantly be applying to the court for directions of the kind sought in this case. Such an interpretation would also avoid the danger that the trust might be void. Were the trust under paragraph 6 a private law trust it would be a fixed trust, and not a discretionary one. A fixed trust with conceptual and/or evidential uncertainty is a void trust, and a fixed trust is only valid if it is possible to draw up a complete list of the beneficiaries at the time of distribution: Lewin on Trusts, para 4-30. I accept that it is by no means certain that failure to identify the clients would make such a private law trust invalid, and certainly a court would do everything it could to find it valid, but it would be an odd interpretation of paragraph 6 to allow it to result in a situation where it is possible that some trusts were valid, because of the good level of accounting records maintained by the solicitor prior to intervention, and others (those, often in fact, where intervention was required the most) were void for evidential uncertainty. The only way in which to ensure that all of the trusts created under paragraph 6 are valid, no matter how bad is the level of evidence as to beneficiaries, is to recognise that the trust created under paragraph 6 is not a trust subject to the usual rules, such as evidential certainty, imposed upon such fixed private trusts. I consider that the analogy of liquidators and trustees in bankruptcy is an apt one. They inherit the company's or individual's affairs when they are financially in a mess and, very often, there is a deficit between the available assets and the total potential claims for a share in the assets. The purpose of their appointment is to wind up the company's or individual's affairs and distribute such assets, as are recovered and available, to the creditors. Similarly, the Law Society intervenes and, in some, limited, senses, winds up the practice that is the subject of the intervention. It is not an administrator, but it is terminating the practice of the individual solicitor, at least so far as it relates to historic client matters. It inherits a situation, often, financially in a mess where there is a deficit between the funds in the client accounts and the potential claims to those funds and it, too, has to distribute the monies it recovers to identified claimants. Consequently, I do not consider that in exercising the power under paragraph 6 the Council of the Law Society is effecting an assignment of the trusts constituted by the client accounts, such as it was in the hands of the solicitor. It is legally divesting the solicitor of legal ownership of the funds and vesting the same in the Law Society, and also creating a new trust upon which the funds are to be held. The solicitor did not hold the funds on trust to exercise in relation to them the powers conferred by Part II of Schedule 1. On the other hand, paragraph 6 specifically provides that the funds are to be held on trust to exercise in relation to them the powers conferred by Part II of Schedule 1, and only subject thereto on trust for the persons beneficially entitled to them. This solution effectively involves two forms of statutory trust. A statutory purpose trust first arises whereby the monies are held to exercise in relation to them the powers conferred by Schedule 1, which includes the ancillary power in paragraph 16. The statutory purpose trust must include the purpose of determining who are beneficially entitled to the funds in order that the funds can be held for those who are entitled to them. A second statutory trust arises under paragraph 6, namely, for the persons beneficially entitled to the funds. The Law Society therefore has a statutory power to determine who is entitled to the funds under paragraph 6. That does not mean that it has a discretion as to who is beneficially entitled: cf Roy v Kensington and Chelsea and Westminster Family Practitioner Committee [1992] 1 AC 624; Trustees of the Dennis Rye Pension Fund v Sheffield City Council [1998] 1 WLR 840; Steed v Secretary of State for the Home Department [2000] 1 WLR 1169. In taking steps to determine who is beneficially entitled, it must exercise the power in a way that is bona fide, rational, reasonable, takes into account relevant considerations and does not take into account irrelevant considerations. The exercise of the power would be subject to review on public law grounds. So also the statutory power to distribute must be exercised in accordance with public law principles. The Law Society accepts that private law trust principles and the claims of the clients to the monies prior to the intervention would be relevant: cf R v Tower Hamlets LBC, ex p Chetnik Developments Ltd [1988] AC 858, 882, per Lord Goff of Chieveley. The Law Society, in exercising its power rationally and reasonably, would need to take into account and give due weight to principles of trust law in, for example, arriving at a Best List of whom it reasonably considers to be, on the available information, the most probable persons entitled to the fund vested in itself. VI Other matters Accordingly most of the other questions which the Law Society has brought before the court do not, strictly, arise for determination. I have set out the relevant material on these questions in an appendix to this judgment, together with my views on the approach which the Law Society has taken. But there are three matters with which I should deal at this point. A Unbilled costs The first relates to the position of unbilled costs. I am satisfied that the Law Society is right to proceed on the basis that where there is no evidence of a bill, or other written notification of the costs incurred, having been sent to the client or paying party, sums of money on a client ledger, which might represent payments made on account of costs or be equivalent to the costs incurred on behalf of that client, are to be held for the client and not for the solicitor. In determining whether the sums of money should be held for the client or the solicitor, the Law Society need only conduct reasonable and proportionate enquiries. It is common for clients to pay solicitors money on account of the solicitors' costs or on account of unpaid professional disbursements. This money is client money and, as such, has to be held in a client account: Solicitors' Accounts Rules ("SAR 98"), r.13 and the notes thereto, and r.19(4). One of the fundamental principles of the SAR 98 is that client money is kept separate from office money, which belongs to the solicitor; see SAR 98, r.1(b), r.13(c), r.19(1)(a)(i). In order for money to be transferred properly from a solicitor's client account to office account, certain procedures have to be followed, as laid down in the SAR 98. Under rule 19(2), the solicitor must first give or send a bill of costs or other written notification of the costs incurred to the client or to the paying in party, whenever he properly requires payment of his fees. Once that has been done, the money then becomes office money and must be transferred out of the client account within 14 days: see r. 19(3). Consequently it has been held that a solicitor cannot transfer small, old balances existing on client ledgers to his office account without raising a proper bill prior to the transfer: Doggett v Law Society, February 21, 2000, unreported. These are provisions of the SAR 98 that are often breached by solicitors who are then subject to intervention. It is not uncommon for solicitors who are the subject of inspections and/or interventions to have made round sum withdrawals on account of costs generally without reference to precise figures as should be contained in a proper bill of costs. Such round sum withdrawals are prohibited: note (x) to r. 19. The Compensation Fund operates a policy whereby it may deduct, from any grant it makes to an applicant, the costs that would have been due to the solicitor provided that the work had been properly completed, so that the applicant is not in a better position by reason of a grant than he would otherwise have been. This is so, even if the intervened in solicitor did not hold a practising certificate at all material times: Guideline 11(a). It can mean there are situations in which the Compensation Fund makes a grant to an individual of less than the balance shown under the name of the individual on the Best List, having calculated itself what the likely costs of the work done by the intervened in solicitor on behalf of the applicant would have been. This leaves a small residual balance on the client's ledger, the beneficial entitlement to which the Law Society, in its capacity as statutory trustee, must determine. While it is justifiable for the Compensation Fund, in the exercise of its discretion, to choose not to award a grant which includes sums of money, which it considers equivalent to the amount of work the solicitor concerned had carried out on behalf of the applicant, the Law Society is determining existing entitlement to the funds at the date of intervention. I accept the Law Society's submission that the Law Society should treat money on a client ledger as held for the client and not for the solicitor. To do so would not undermine the solicitor's entitlement to be paid for work he has done and for fees properly incurred, should there be any. This is a personal remedy as between the solicitor and the client. It (and the lien which it triggers) is a separate question to that of entitlement to the money physically sitting in the client account at the date of intervention, subsequently vested in the Law Society. The Law Society is mindful of the fact that the solicitor who has been the subject of an intervention may well have a considerable interest in being able to recover costs properly due to him, but in respect of which he has not been able, prior to the intervention, to bill his respective clients. To ensure that the interference with the solicitor's property is as little as is reasonably possible, the Law Society usually agrees to allow the solicitor supervised access to the files in order that he may take steps to recover costs due to him. The Law Society is entitled to do so, even though the costs of providing supervision of the solicitor (recoverable from the solicitor himself under paragraph 13 of Schedule 1) may render costs recovery by the solicitor economically unviable: Dooley v Law Society, supra, at [11]-[12]. B Distribution in cases of deficiency The second question to which I shall refer is the application of the Rule in Clayton's Case where there is a deficiency. I accept that the Law Society may determine entitlement to the funds vested in it, having regard to any shortfall in client account at the date of intervention, and the most reasonable and proportionate manner of allocating the shortfall as between all of the clients who had money deposited in client account prior to the intervention, taking note of principles of private trust law governing allocation of deficiencies in trust funds. It is very common for there to be a deficit between the amount of money recorded as supposedly in client account at the time of the intervention and the amount of money that is, in fact, there and becomes vested in the Law Society. This may arise as a result of debit balances, representing the fact that sums of money have been spent on behalf of other clients who did not have money in the client account at the time the money was withdrawn on their behalf. Alternatively, the solicitor may have been dishonest and withdrawn money, to which he was not entitled, for himself or others and either posted such withdrawals dishonestly to named clients, or not bothered posting the withdrawals to any ledger. Alternatively, the solicitor may have failed properly or accurately to record withdrawals made from the client accounts for some time prior to the intervention. The rule in Clayton's Case is still treated as the starting point: Lewin on Trusts, para 41-52. Under that rule, those funds which are deposited with the solicitor first are the funds which are presumed to have been the first to leave the client account. However, it takes only a very small counterweight to displace the rule in Clayton's Case: Russell-Cooke Trust Co v Prentis [2002] EWHC 2227 Ch, [2003] 2 All ER 478 at [55]. It is commonly recognised that a pari passu solution, in which all of the beneficiaries share the loss pro rata in accordance with the proportion of their beneficial entitlement to the fund as a whole, is the usual solution: Commerzbank Aktiengesellschaft v IMB Morgan Plc [2004] EWHC 2771 (Ch), [2005] 1 Lloyd's Rep. 298 at [47] and [48]. This solution was adopted in Barlow Clowes International Ltd (in Liquidation) v Vaughan [1992] 4 All ER 22. In most intervention cases, there will be a counterweight. Payments into solicitors' general client accounts do not generally get paid out in the same sequence. Nor would any of the clients of the solicitor expect them to. Some clients' money sits in solicitors' accounts for some time, for example, if paid in as a payment on account of costs in ongoing litigation. Other money comes in and goes out again in a short space of time, for example, the purchase money remitted by a mortgage company to complete a conveyancing transaction. In Russell-Cooke Trust Co v Prentis Lindsay J said (at [58]) that he considered the pari passu approach to be the system least unfairly distributing loss on an account that should have been dealt with in accordance with SAR 98. Accordingly, the pro rata approach is, in most cases, likely to be the most appropriate approach, simply because of the very nature of a solicitor's general client account. In addition, attempting to allocate a deficit on the basis of the "first in first out" rule would also be extremely impracticable. The evidence is that it is difficult enough, given the commonly found levels of available evidence, to reconstruct the accounts as at the date of the intervention with sufficient accuracy. The following problems arise in the application of the "first in first out" rule: It would require the identification of all of the misappropriations from the client account. This would, itself, not necessarily be straightforward. Ledger balances which are in debit at the time of the intervention are an obvious place to start, but they are not the only possible source of misappropriations. There may have been unauthorised or improper withdrawals from the client account which were posted to a ledger sufficiently in credit, so that the net effect was that the credit on that ledger was reduced as opposed to creating a negative debit balance. The only way in which those misappropriations could possibly be identified is if the Law Society went behind all the ledgers in credit, checking every transaction that had been posted to that ledger. Even if all of the misappropriations from the client account could be successfully identified, then, in order to allocate them on a "first in first out" rule, a reconciliation of the account would be necessary as at the date of each misappropriation, together with a list of dates on which all of the funds present in the reconciled account had been deposited. The difficulties in achieving reconciliation at the time of the intervention demonstrate how difficult, time-consuming and expensive such a process would be. Equally, the further back in time the reconciliations go, the less evidence there may well be from which a reconciled account could be drawn up, and the greater chance that attempting to chase down evidence from missing files etc. would produce inconclusive or no results. Assuming misappropriations could be successfully identified and reconciliations effected at each of the relevant dates, it may well be that the client's money presumed to have been used under the "first in first out" rule would have subsequently been used in a legitimate transaction. The rule in Clayton's Case is only an evidential presumption, rebuttable by contrary evidence. It would be incredibly onerous, and most likely not possible, to attempt to undo all of the legitimate withdrawals that took place after a misappropriation on the basis of an evidential presumption that money legitimately withdrawn for a client had earlier been presumed withdrawn under the rule. C Costs reimbursement from undistributable sums The third issue is whether, as it proposes, the Law Society may reimburse itself for costs out of undistributable sums. The relevant sums arise because there may be historic balances, which have remained on ledgers for long periods of time without any further movement on the ledger. There may be clients for whom up-to-date contact details are not available and who do not come forward in response to advertisement. There may be small sums for which any further work would be completely disproportionate to the amounts of money involved. These small sums, when added together over numerous interventions, amount to significant amounts of money. The Law Society is proposing to retain the undistributable sums as reimbursement of the Law Society's properly incurred costs in determining entitlement to the funds and taking steps to distribute the funds to those it has determined to be entitled thereto. Costs would only be reimbursed from property that would not otherwise be distributed to clients, those clients not being reasonably and proportionately identifiable or contactable. In addition, the Law Society has offered an undertaking to repay money retained as reimbursement to late-emerging beneficiaries. The undertaking would be limited to the total sum of money it had received as reimbursement for its costs. It would also be limited to a period of one year. The limitation of one year has been chosen in order that the Law Society may have some certainty after a reasonable period of time, in order to be able to know what financial liabilities it has going forwards, and rule out contingent liabilities going forward after a period of time has elapsed. This would present no problem if the Law Society were a private law trustee, since it would be entitled to be indemnified out of the trust property for all expenses and costs incurred in connection with the performance of its duties: Lewin on Trusts, paras 21-03–21-03E; Trustee Act 2000, section 31(1). But if a public body is to levy a charge, there must be clear statutory authority to that effect: Attorney-General v Wiltshire Dairies Limited (1921) 37 TLR 884, affd (1922) 38 TLR 781, HL. Consequently, a public body charged with a public duty may not charge for carrying out the duty without specific statutory authority: Goff and Jones, Law of Restitution, 6th ed. 2002, paras 10-019 – 10-024; Woolwich Building Society v IRC [1993] AC 70 at 155 per Lord Keith (dissenting), and 164-165 per Lord Goff of Chieveley. The authority must be express or arise by necessary implication: R v Richmond upon Thames London Borough Council, ex p McCarthy & Stone (Developments) Ltd [1992] 2 AC 48, at 74, per Lord Lowry. See also R v Greater Manchester Police Authority, ex p Century Motors (Farnworth) Ltd, March 24, 1998, unreported.; R v Liverpool City Council, ex parte Barry [2001] EWCA Civ 384. With some hesitation I have come to the conclusion that the Law Society is entitled to make the deduction from the undistributable funds. The fact that the relevant funds are undistributable is not relevant to the existence of the power, although it does mean that it is unlikely that there will be any prejudice to anyone if it should turn out that, contrary to my view, the Law Society has no power to deduct its costs. My reasons are these. The essential question is whether, in the absence of an express power, there is any necessary implication that there is such a power. Against such an implication are the express provisions for costs. First, paragraph 13 of Schedule 1 provides that the solicitor is responsible for the costs, but the solicitor may have disappeared, and/or be bankrupt, and/or simply be unable to raise sufficient money to pay the costs. Second, the effect of paragraph 7(e) of Schedule 2 is that the Law Society's costs in dishonesty interventions are payable out of the Compensation Fund (about one-third of interventions). Nevertheless I consider that there is the necessary implication because although, in fact, the Law Society has sufficient funds to carry out the intervention exercise, it is not publicly funded and it might be possible to envisage cases in which it could not carry out the intervention exercise unless it could be satisfied that the costs would be met. The potential sources of recovery from the intervened in solicitor and the Compensation Fund should not preclude the Law Society being reimbursed out of money that will not otherwise be distributed, particularly if it may be that, in a given intervention, recovery under paragraph 13 is theoretical only and will not result, in reality, in recovery of all or part of the costs incurred. I do not consider that the ancillary power in paragraph 16 is a safe basis for reimbursement, but I do accept the alternative submission that the power to reimburse can derived from the general principle that where a person seeks to enforce a claim to an equitable interest in property, the court has a discretion to require as a condition of giving effect to that equitable interest that an allowance be made for costs incurred in connection with the administration of the property: cf Re Berkeley Applegate [1989] Ch 32. I should record my gratitude to counsel and solicitors for the excellent and extremely thorough presentation of this interesting matter. I will hear submissions of the form of the order.   Appendix A1. I will set out in this Appendix the contentions of the Law Society in relation to the subsidiary matters which do not strictly arise for decision in the light of the ruling that the Law Society's duties are not those of a private law trustee, together with in each case my view of the procedure adopted or proposed to be adopted. A. Verification of accounting records from a sample of client files A2. The Law Society first seeks to reconcile such accounting records as it has following the intervention. Under rule 32(7) of the Solicitors' Accounts Rules ("SAR 98"), solicitors are obliged every five weeks (a) to compare the balance on the client cash accounts with the balances shown on statements and passbooks (after allowing for unpresented items) of all general client accounts and separate designated client accounts, (b) as at the same date to prepare a listing of all of the balances shown by the client ledger accounts of the liabilities to clients and compare the total of those with the balance on the client cash account, and (c) to prepare a reconciliation statement which must show the cause of any difference in these comparisons. Although the strict obligation is to effect a reconciliation once every five weeks, the notes to the accounting rules strongly recommend writing up (and effecting a reconciliation of) the accounting records weekly, even in the smallest of practices, and daily in the case of larger firms. A3. The current balance on each client ledger account must always be shown or be readily ascertainable from the solicitor's records: r.32(5). A4. Often, when the Law Society intervenes, the solicitor has not been complying with these obligations and the Law Society must carry out its own reconciliation to ascertain whether or not the sums recorded in the solicitor's records, as held by the solicitor for each client, amount to the total the bank has recorded as deposited in the bank account(s). Even where there has been compliance, the records may not be up to date at the date of the intervention and may need to be brought up to date prior to effecting a reconciliation at the date of the intervention. A5. In Ahmed & Co, Mr Ahmed's accounts were up to date as at the end of December 2001, a few days prior to the intervention and, when updated to the date of the intervention, they reconciled. Biebuyck Solicitors' records were up to date as at August 30, 2002, two months prior to the intervention, and also reconciled. Dixon & Co's records were also written up, six days prior to the intervention. The practice bookkeeper, upon request by the intervention agent, then wrote the records up to the date of the intervention. In the case of Mr Zoi's practices, at the time of the Law Society's first evidence, it appeared that the accounts had been written up to September 30, 2000 pre-dating the intervention (in June 2002) by over a year and a half. It was not possible to reconcile the accounts, from that client ledger list, as at the date of the intervention. Mr Zoi subsequently produced a client ledger list for May 2002, the month prior to the intervention, which appears to reconcile to the bank statements for that month. A6. The Law Society proceeds to verify, if possible, the accounting records which are present. Verification involves looking at underlying client files in order to ascertain whether or not the client ledgers accurately reflect transactions that have taken place in relation to a particular client or matter. A7. Some form of exercise of verification is important given that some solicitors who are the subject of interventions are known to falsify entries on ledgers in order to make the client ledgers reconcile with the amounts of money held in the solicitors' client bank accounts. When faced with an investigation into their accounts and records (often a precursor to an intervention), solicitors have been known to falsify records in order to eliminate discrepancies and achieve a reconciliation. A8. But the number of files a solicitor holds is usually very considerable. It includes "dead" files concerning matters closed a long time prior to the intervention. In theory, it would be possible for a solicitor to falsify the client ledgers to make a ledger balance appear to be a nil balance and, therefore, a finished matter, when it was not in fact so. The only – and wholly impracticable – way in which the Law Society could know for certain that all of the seemingly finished matters were indeed finished is if it were to revisit all of the files relating to finished matters, and not just the files relating to live matters. Live matters are usually the focus of an intervention, because the client is more likely to be affected by the intervention. A9. If the Law Society were required in all cases to examine all of the files a solicitor holds, it would make the process of intervention vastly more expensive and time-consuming than it already is. The Law Society has adopted the approach of examining a sample of client files in order to verify reasonably and proportionately, if possible, the accounting records. By way of example, in Ahmed & Co, 10% of live client files were examined by the intervention agent. The sample represented client balances amounting to more than 50% of the funds held on trust under paragraph 6. The sample tallied with the accounting records, strongly suggesting that such records were accurate. A10. The verification undertaken varies according to the circumstances of the individual case. For example, in Biebuyck Solicitors, the intervention agents had identified unusually large billing and, therefore, wished to examine more closely the reasonableness of billing in general. To do so, they examined dead files with a nil balance on the client ledger, as well as files relating to live matters, in order to examine the reasonableness of the billing of those cases and to identify any cases in which the client's ledger had gone into debit historically and the reasons for the client's ledger being allowed to go into debit. A11. This reconciliation procedure reflects the procedure which the solicitor should have been following in any event, had he been complying with SAR 98. It is in line with private trust law requiring trustees to acquaint themselves with the trust and to read and consider the trust records. I accept, therefore, that it is a rational approach for a public body exercising public statutory functions to adopt, as well as being a proper discharge of a private law trustee's obligation to acquaint itself with its trust. B Compiling a "Best List" of entitlement to the funds A12. In the case of Ahmed & Co, the sample of files examined verified the accounting records, which was a relatively unusual case. It is possible in an intervention for there to be insufficient files to verify, as in the practices of Mr Zoi. It is also often the case that there are concerns when the files are examined, in relation to the accuracy of the accounting records, as in Biebuyck Solicitors. A13. The initial reconciliation exercise, even if successful, may also throw up doubts because of the presence of debit ledger entries. Under SAR 98, r. 22(7), money held for a client in a designated client account must not be used for payments for another client. Under rule 22(6), a solicitor may make a payment in respect of a particular client out of a general client account even if no money or insufficient money is held for that client in the solicitor's general client accounts, so long as sufficient money is held for that client in a designated client account and the appropriate transfer is made immediately from the designated client account to the general client account. A14. Overdrawn client ledgers (arising from debit ledger entries) suggest that withdrawals have been made from the client account, in breach of SAR 98, over and above the amount that that particular client had deposited in the client account, and that, therefore, another client's money has been withdrawn and used. Rule 1(d) states that solicitors must use each client's money for that client's matters only. Overdrawn ledgers suggest strongly that the client account is not intact and that there is insufficient money in the bank account to meet the claims of clients who have deposited money with the solicitor. A15. The notes to SAR 98, r.32(7) also state that, when effecting a reconciliation, solicitors should not use the credits of one client against the debits of another, when checking whether the total client liabilities tally with the amount recorded as deposited in the client bank account. This is described as improper since it fails to show up the shortage. The initial reconciliations achieved in Biebuyck Solicitors and Dixon & Co only tally with the bank statements because the credits of one client are used against the debits of another client so that the net position is shown. This, superficially, conceals the shortage in trust funds. The shortage is revealed when a list of all of the ledgers in credit (ignoring the ledgers in debit) is compared with the available trust funds. The ledgers in credit represent potential beneficiaries of the trust funds and their respective claims on the trust funds and this should be compared to the trust funds available for distribution. This has been done in both Biebuyck Solicitors and Dixon & Co and the shortage has been exposed. A16. Although a reconciliation, in which debit ledger balances are used against credit ledger balances and the net position alone is compared against the bank balance of the client account(s), is limited in that, without more, it would conceal the extent of any shortfall on the account, it does, it is submitted, have some value: if a reconciliation can be achieved on that basis, it does suggest that the solicitor has recorded all of the withdrawals made out of the client account accurately, even if those withdrawals should not have been made since a client did not have the requisite money in the client account to permit a withdrawal in his name. It is always possible that a solicitor could have forged such postings in order to achieve a reconciliation, but, in the absence of evidence to suggest that that is so, and given that interventions can occur where the solicitor has been incompetent (for example, by permitting withdrawals in the name of a client when there was insufficient money in the client account to do so) but not dishonest, a reconciliation which demonstrates that the withdrawals have all, or mainly all, been accurately recorded by the solicitor is a useful starting point in the investigation into the entitlement to the funds. A17. In cases such as Biebuyck Solicitors, Dixon & Co, or the practices of Mr Zoi, the Law Society must then proceed to consider how best it can arrive at a list of beneficiaries and beneficial entitlement to the trust funds. A18. It does so by identifying the most up–to-date list that it can find of client ledger balances. If no list of ledger balances can be found, then alternative sources could be used, such as the list of applicants for a grant from the Compensation Fund or a list of current clients. The Law Society's agents then review such accounting information as there is (both primary and secondary such as solicitor's vouchers, solicitor's bank reconciliations, cheque book stubs, paying in books and bank statements) to see if the identified list can be updated by, for example, reposting un-presented items back to ledgers, or identifying unidentified transactions and posting them to the specific client to whose matter they related (this involves writing to third parties, such as banks, for details about unidentified transactions posted to suspense accounts). A19. Compensation Fund information comes from all of the applications made to the Compensation Fund. In relation to those that are withdrawn, it is possible that they are withdrawn because, when the solicitor was notified of the intention to award a grant under Rule 14 of the Compensation Fund Rules, he made a direct payment to the applicant, obviating the need for a grant to be made from the Compensation Fund. If the direct payment made was made in respect of funds which were in the client account at the date of the intervention, the solicitor will then expect to be entitled to receive a share in the distribution based on an entitlement to those funds. A20. The inherent difficulty in compiling a Best List is similar to that encountered in verification. It is theoretically possible to investigate further, in terms of investigating all of the nil balances and their underlying dead files. The client ledger balances represent, in some cases, months or years of different transactions in relation to a matter. It would theoretically be possible, but, again, obviously completely impracticable, for the Law Society to re-visit every single one of those transactions to see if what is entered on the ledgers accurately represents the transaction that took place, as recorded in the client file. A21. Were the Law Society required to carry out such an activity, the costs in terms of time and finance would, again, be very substantially increased from the considerable level which they already reach. Interventions would, in all probability, become a wholly unmanageable burden for the Law Society. A22. It is far from certain that such an exhaustive exercise would produce better results. Many of the dead files may date back considerably and further information from the client may be difficult to obtain, given the lapse in time. The files themselves may appear to tell a different story to the accounting records because the files were not kept properly or have missing information. It may not be possible to find up-to-date contact details for third parties, such as clients, from whom additional information may be required to make sense of the files and/or of individual transactions that took place many months or years previously. A23. Generally, a trustee does not have to look into all of the historic trust records to see if there might have been some misfeasance by a previous trustee: Lewin on Trusts, para 12-58. Whilst the Law Society does not have to suspect dishonesty in relation to every ledger automatically, the difficulty it faces is that it is intervening in situations where the very reason why it is intervening might be sufficient to give a normal private law trustee grounds for investigating historic transactions concerning the trust. Often, the Law Society is on notice that the ledgers cannot necessarily be trusted or taken at face value and that there may well be errors in the trust accounts, such as they are, either through incompetence or dishonesty: Law Society v Soulimov, May 27, 2002, unreported, at [71]. A24. I accept that the decision to compile a Best List and the manner in which it is compiled by the Law Society, in situations where reconciliation and verification are not possible on the available evidence, is a rational approach for a public body to adopt in exercising public statutory functions in determining entitlement to funds vested in it under paragraph 6. It is both reasonable and proportionate in the context of a body with finite resources exercising statutory powers given to it by Parliament in the interests of the public at large. If the Law Society were a private law trustee, such an approach would be a proper discharge of its obligation to ascertain beneficial entitlement to the trust funds. C Ability to net off debit and credit ledgers A25. It is normal for clients to instruct solicitors on various matters and to remit to the solicitor different amounts of money in relation to each separate matter. Under SAR 98, r. 29 the Council of the Law Society may publish guidance with the concurrence of the Master of the Rolls to assist solicitors in complying with SAR 98. The guidance is in SAR 98, Appendix 3. Paragraph 2.4 of the guidance states that ledger accounts should include the name of the client and contain a heading providing a description of the matter or transaction concerned. This means that it is common for the same client to have several ledgers headed with different matters, should that client have instructed the solicitor on more than one matter. A26. If a client has a ledger balance which is in debit, this prima facie suggests that money was withdrawn on behalf of the client and for his benefit when the client had not deposited sufficient funds with the solicitor in relation to that matter for the withdrawal to be permissible. The client has effectively received an unauthorised windfall of funds that were not his. A27. The loss of such a withdrawal is borne by the remainder of the clients who had deposited money in the client account, unless the client, in whose favour the withdrawal was made, had deposited other money in the client account in respect of other matters which had not been withdrawn at the time of the intervention. Such deposits would be represented by ledger balances in the same client's name but headed with the description of other matters, which were in credit at the time of the intervention. A28. Such examples have arisen in these cases and the Law Society proposes to net off the ledger balances in credit and those in debit in the same client's name relating to different matters, since, then, the loss to the client account arising as a result of the debit balance will be borne solely by the client for whose benefit the withdrawal was made, as opposed to being borne by all of the other clients who did not receive any benefit from the withdrawal. A29. The netting off approach can be said to be accepted implicitly by SAR 98. Rule 22(5) only prohibits the paying out of money from a general client account in relation to a particular client if the money to be paid out exceeds the money held on behalf of that client in all the solicitor's general client accounts. There is no requirement for the money not to exceed the money deposited by that client in respect of that particular matter. The solicitor must simply be aware of the total of all of the money deposited by that client in his general client accounts, and ensure that money paid out on behalf of that client does not exceed that total. A30. Netting off is different to adjusting ledger balances by posting back to those ledgers sums that should not have been debited from them, e.g. because of post-intervention receipts correcting mistakes made earlier or because of un-presented cheques, or by reducing ledger balances to reflect sums which should have been debited from them, e.g. because of transactions going out of the client account posted to a suspense ledger that should have been properly posted to the client's ledger. Netting off occurs once the ledger balances have been finalised, so far as possible, and occurs in respect of ledgers that are in relation to different matters, so that, when receiving a share in the distribution of the funds, each client's entitlement to such a distribution is based on his aggregate position across all his ledgers, at the date of intervention. A31. In clear-cut cases, there may seem to be no problem with the above approach. However, as is repeatedly the problem for the Law Society in the intervention context, it is possible that a debit balance under a client's name is not a genuine debit balance or that the money withdrawn from the client account, although posted to that client's ledger, was not used for that client's benefit. In some cases, it is not possible to be satisfied either way on the evidence. A32. It is in that context that the Law Society does what is reasonably and proportionately possible in investigating the debit balance before proposing to net it off against credit balances in the same client's name. A33. In the absence of any evidence (or any reasonably and proportionately sufficient evidence) suggesting a ledger balance is wrong, it takes the ledger balances at face value as genuinely representing withdrawals made on behalf of the named client for the amount recorded on the ledger. A34. By way of example, in Biebuyck Solicitors five debit ledgers have been identified in the name of five persons who also are named on ledgers with credit balances. The five balances are for the following amounts: -£623.10, -£451, -£205, -£100, -£36. These are relatively small balances. The point of principle is important because, in some cases, very large balances may be involved. In any event, over numerous interventions, the amount of money affected by this point of principle will be significant. A35. The corresponding balances under the same names which are in credit are, respectively, £623.10, £1085.80, £80, £151 and £36. If netting off were to take place on all of the above, the shortfall in funds in Biebuyck solicitors would be lessened by the sum of £1,290.10. The benefit of this lessening in the overall shortfall would be shared by all of those entitled to the funds, since the general shortfall is to be allocated on a pro rata basis between all. A36. Verification of the debit balances involves finding the files for those clients and those matters. This is what will happen in the case of these five ledger entries. If they are all successfully found, they can be examined. Should there be nothing on the file, which suggests that the sums debited from that client's ledger should not have been, then the debit ledger balance is usually considered to be verified. This is the general approach. It is difficult and undesirable to fashion an absolute, automatic approach from which there is never any variation, since each case and even each ledger entry involves different facts and may require further investigation. A37. I accept that the netting off approach is a rational approach for the Law Society to adopt in exercising public statutory functions in determining entitlement to funds vested in it under paragraph 6. If the Law Society were a private law trustee, it would be a proper discharge of the Law Society's obligation to ascertain beneficial entitlement to the trust. D Re-allocating postings from a suspense ledger to named ledgers A38. Suspense ledgers are not (generally) supposed to be used by solicitors, although they are relatively common in accounts of solicitors who are the subject of an intervention. SAR 98, r. 32(16) states that suspense client ledger accounts may be used only when the solicitor can justify their use; for instance, for temporary use on receipt of an unidentified payment, if time is needed to establish the nature of the payment or the identity of the client. Frequently, the suspense ledgers in the accounts of solicitors who are the subjects of an intervention have been used for long periods of time, the solicitor writing transactions to the ledger, instead of properly attributing the transaction and writing it to a properly named client ledger. A39. Credit transactions, that is, transactions comprising money coming into the general client account, will, if they remain unnamed, be for the benefit of all of the named clients recorded as having money deposited in that general client account. The money coming into the general client account, in real cash terms, swells the money available in that account and, assuming that that account has an overall deficit (as is often the case), lessens the deficit to be borne by all the named clients. A40. However, the Law Society does not presume that these credit transactions cannot be allocated, and, instead, attempts to identify the person for whose benefit money was being deposited in the account. The Law Society seeks, if reasonably possible, to identify the transaction and re-post it to a named ledger, either existing at the time of the intervention or (if there is none already existing) created by the accountants working on the accounts on behalf of the Law Society. A41. Likewise, debit transactions are investigated, when they have been posted to suspense ledgers. If such transactions remained unnamed, and therefore unallocated, they will be a loss that falls on all of the clients who are recorded as having deposited money in the client accounts. It may be that this remains the case, even if the transaction can be identified. However, if identified in the name of a client with an existing credit balance on a ledger relating to that specific matter, then the debit transaction can be posted back to that ledger, thereby reducing the credit balance; or, if the ledger relates to another matter (see the principles discussed in the previous section), then the debit transaction can be netted off against that credit balance and, thereby, borne by that client alone. A42. Again, in clear-cut cases there may seem to be no difficulty with that approach and, at times, there is enough accounting material for the accountants to be confident about the re-allocation of transactions posted to a suspense ledger, from that ledger, to a named ledger. The issue arises where there is an absence of information and a need to decide the level of information to justify, acting in a reasonable and proportionate manner, a decision to re-allocate or not re-allocate transactions from suspense ledgers. A43. By way of example, there was a suspense ledger in Dixon & Co with a balance of -£2,283.75. This balance represented a transfer from the Dixon & Co client account to the office account effected by Ms Dixon without attribution to any particular named client. Ms Dixon provided information to the Law Society stating that the transfer was on account of costs whilst she was away and that she knew one transfer was in relation to Mr B and one in relation to Mr and Mrs H. She believed that there should be a bill on the respective files. A44. Both of these clients had ledgers which were in credit: Mr and Mrs H in the sum of £547.49 and Mr B in the sum of £421.87. No file could be found for Mr and Mrs H and it was not possible to contact them. Mr B's file, which was found, suggested that the costs had already been paid. A45. Ms Dixon, subsequently, informed Russell-Cooke on November 7, 2005, that the Mr and Mrs H matter may have been taken over by Dixon Emberton. A request has been made of that firm for the file and a response is awaited. Mr B was contacted by Russell-Cooke and said that he had no recollection on the issue of costs and had no records. Ms Dixon, in her letter of November 7 2005, also said that there were two Mr B matters and, therefore, there should be two bills. Only one file has been found, and it may be that the costs were due and/or bill was raised on the other matter, in respect of which no file has been found. A46. The Law Society has reached a decision on the currently available evidence, in these two cases, that this level of evidence is not sufficient to warrant reallocating the debit postings from the suspense ledger to the respective ledgers of Mr and Mrs H and Mr B. A47. The point of principle is that of proportionality in setting the level of evidence on which the Law Society can properly act in re-allocating transfers posted to suspense ledgers and in setting the level of inquiries which the Law Society should make into transactions posted to suspense ledgers. A48. I accept that this is a rational approach for the Law Society to adopt in exercising public statutory functions to determine entitlement to funds vested in it under paragraph 6. If it were a private law trustee, it would be a proper discharge of its obligation to ascertain beneficial entitlement to the trust funds. E Reliance on posting of debits to a specific ledger by a defaulting solicitor A49. It is not uncommon for a solicitor who is the subject of an inspection and an intervention to create postings in his accounting records. It is also possible that entries may be wrong through human error and not dishonesty. A50. Unlike common private law trusts, a solicitor's general client accounts may be dealing with numerous transactions each day, with money coming into and out of the account, all having to be accurately recorded. A51. Whilst a private law trustee should always investigate prior misfeasance by his predecessors, should he become aware of it, the context in which the Law Society inherits the client accounts is such that it is possible in most cases to question whether or not the ledger balances as at the date of the intervention are 100% accurate. A52. However, to have to go behind all of the ledger postings as a matter of course, because of the context in which the Law Society is intervening, would impose an extraordinarily onerous burden on the Law Society in terms of time, money and human resources. The Law Society's position is that, if reasonably sufficient specific evidence emerges in the course of the intervention to cast doubt on a particular posting or postings, it will do all that it reasonably and proportionately can to investigate the posting and to rectify it should it emerge with reasonable certainty that it is wrong. A53. The Compensation Fund has, in some cases, made grants to individuals based on the information then available as to the amounts deposited in the client account by that individual. As the investigation has continued, it has become clear that the Best List compiled by the efforts of the Law Society and its agents, in its capacity under paragraph 6, varies from the basis on which the Compensation Fund made a particular grant or grants. A54. Moreover, it has been known for a solicitor to certify that money lent to him in his personal capacity was "client funds" in order to deceive the Compensation Fund into making grants to the lenders, on the basis that those lenders were individuals who had suffered loss or hardship as a result of the solicitor's dishonesty or failure to account for the client money in his hands: Holder v Law Society [2002] EWHC 1559, [2003] 1 WLR 1059, at [13] to [15]. A55. Insofar as these discrepancies have emerged, the Law Society has taken or will take all reasonable and proportionate steps to investigate and to seek to ascertain the cause of the discrepancy. The Law Society does not propose to apply a fixed threshold to its investigations; in other words, there should be no fixed minimum amount of discrepancy, less than which no investigation will be carried out. It would be very difficult to set a fixed threshold, given the manner in which each individual discrepancy depends on its own individual facts. However, the guiding principle in all investigations is what is reasonable and proportionate in that set of facts. A56. By way of example, various discrepancies arose in Dixon & Co, several of which have been resolved since these proceedings were commenced. A57. The remaining discrepancies, those of Mr R as executor of Mr H, a discrepancy of £4,824.62, of Mrs P, a discrepancy of £208.75, of Mrs C, a discrepancy of £944.97 and of Mr W, a discrepancy of £250, all relate to one issue: where there is evidence that points to a solicitor removing a client's money from the client account, albeit in an unauthorised manner, whether the loss of that money from that client account should be borne by the individual client (or the Compensation Fund by way of subrogation in this case) or pro rata amongst all clients. All of the discrepancies concern transfers of money on account of costs from the client account to the office account, when there was no bill, or it appears that there was no bill, sent to the client. This could also be characterised as an allocation of loss question. A58. Mrs P made an application to the Compensation Fund for a grant representing funds which she had paid into the client account on account of costs, amounting to £1,007.50. A total of £767.95 had been transferred by Ms Dixon from her client account to the office account on account of costs and posted to Mrs P's ledger. The Compensation Fund could find evidence of only one bill having been sent to the client for the sum of £558.12. It took the view that there was no evidence of bills for £150 and £58.75 having been raised to justify the transfers on October 31, 2000 posted to Mrs P's ledger. A59. Accordingly, the Compensation Fund made a principal grant of £449.38, being the sum originally remitted to Ms Dixon less the sum of £558.12 properly billed. The Compensation Fund then asserted a claim by way of subrogation to the full amount of the grant of £449.38. A60. The ledger shows Mrs P as entitled to receive £240.63, since the ledger also reflects the (possibly) unauthorised transfers out of the client account on account of costs in the sums of £150 and £58.75 on October 31, 2000. A61. The question arises as to whether the Compensation Fund should receive a distribution of the funds based on the higher figure of £449.38, monies which it says should have been in the account had the solicitor complied with SAR 98, or the lower figure of £240.63, the amount which the Law Society, in its capacity as trustee under paragraph 6, believes was left in the client account at the date of intervention in the name of Mrs P. A62. The Law Society, in its capacity as trustee under paragraph 6, conducted further investigations and examined the underlying materials that might shed light on the veracity of the debit postings to the client ledger. In essence, the ledger card shows the transfers out of the client account to the office account on account of costs. The file shows nothing of use either way. The relevant bank statements show that there were transfers from the client account to the office account on the relevant days, albeit not in the precise amounts listed above, but this is not surprising, since it is common for solicitors to make one transfer from the client account to the office account which include several clients' costs all in one go. A63. On the basis of the investigations carried out, it would appear that the sums of money were transferred out of the client account to the office account and, therefore, lost from the client account. The Law Society, in its capacity as trustee under paragraph 6, is concerned solely with establishing and determining entitlement to funds in the solicitor's client account at the date of intervention. This is a question of tracing so far as is possible on the evidence and identifying the location and movement of funds. If there is evidence that a particular client's funds were removed from the solicitor's account on a particular day, albeit that such removal might have been unauthorised, the Law Society is of the view that it is reasonable to allocate that loss of money from the client account to that particular client. A64. The Law Society is reliant upon the postings made by the defaulting solicitor and there is a valid concern that those postings, in certain cases, may not be accurate but may be self-serving, for example, in the case of a solicitor taking randomly from the client account and posting to unrelated ledgers where he or she thinks the misappropriations will be least noticed. A measure of reliance on the solicitor is inevitable, since very often the only tools which the Law Society has, with which to identify entitlement to the funds vested in it, are whatever accounts and records the solicitor kept. The decision of how to allocate loss is not a decision as between the loss falling on the innocent client and the loss falling on the defaulting solicitor, where the presumption may well be that the solicitor should bear the loss, but it is a decision between innocent clients. Should the ledger not be relied upon and the posting of debited costs be reversed, this would increase the loss falling on other clients of the solicitor. A65. On the available information in Mrs P's case, since there is evidence that the transfers took place out of the client account, and there is nothing to suggest that they were not transfers effected on account of costs incurred on her behalf, it may be that the Law Society should rely on the current ledger balance for Mrs P and the debits that have been made to that ledger. On the other hand, it may well be considered necessary to ascertain some positive evidence (as opposed to the absence of any contrary evidence) suggesting that the transfer was effected on account of actual costs incurred on Mrs P's behalf (albeit unbilled), so that the transfer is evidenced as referable to something related to the client, justifying the allocation of the loss of money from the client account to that particular client. In Mrs P's case, a review of the file has shown that work has been done on Mrs P's matter, which indicates costs were incurred on her behalf, albeit it is not clear if they were billed properly so as to be debited in accordance with SAR 98. It is possible that further information could be obtained from Mrs P or Ms Dixon. However, the costs involved in doing so, given the costs already incurred in investigating what is a discrepancy of £208.75, may well be disproportionate. If so, and the debit postings of costs that might not have been billed are reversed, this increases the general shortfall in the client account at the time of the intervention by £208.75, which will be borne pro rata, see below, by all the clients on the Best List. As a general policy, the Law Society favours the first solution, namely, reliance on the current ledger balance, given the absence of evidence to suggest that it was wrong. A66. The Law Society in its capacity as trustee under paragraph 6 submits that the same approach must be adopted where the costs debited exceed what is considered by the Compensation Fund to be reasonable for the work in progress. The Compensation Fund in making a discretionary grant will assess what it considers to be a reasonable value for the work in progress being carried out by the solicitor and deduct that from any grant that it makes. In the case of Mr R as executor of Mr H, mentioned above, where a discrepancy remains between the Compensation Fund and the Law Society in its capacity as trustee under paragraph 6, the Compensation Fund came to the view that whilst £12,036.77 incl. VAT had been deducted from the client ledger on account of costs, incurred in the course of the administration of the estate, only one bill had been rendered in the sum of £2,131.50. However, rather than award a grant based on the difference between those two figures, the Compensation Fund commissioned an informal assessment as to the value of the work done by Ms Dixon on behalf of the estate. The value of the work was assessed at £7,212.15 inclusive of VAT and the Compensation Fund made a grant for the difference between the value of the work and the actual sums deducted from the client ledger. The difference between £12,036.77 and £7,212.15 is £4,824.62. A67. The Compensation Fund has asserted a claim by way of subrogation for the amount of £4,824.62 granted, in addition to the balance remaining on client account of £11,852.45. Since the sums deducted from the client account on behalf of the solicitor's costs incurred on behalf of that client are a loss to that particular client, even if unauthorised, then it must follow that it is still a loss to that particular client, even if the sums deducted were too high and could have been the subject of assessment. Whilst it is right that the Compensation Fund, in the exercise of its discretion, can take such matters into account in deciding what level of grant it will award in its discretion, the Law Society, in its capacity under Paragraph 6, is concerned to identify and determine entitlement to a specific fund of money existing at the date of intervention, applying principles of tracing. All that concerns the Law Society in identifying entitlement is the movement and identity of funds deposited by clients in the client account. A68. Were it to be said that the Law Society, in its capacity as trustee under paragraph 6, had to take into account what the reasonable value of the work done by a solicitor for a client was, this would require the Law Society to conduct informal assessments into that value, which, as can be seen from the Compensation Fund records referred to above, are by no means necessarily simple or cheap inquiries. There may be situations, as in the case of Mr R, where the Compensation Fund has already carried out such an inquiry, upon which perhaps reliance could be placed. However, the principle, if a correct principle, which the Law Society, in its capacity as trustee under paragraph 6 contends it is not, would have to be applied in all situations, including those where the Compensation Fund has not been involved and has not conducted its own inquiry into what might have been a reasonable cost for the work done by the solicitor on behalf of the client. A69. The usual form of discrepancy concerns situations where the Compensation Fund's view of the subrogatable element of its grant exceeds the adjusted and updated ledger balance of the client (in the Best List) to which the Compensation Fund is subrogated. It is also the case that the subrogatable element of the Compensation Fund's grant may be less than the ledger balance. It is common for there not to be an exact match. The Law Society would not generally investigate differences where the Compensation Fund grant was less than the ledger balance. However, in the case of Biebuyck Solicitors, the Compensation Fund has raised a specific example of this where the Compensation Fund grant is less than the amount of the ledger in the name of Mr F, and it believes that the client ledger may overstate the client's entitlement to funds at the date of the intervention. A70. This is a highly fact sensitive area, which needs to be considered on a case by case basis. The general approach of the Law Society is to (i) rely on ledgers save where there is evidence to suggest the ledger balance might be wrong, (ii) conduct reasonable and proportionate inquiries into differences over what should be the correct ledger balance (and this would be done whether the beneficiary pointing out the discrepancy was the Compensation Fund or a non-Law Society beneficiary, and discrepancies include those that arise when a non-Law Society beneficiary emerges claiming an entitlement to funds when he or she is not recorded even as having a ledger in the records held by the Law Society), and (iii) treat deductions from the client account as losses of a particular client's money where there is reasonably and proportionately sufficient evidence to indicate that the transfers were made in relation to that client, in respect of that client's money, albeit unauthorised. A71. I accept that this is a rational approach for the Law Society to adopt in exercising its public statutory functions to determine entitlement to funds vested in it under paragraph 6. If it were a private law trustee, it would be a proper discharge of the Law Society's obligation to ascertain beneficial entitlement to the trust funds. F Reliance on Compensation Fund verification exercise A72. In order for the Compensation Fund to exercise its right (under section 36(4) of the Act) of subrogation to the rights of a recipient of a grant from the Compensation Fund to the funds vested in the Law Society under paragraph 6, it must identify how much money it believes that recipient had in the client accounts of the relevant solicitor at the time of the intervention and, therefore, how much of the money vested in the Law Society at the time of the intervention belonged to the recipient of the grant. A73. Grants made by the Compensation Fund are also made in respect of items, such as lost interest, the costs of instructing new solicitors to rectify work badly done or to complete work incompletely done by the original solicitor, the costs of instructing solicitors or other professionals to prepare the application to the Compensation Fund or certain compensatory items such as penalties for late payment of stamp duty. A74. Each composite grant has to be broken down into all its elements. A subrogated claim will only be maintained in respect of the sum or sums that represent money the Compensation Fund believed, at the time of making the grant, to be money which the applicant should have had in the solicitor's client accounts at the time of the intervention. A75. In order to identify this element of the grant, the Compensation Fund staff carry out a verification exercise. A76. The Law Society is mindful of the need to ensure that the Compensation Fund is treated no differently – neither worse nor more favourably – than any other person entitled to a share of the funds vested in the Law Society under paragraph 6. As other non-Law Society persons do, so must the Compensation Fund submit a claim form verifying the number of subrogated claims it is making to any funds vested in the Law Society under paragraph 6. A77. When considering how far the Law Society, in its capacity under paragraph 6, should re-verify the claims submitted by the Compensation Fund, it is important to bear in mind that the Compensation Fund is itself a trust and the administrators of the Compensation Fund will have had to carry out their own checks upon receipt of an application for a grant, to satisfy themselves of the basis on which an application was being made to the Fund. A78. There are times when the Compensation Fund has access to better, different or just more evidence relating to entitlement to the money in the client accounts at the time of intervention and, as such, is a useful source of information in compiling the Best List. A79. The Compensation Fund is part of the Law Society's regulatory arm. Both the funds within paragraph 6 and those administered by the Compensation Fund are subject to the same statutory framework, in the context of the Law Society exercising the public function given to it by Parliament to regulate the solicitors' profession. To require the Law Society, in its capacity as trustee under paragraph 6, automatically to re-consider everything done by the Compensation Fund staff, when there is nothing to suggest that there is any need to do so, would be unnecessary duplication, and render the Law Society's exercise of its statutory powers far more onerous. A80. The Law Society has adopted the approach whereby it relies on the claims submitted to it by the Compensation Fund and does not seek to go behind the verification exercise carried out by the Law Society's staff who administer the Compensation Fund, save where it, in its capacity as trustee under paragraph 6, has conflicting evidence which suggests that the Compensation Fund's assessment of how much money a particular client should have had in the client account at the time of intervention cannot be relied upon or might be questioned. A81. In the practices of Mr Zoi, such is the state of evidence available to the Law Society from the solicitor's own records that, in respect of some of the claims submitted by the Compensation Fund to the trust fund, it has to rely entirely on the Compensation Fund. It has no evidence to suggest that the Compensation Fund might be wrong or inaccurate in any respect in its analysis of the subrogated claims it can properly maintain to the funds, save for the further investigation now being carried out in Zoi & Co in light of further evidence. A82. I accept that the reliance upon the Compensation Fund's record of its verified claims by way of subrogation to funds vested in the Law Society, save where a claim exceeds that which the client, to whose claim the Compensation Fund is subrogated, is a rational approach for the Law Society to adopt in the exercise of its public statutory functions in determining entitlement to funds vested in it under paragraph 6. If it were a private law trustee, it would be a proper discharge of its obligation to ascertain beneficial entitlement to the trust funds. G Entitlement in respect of unbilled costs A83. I have dealt in the judgment with the principles relating to unbilled costs, and I set out here the Law Society's evidence. A84. In each of the cases now before the court, where this issue has arisen, the solicitor concerned has been contacted. But these are all cases in which the solicitor is interested neither (i) in ascertaining current entitlement to the sums of money concerned, in terms of helping to identify whether or not a bill exists and has been sent to the client already, rendering the money office money under SAR 1998, r. 19(2) nor (ii) in recovering the costs himself. A85. In seeking to ascertain whether or not there has been a bill, or written notification, prepared and/or sent to the client, in the absence of assistance from the solicitor concerned, the Law Society has to decide how far it should look to see if it is possible to establish evidence either way. Investigations - involving looking for files that may not exist, looking through the files that do exist or are found, for information that may not be recorded in that file, trying to contact clients or third parties when no addresses or up-to-date addresses and/or contact details for those persons are available and/or the individual concerned may not be able to recall whether or not a proper bill, or written notification of costs incurred, was sent - can be extremely onerous in terms of time and financial expense, with far from sure prospects of success or certainty. A86. A line has to be drawn which is both reasonable and proportionate and which makes sense in the context of a body with finite resources exercising statutory powers given to it by Parliament in the interests of the public at large. The Law Society has done and will do what it reasonably and proportionately can to ascertain whether or not a bill has been sent in the cases that have arisen and, on the basis of the available evidence, will reach a decision as to whether the matter was properly billed. A87. By way of example, in Biebuyck Solicitors, the Compensation Fund refused Miss M a grant on the basis that the balance of £20.75 on her ledger was in respect of work carried out by the solicitor. The grant awarded to Mr S was reduced by £616.88 to reflect the costs incurred by Mr Biebuyck. This balance remains on Mr S's ledger once the Compensation Fund has been paid its entitlement to the funds based on its subrogated claim of £23,000, the amount of the grant which it gave to Mr S. A88. Neither of the files showed any evidence which might assist on the question of whether or not a bill or written notification had been sent to the client or paying party. Mr Biebuyck has said he is not asserting any claim to the funds held by the Law Society based on costs due to him. Responses are awaited from Mr S and Miss M and, should any be forthcoming, they will be considered prior to distribution. A89. As far as Miss M is concerned, subject to any response from her or further information provided by her, there is insufficient evidence to say that the balance on her ledger is office monies. It will be treated as client account monies held for her. A90. The Compensation Fund has shed some further light on the deduction on account of costs it made in the case of Mr S. The matter related to the release of a charge held by Mr S, where the Compensation Fund were of the view that the chargor was to pay the legal costs. The sum of £616.88 was paid over and above the amount required to release the charge, which the Compensation Fund considered to be evidence that the chargor must have been notified of the legal costs incurred as being £616.88. SAR 1998, r. 19(2), does allow for written notification of the costs incurred to be sent or given to the paying party as opposed to the client, and this may be a case where, even without evidence of a bill having been raised and sent, rule 19(2) can be considered to have been complied with and the balance of £616.88 should be treated as having been office money at the time of the intervention. A91. The question of unbilled costs arises in respect of ledgers where there has been no Compensation Fund involvement. For example, in Biebuyck Solicitors, the ledger of Mr G shows a credit balance of £115. However, Mr G has returned a claim form stating that his claim was settled and that no money was owing to him and that Mr Biebuyck had deducted his fees from his claim. Notwithstanding the fact that Mr Biebuyck appears not to be attempting to assert any claim to such monies, in the light of Mr G's comments, the Law Society takes the view that it is reasonable and proportionate to treat the balance of £115 as office money at the time of the intervention. H Allocation of a deficit in trust funds A92. I have dealt in the judgment with the legal aspects of distribution where there are deficits, and I set out here the Law Society's evidence. A93. The Law Society does not presume that the most applicable evidential presumptive rule will be the pro rata rule. The case of the practices of Mr Zoi is an unusual case, but a good example of a case in which the accountants reconstructing the solicitor's accounts identified a situation in which the rule in Clayton's Case would be more apt on the specific facts of that case. A94. From an analysis of the bank statements immediately prior to the intervention date, it became clear that one of Mr Zoi's client accounts (the one with the largest amount of money in) had gone overdrawn shortly before the intervention. Once an account is overdrawn, the money that had been deposited therein has been dissipated and, should the account go back into credit at a later date, the credit balance is clearly created by new money and not the money which was originally deposited in the account (unless it can be shown that the "new money" represents the traceable proceeds of the money originally deposited in the account and then dissipated): Bishopsgate Investment Management Ltd v Homan [1995] 1 WLR 31. A95. The fact that the client account had become overdrawn less than a month prior to the intervention gave the accountants a much narrower window to survey and in which to assess all the payments coming in and out of the client account in those few days. It was also thought to render consideration of deposits made into the account prior to the point in time at which it became overdrawn more or less academic. A96. Moreover, it became clear from the bank statements that a substantial proportion of the trust funds had been paid into the client account just 3 days prior to the intervention, and that there had only been one relatively small payment out of the account after that receipt. The sum of £19,300 was received from PKP French solicitors on behalf of Mr M on June 11, 2002, 3 days prior to the intervention on June 14, 2002. On June 14, 2002 a cheque in the sum of £1,770 was paid out from the client account. Compensation Fund information revealed that it was paid out on behalf of Mr M. There were no payments out of the client account other than this one payment after receipt of the sum of £19,300. Thus, clearly, the sum of £17,530 remained in the account of the money paid in on behalf of Mr M. A97. The application of a last in-last out rule does seem more appropriate in this case, and, on that basis, the sum of £17,480 will be paid to the Compensation Fund, since it paid a grant to Mr M for this amount on account of the monies deposited in the Zoi & Co client account at the date of intervention. The balance of £50 may be paid to Mr M, subject to the investigation concerning the sum of money paid to Mr A by the Compensation Fund, which was also supposed to relate to the sum of money received on behalf of Mr M. A98. The remaining funds in the Zoi & Co client account will also be dealt with on a last in-last out basis; however, this is the subject of some further investigation, as a result of recent information provided by Mr Zoi which might shed a little more light on sums that were previously unidentifiable. A99. I accept that the Law Society's approach of determining entitlement to the funds vested in it, having regard to any deficiencies in the client account at the date of the intervention, and the private trust law principles of allocating deficiencies between beneficiaries to deficient mixed trust fund, is a rational approach. If it were a private law trustee, I would have approved the pro rata method of allocating loss in Biebuyck Solicitors and Dixon & Co and the application of the rule in Clayton's Case in Zoi & Co. I Advertisement A100. In cases where private law trustees are concerned as to whether or not they have sufficiently identified all of the beneficiaries of their trust, they can obtain some protection under section 27 of the Trustee Act 1925 by giving notice by advertisement in the Gazette. This provision only applies to trustees for sale of personal property as opposed to all trustees of personal property. The Law Society is a trustee of personal property, but not a trustee for sale of personal property. A101. The Law Society has carried out an advertising campaign which mirrors the requirements of section 27. Advertisements have been placed both in the Gazette and in newspapers circulating in the area where the majority of the solicitor's known clients were located; this being the best equivalent to land comprising the trust property, as provided for in section 27. A102. In all of these cases, the advertisements have been repeated in a manner which would not have been required under section 27. This has been part of doing everything possible in the context of these test cases and goes beyond what the Law Society would consider, in general, to be proportionate. It has served to highlight how, even deploying unrestricted resources and imposing no limit upon the steps taken in the name of proportionality, results may not be forthcoming. In general, the advertisements have produced only a handful of responses at best. A103. I accept that the use of the advertising campaign is a factor to be taken into account in demonstrating that the Law Society has adopted a rational approach to its exercise of its power to determine entitlement to the funds vested in it under Paragraph 6 or, if it were a private law trustee, in demonstrating that the decisions reached by the Law Society could be approved as a proper discharge of the Law Society's obligation to ascertain beneficial entitlement to the trust funds. J Contacting persons entitled to funds: £75 limit A104. The Law Society adopts various methods for contacting persons who might be entitled to a share in the funds. Advertising, described above, serves not only as a mechanism of identifying entitlement for the Law Society as a result of any information that it obtains following the advertising campaign, but also as a method of alerting those who have been identified as entitled to a share in the funds to the possible existence of their rights to claim against the funds. A105. All clients with live matters should have already been contacted by the intervention agent at the date of intervention. The Law Society has now adopted an approach of only writing again to those clients with ledgers recording over £75 in the client account at the date of intervention. A106. The cost of the steps which are involved in writing to a client, where up-to-date contact details are known, and then processing any response and making any payment that might be due once the response has been processed are estimated by the Law Society to be on average £233. These costs will be increased where the file has to be requested from Law Society archives, or from a solicitor to whom it was released, in order that contact details can be obtained. A107. Substantial costs will already have been incurred in reconciling the accounts, verifying them if possible, compiling a Best List and resolving all of the uncertainties arising as a result of compiling that Best List, ascertaining any shortfall, deciding how to allocate that shortfall and advertising. All of these costs have to be incurred before it can be determined to what any one client who deposited money in the general client account might be entitled and, therefore, before the stage is reached when a client can be written to. A108. Moreover, in cases of shortfall, a client may have a ledger balance in credit with the sum of £75 but, if loss is allocated on a pro rata basis, his or her entitlement to funds may be considerably less. For example, in Dixon & Co, a client such as Miss D who has a ledger balance of £70.50 will only be entitled to £10.64 out of the funds vested in the Law Society and a client such as Miss M who has a ledger balance of £84.52 will only be entitled to £12.75 out of those funds. To incur, say, between £82 and £233 worth of costs, on top of substantial costs that have already been incurred, in order to be able to effect a distribution of £10.74 or £12.75 is, in the Law Society's view, disproportionate. In many cases, it may not be known, until the letter is written and sent, whether or not the contact details are up–to-date for the client. If not up-to-date, the costs of tracing that client will increase the costs of distribution of whatever sums that client is entitled to, and the costs of sending the letter will have been incurred with no success in effecting a distribution. A109. In the case of Biebuck Solicitors, Mr S made an application to the Compensation Fund for a grant of £50, but was rejected since he could not demonstrate hardship as a consequence of the failure of Biebuyck Solicitors to account for money to him. A110. On the basis that Mr S had a ledger in credit for the sum of £50, the amount he would receive on a pro rata distribution of the funds would be in the order of £30, given the shortfall in the client account at the date of the intervention. The Compensation Fund has said that it has Mr S's address as at April 24, 2003, but that address dates back over two and a half years and it may no longer be up–to-date. The only way in which the Law Society would know whether or not it is, would be if a letter were sent, by which time the costs (which would certainly exceed £30) would have been incurred, possibly in vain. A111. In these circumstances the Law Society submits that it is rational (i) for the Law Society to apply, as a general current approach, a limit of £75 on a client ledger, less than which it will not write again to clients in addition to the letter that should have been written at the time of the intervention, whilst (ii) recognising that there may always be particular cases which merit not following the general approach. If it were a private law trustee, that would be a proper discharge of its obligation to contact beneficiaries and inform them of the trust. A112. If a client comes forward, perhaps in response to the earlier letter written by the intervention agent or having seen the advertisement or having contacted the Compensation Fund, and requests distribution of what he or she is entitled to, the Law Society is likely to effect a distribution, even though the costs incurred in doing so may exceed the amount being distributed. This also means that, should the client come forward and approach the Compensation Fund seeking a grant from the Compensation Fund, he or she could be referred on to the Law Society, in its capacity as trustee under paragraph 6. A113. Where contact details or up-to-date contact details are not available for clients who might be entitled to substantial amounts, the Law Society considers the use of tracing agents. In the Law Society's experience, the effectiveness of using tracing agents has not been high, and is extremely dependent on the amount of information available for the client being traced. The amount of money invested in tracing also affects the effectiveness of the tracing exercise, and the amount of money that can be spent proportionately and reasonably is directly affected by the value of the ledger balance. A guideline level of £500 has been adopted now above which tracing will be considered by the Law Society. A flexible approach has been adopted so that, in Dixon & Co, where the shortfall was considerable, the level of £500 was applied as referable to the amount to be distributed to those entitled as opposed to their ledger balances. A114. I accept that this is a rational approach. K Disputes between beneficiaries A115. There may be situations where proper determination of entitlement is outside the bounds of what it can achieve from the material available to it e.g. the solicitor's books and records and accounting materials. Entitlement may well depend on factual and evidential matters in dispute between two would-be beneficiaries. The name on a client ledger list may not always reveal what dealings there may have been with the entitlement to the money recorded on that ledger. In such a situation, the Law Society may ask for directions as trustee. L Distribution A116. Many balances left on client ledgers are small balances and swiftly dwarfed by the costs even of locating the client file, finding a current address for the client and writing to the client in an attempt to notify the client of the trust and the existence of his or her possible claim to a share in the trust funds. These costs are increased where, as often is the case, repeat letters have to be sent to the client chasing the client for a response to the initial letter and/or attempts have to be made to find an up-to-date contact address for the client by means of tracing agents if necessary. A117. Ordinarily, a private law trustee would exert a right to reimbursement for the expenses incurred in administering the trust, recoverable from the trust fund itself: Trustee Act 2000, section 31(1). Exercising the right to reimbursement against the trust fund itself, in the case of a private law trustee, acts as natural barrier to carrying out exhaustive disproportionate attempts to locate and contact beneficiaries who have disappeared. Since the Law Society's own funds are being expended in determining beneficial entitlement to these trusts and effecting a distribution, the natural barrier against disproportionate enquiries into the whereabouts of beneficiaries is not present, albeit that the Law Society does not have inexhaustible funds and is funded by the profession itself. A118. The Law Society is mindful of the desirability of ensuring speedy distribution to those who have been determined as entitled to funds. To that end, the Law Society has formulated an approach of interim distribution, which involves distributing to an identified person the minimum to which on any view he must be entitled, even were outstanding matters resolved eventually by the Law Society wholly contrary to the interests of that particular person. A119. Although interim distributions will only take place where the Law Society is confident of the minimum entitlement of the person to whom it is proposing to effect an interim distribution, it is possible for there to be others entitled to the funds of whom the Law Society is unaware, given, for example, the fact that investigations are ongoing at the time of an interim distribution. Accordingly, recipients of an interim distribution will usually be asked to give undertakings to repay any amount, subsequently determined to have been overpaid in the interim distribution. The reality is that the most common recipient of an interim distribution is likely to be the Compensation Fund, since the Compensation Fund is often entitled to the largest proportion of the funds, by way of subrogation. Whereas, for the purposes of the interim distribution, resolving uncertainties against a particular individual (e.g. presuming that that individual bears the entire shortfall in funds by himself) would often eliminate the entitlement of an individual who was not the Compensation Fund, this is often not so for the Compensation Fund, because of the size of its entitlement. A120. Where there is evidence of potential discrepancies between additional information (more likely than not provided by the Compensation Fund) and the ledger balances held by the Law Society in its capacity as trustee under paragraph 6, and whilst investigation into those discrepancies is ongoing, the balance that reflects the least favourable distribution as far as concerns the recipient of the interim distribution will be used in calculating the distribution. To calculate entitlement based on a possible higher ledger balance for the recipient would risk overpaying. It may be correct to calculate the overall claims to funds using the higher ledger balance in order that the potential overall claim is as high as possible, whilst the calculation of the entitlement of the individual to a share in the funds is calculated using the lower of the two possible ledger balances to reduce the risk of overpayment. The principles on which interim distributions are to be made is the subject of discussion between the Compensation Fund and the Law Society. In the case of Biebuyck Solicitors, Mrs N was the beneficiary of a trust; from evidence supplied by the trustee the balance of the trust funds at the time of the intervention should have been £194,000, but the Best List indicated a ledger balance of £164,000. The shortfall of £30,000 indicates misappropriation, or at least erroneous debits. Whilst further investigation is ongoing, the most prudent course would be to calculate an interim distribution using the higher value of her ledger for calculation of the total potential claims on the funds so that that figure is in the order of £370,000 as opposed to £340,000, whilst using the lower balance to calculate the Compensation Fund's entitlement to funds by way of subrogation to her ledger, so that that figure is in the order of £164,000 as opposed to £194,000. An alternative would be to rely on the lower balance for both the calculation of the total potential claims on the funds, and, therefore, the shortfall, and for the Compensation Fund's entitlement to funds by way of subrogation to that ledger balance. A121. The standard claim form used to date has included an undertaking in the following form: "I hereby formally confirm that I am entitled to the sum claimed and acknowledge that any payment I receive will be made in reliance upon my confirmation. In the event that it transpires that I am not entitled to all or part of any sum paid to me, I undertake to return that sum to The Law Society within seven days of notification." A122. The intention has been for undertakings to be given in both the interim and final distribution contexts. This standard form is not limited in terms of time. A123. The Law Society has considered whether to ask, as an extreme precaution, for an undertaking from persons to whom distribution is effected, even if the Law Society is held only to be amenable to judicial review. The undertaking would guard against the remote possibility of judicial review of the Law Society's determination as to entitlement. However, the Law Society regards guarding against such a remote possibility in this way (save in unusual cases) as unattractive and unlikely to achieve a better or fairer solution overall than not seeking the undertaking, and paying the wronged person who emerges later claiming an entitlement to funds. A124. I see no objection to the Law Society effecting distribution to those it has determined are entitled or identified as entitled, without any further retention or other security save for that which has been mentioned above. M Retention of the undistributed sums as reimbursement of the Law Society's properly incurred costs in determining entitlement to the funds and effecting distribution of the funds A125. I have dealt with this in principle in the judgment. I set out here the Law Society's evidence. A126. In Zoi & Co, once all the funds have been distributed to those who can be identified as entitled to a share in the funds, there will remain an unidentified surplus of £6,075.11, and it is possible that that unidentified surplus may be greater. This unidentified surplus is unidentified in the sense of there not even being names of clients to whom the funds might be payable. A127. In Dixon & Co, potential entitlement to the funds far exceeds the funds. The shortfall in Dixon & Co in the client account at the time of the intervention was considerable and calculated at the time of the Law Society's original evidence as £250,181.31. Therefore, any undistributed surplus in this case would not arise as a result of an inability to identify those entitled to the funds. It might well arise, though, when distribution is effected. Clients may well have moved since the intervention in March 2002 and there may be no up-to-date address or contact details for some clients. Other clients have a ledger balance under £75 in credit and no further attempts would be made to contact them for the reasons explained above, given the considerable costs involved, the extremely small amounts that would be distributable to them and the amount of work that has already been done in Dixon & Co in compiling a Best List and in notifying clients by way of advertisement etc. In Dixon & Co the agent has confirmed that all clients whose files were uplifted at the time of the intervention were written to, regardless of whether their matter was a finished or current matter. The number of ledgers with balances under £75 are 28, with balances ranging from £3.50 to £70.50 and a total value of £1,106.45. Bearing in mind the amount of shortfall in the Dixon & Co client account at the time of the intervention, this is in fact only £160.39 of the funds to be distributed in Dixon & Co. This would be the undistributable surplus in Dixon & Co solely attributable to the application of limit of £75 under which no further letter would be sent to the client. Moreover, if any of the clients with one of the small balances in credit approached the Law Society, perhaps in response to the advertisement, or the letter from the intervention agent, or information from the Compensation Fund, their entitlement would be likely to be distributed to them, thereby reducing the undistributed surplus. A128. On the current available evidence, the amount of money which will remain undistributed on ledgers over £75, as a result of the absence of contact details or response from the person entitled to the funds is estimated to be £1,122.92. A129. The Law Society has recovered its costs of intervention from solicitors in approximately 6 to 10 cases each year; for example, in 2004, having incurred the sum of £5,086,591 in intervention costs, the Law Society recovered £960,681. A130. In some cases, such as Ahmed & Co and Zoi, all reasonably and proportionately identifiable and contactable beneficiaries have received the most they were recorded as entitled to at the time of the intervention in the solicitor's records. In Ahmed & Co, the practice monies were intact and, therefore, all those who could reasonably and proportionately be found received all that they were recorded as entitled to at the time of the intervention. In Zoi, once all reasonably and proportionately identifiable and locatable persons have received that to which they appear to be entitled there remains a surplus for which there are no known beneficiaries. A131. However, in other cases, such as Dixon & Co and Biebuyck Solicitors, the practice monies were not intact and there was a shortfall at the time of the intervention. In determining entitlement, the Law Society has considered and taken into account private law trust methods of allocating deficiencies in trust funds as between beneficiaries of a mixed fund, and arrived, in both, at a pro rata method of allocation of loss. The entitlement of individuals to the funds in the Law Society's hands is their pro rata entitlement. Once they receive their pro rata entitlement, those persons will have received their full entitlement to the funds in the Law Society's hands. Although this is the case, if it transpires that there is a surplus after distribution in such cases, an alternative way of dealing with the surplus might be to distribute a second amount to those who have already participated in the initial distribution, pro rata to the amount they are recorded as having deposited with the solicitor at the time of the intervention. A132. The disadvantages of this approach are that to do so may well be, in some cases, disproportionate, given the small amounts of surplus there may be and the costs of effecting a second distribution. Dixon & Co is a good example of this. More importantly, in dealing with any surplus, there need to be safeguards to protect any late-emerging persons, who have been identified by the Law Society as entitled to the money, but who were not reasonably and proportionately contactable by the Law Society at the time of the initial distribution. It would be far harder to ensure that a late-emerging person would be paid his entitlement, if the surplus (which was not distributed in the initial distribution) were distributed in a second wave of distribution to those who had received their entitlement already in the initial distribution. If the surplus is used to reimburse the Law Society for its costs incurred under paragraph 6, that could be underwritten by an undertaking given by the Law Society to repay the relevant amount of money to such a late-emerging person. The Law Society considers that such an undertaking should be confined (i) to one year and (ii) to those who had been previously identified as entitled to a share of the funds but were not traceable or contactable by the Law Society at the time of distribution.

Mr Justice Jack : On Friday 11 May 2007 following the handing down of my judgment in this action I heard among other submissions, submissions on behalf of the claimants and on behalf of Strutt & Parker as to an issue concerning the assessment of damages. I reserved my decision. In the judgment I had had to decide whether damages were to be assessed on the basis of a value difference at transaction date or on the basis of the likely lost income. I decided that in accordance with Court of Appeal authority the former was correct. It is not a straightforward question, and it plainly merits permission to appeal. The House of Lords was recently divided on a similar issue in Golden Strait Corporation v Nippon Yusen Kubishka Kaisha [2007] UKHL 12, [2007] 2 WLR 691. Mr Anthony Speaight Q.C. submitted on behalf of the claimants that on the assessment of damages I should hear evidence and reach a conclusion on each basis. Mr Timothy Lamb Q.C. submitted on behalf of Strutt & Parker that I should not. The arguments in favour of deciding the appropriate damages on both bases are as follows. It will enable the claimants to see whether there is a substantial difference between the figures meriting an appeal. If there is an appeal, it will enable the Court of Appeal to see what the difference is and how its arises. That is something which could be relevant to which measure of damage better satisfies the overriding principle as to damages stated by Lord Blackburn in Livingstone v Rawyards Coal Co. (1880) 5 App. Cas. 25 at 39. It would avoid the need for a second assessment following a successful appeal. Such a second assessment would be a cause of delay. The additional costs of a second assessment would be substantially greater than those which would be incurred if the both measures were covered at a single hearing this year. The disadvantage of deciding the damages on both bases would that the hearing would take longer and cost more. It would not take twice as long nor would it cost twice as much. For both exercises would in part be essentially the same but would use different data to reflect the different dates. The first exercise would involve both an assessment of the likely income streams over the period of the leases using a turnover rent and the likely actual rent, and then a valuation of them. The second exercise would not involve valuations but would involve assessment of the likely income streams. I think it likely that the difference in outcome between the two will be substantial, but I do not know and I have heard no evidence or submissions about it. Balancing these factors I have concluded that it will be the better use of costs and court time, and is likely better to further the interests of justice if the assessment is carried out on both bases. I appreciate that this will involve the court making an alternative finding on a basis that the court has held to be wrong. On the other hand, if all the evidence had been available, and I had dealt with damages at the trial as was originally intended, I would certainly have made alternative findings in case the Court of Appeal held that the measure I had chosen was wrong. As I have indicated, that is a very real possibility. In the circumstances I consider that the sensible and practical course in the circumstances is to make assessments on both bases at the one hearing. This ruling gives me the opportunity to mention a further matter which arose in the course of submissions, namely the question of an interim payment by Strutt & Parker to the claimants on account of costs. This was stood over to be heard at the conclusion of the application for interim payment on account of damages. I have not been asked to make any other order as to costs between those parties at this point. I refer the parties to CPR 44.3(8).

Lord Justice Thorpe: The second stage of Mrs H's application for permission to appeal the order of HHJ Bradbury of 5 December 2005 has taken rather longer than it ideally should have done because of the fairly chaotic state of the papers in the case, and I express gratitude to the father's solicitors, Messrs Charles Russell and Co, who have prepared for us a paginated bundle of something recently submitted by Mrs H, which is said to be the appeal summary. It contains some 250 pages, which I suppose are to be taken to be in addition to the appeal bundle which was before me when I dealt with the case in court on 10 May 2006. It is unnecessary for the purposes of this judgment to say any more than that there were exchanges between solicitors to finalise orders to reflect agreement between the parents that the mother would relocate to Spain with the two children and that there would be a downward variation of periodical payments, to reflect the fact that the husband had left his former employment in, I think, the summer of 2005. However the mother, after her departure from Spain, withdrew her instructions from her solicitors; she says because she could no longer afford them. Thereafter Messrs Charles Russell were faced with the not uncommon problem of having to tie the final strings without professionals on the other side with whom they could communicate on issues that are essentially for lawyers rather than for clients. Following the mother's decision to proceed without representation she did have a conversation with Mr Longrigg, the partner at Charles Russell, in the course of which she informed him that she was resiling from what had been agreed prior to her departure, namely monthly contact in this jurisdiction as well as monthly contact in Spain. It is not for us to go into the merits of the communication, but it is a fact that the mother had conceived in the summer and the pregnancy had proved to be a difficult one. Obviously that impeded her capacity to perform what had been agreed prior to her departure. In an endeavour to resolve all this, application was made to the court for orders in terms that had been more or less approved by the mother's solicitors before their withdrawal. Messrs Charles Russell were concerned that she might frustrate this final stage by non-attendance and so they applied without notice to the Senior District Judge, who on 30 November made an order: "If the Mother cannot attend the hearing for a genuine medical reason, she shall send to the court and Charles Russell LLP by 12 noon on Friday 2 December 2005: "(a) a medical certificate explaining her condition and why she is not able to travel to the hearing, whether by air, land or sea; and "(b) any written representation she wishes the court to take into account in deciding whether to make the orders sought by the Father." The mother's only communication to Messrs Charles Russell following the making of the Senior Judge's order was a lengthy letter to the solicitor with conduct, Miss Posnansky, in which she proposed variation of the contact arrangements which had been previously agreed and made some comments on financial issues indicating that she wanted more per child than had been agreed prior to her departure. The letter ends with the important final paragraph: "I shall not be attending Court on Monday and so have taken the liberty of filing open letter with the Court, together with a certificate from my Doctor." When the case came into court on 5 December, we see from the transcript of the proceedings that at the very outset counsel for the father Mr Brooks said to the judge: "MR BROOKS: I hope your Honour has had a chance to read my case summary and my skeleton argument. "JUDGE BRADBURY: I have, yes. "MR BROOKS: I do not propose to say too much by way of opening, apart from raising a few important points, the first being the mother's non-attendance. You will have gathered that we did appear before the District Judge last Wednesday and you will, I hope have seen the order of District Judge Waller? "JUDGE BRADBURY: Yes. "MR BROOKS: We did have a response, as your Honour is aware, from the Mother and this response appears [in the bundle]. The important part is actually in the letter attached to one of the emails. "JUDGE BRADBURY: Yes, I see she has referred to a medical certificate. I have not seen that. I do not know whether it has arrived at the court or not. "MR BROOKS: No. That was the request I had, your Honour. She also mentions an open letter which she sent. I presume that was the letter which was sent to us, although I do not know if another letter has been sent to the court. "JUDGE BRADBURY: I do not know. I have not seen any papers sent to the court at all. All I have are the bundles which your solicitors have lodged." Investigations which I initiated at the previous hearing on 10 May revealed that at 10.23 on 2 December the mother had transmitted to the Principal Registry of the Family Division a clear communication that what she was sending was urgently required for the hearing on 5 December. In terms it is headed in bold "Urgent". Underneath that, "For Hearing Monday 5 December to listing officer in the Principal Registry Family Division. Case numbers" -- and then fully cited are the case numbers, a fax number for her and then clear statement that it is from her with her telephone number and her e-mail address. So that communication fell within the time limit set by the District Judge and the attachments to it were a medical certificate of 14 September, a letter to the judge and a copy of the letter that she on the same day sent to Charles Russell. It can be said that there was not strict compliance with the order of the District Judge, which required her to make the transmission not only to the court but also to Charles Russell and Co and she failed to do that. The common transmission was only the letter of 2 December to Miss Posnansky. The other documents were sent only to the court. As a result of the attendance and the submissions of Mr Brook, orders were sealed in the following days; detailed orders to effect what had been agreed between solicitors both as to contact and as to periodical payments. But what is most unusual is that the judge, in response to Mr Brooks' invitation, made indemnity costs orders against the mother both in relation to the Children Act application and in relation to the periodical payments application. He furthermore summarily assessed those indemnity costs: some £18,000 in relation to the Children Act proceedings and some £6,000 in relation to the periodical payments. So a hefty obligation was heaped upon the absent mother to pay costs summarily assessed at something in excess of £24,000. It was that order that essentially attracted the mother's application for permission to appeal which now receives its second listing, this time with appeal to follow if permission granted. Now the further investigations that we have been able to make with the assistance of Miss Phipps, for the father, and her instructing solicitors reveal that as a result of regrettable error, the clear communication to the listing officer of 2 December was not transmitted to the judge on 5 December, so both the judge and Mr Brooks proceeded on the erroneous assumption that the mother had not taken advantage of the alternative mode of participation offered by the Senior District Judge's order. That is regrettable, particularly because had Mr Brooks and the judge given close attention to the final paragraph of the mother's letter of 2 December to Miss Posnansky, they would surely have been on notice that the mother asserted a communication with the court, both a letter and a certificate from the doctor. What then are the consequences of the error? In my judgment they are fundamental because the judge's explanation for making what is a most exceptional order in Children Act proceedings is to be found essentially in paragraphs 4 and 6 of his judgment. In paragraph 3 he had referred to the mother's conduct since her departure for Spain; not responding to letters or e-mails, not signing a proposed consent order. He continued in paragraph 4: "That behaviour on the part of the mother inevitably has led to a considerable flurry of activity since she went to Spain -- activity on the father's solicitor's part, who had to issue an application before the Senior District Judge last week seeking an order that the mother attends today's hearing. In the event she has not attended and not participated in any way… These are all factors which I must consider in relation to the application for costs on an indemnity basis that the father now makes." In paragraph 5 he then directed himself to the case of T (a Child) [2005] EWCA Civ 311 and a judgment given by my Lord, Lord Justice Wall. He then said in paragraph 6: "I am satisfied, after some thought, that the [argument] for making a costs order in this case are made out because I am satisfied that since 5 September the children's mother has been unreasonable in her conduct of the litigation… It has been her unreasonable conduct, which has not been justified to any degree at all, which has led to a very considerable increase in costs which have been incurred which would only have been otherwise incurred in the preparation of an agreed consent application and lodging [at the] court." Those citations demonstrate plainly that the judge's erroneous conclusion that the mother had not participated in any way was an ingredient (and it seems to me an important ingredient) in the exercise of the broad discretion. What then are the consequences? It seems to me that they are plain enough. First of all I would grant permission; secondly, I would allow the appeal and set aside the order which plainly rests on an erroneous foundation. I have considered whether I would remit for reconsideration by a judge of the Division in possession of all the facts, but that option is deeply unattractive for pretty obvious reasons. I have concluded that I would grasp the nettle and exercise an independent discretion. I have reached the conclusion that an indemnity order against the mother was simply unthinkable. Should any order be made against her, bearing in mind that orders for costs particularly in Children Act cases are extremely uncommon, and bearing in mind that the conduct which was the matter of such complaint by the father's solicitors was conduct that had to be put in the context of the changes of circumstance, the intervening developments in her life? I have reached the conclusion that the proper order, in the exercise of an independent discretion, is no order as to costs in relation to the matters that were before the judge on 5 December. In some respects I would balance what has undoubtedly been an expensive and frustrating experience for the father by indicating that I do not think that there should be any costs in respect of the appeal either. Thus the parents will each bear their own costs and hopefully the issues that remain (the mother has not sought from us any order in relation to the contact provisions) can be approached by the parents with goodwill and sense on both sides. It should surely be possible for them to agree a future plan of contact which relieves the children from over-frequent visits to this jurisdiction, but compensates by ensuring that such visits as are made in half-terms and holidays are of longer duration than the brief hours at the weekend that remain, after exhausting journeys between the mother's home somewhere in the Jerez area and the father's home in Surrey. So that is the disposal that I would propose. Lord Justice Wall: I agree. I add a short judgment of my own not least because the judge below has relied upon a decision of this court in which I gave the judgment of the court in order to justify his decision for indemnity costs. In my view an order for indemnity costs is a wholly exceptional order to make in family proceedings and needs to be very carefully thought through and justified. In the instant case it is of course a matter of the most substantial regret that the communication which the mother undoubtedly sent to the Principal Registry was not placed before the judge before he gave his judgment, but I cannot but notice as my Lord, Lord Justice Thorpe has pointed out, that in the long letter to the father's solicitors dated 2 December, which was before the judge, the fact that she had communicated with the court and had provided a medical certificate was clearly flagged up. In my judgment, whilst it was perfectly appropriate for the father to apply to the court for the orders which were actually made -- and indeed the mother makes no complaint about the orders themselves although she may seek to vary them -- it seems to me that the position which she adopts in the letter of 2 December is not a wholly unreasonable one. Therefore for the judge to condemn her out of hand unreasonable conduct when the material was available for him to appreciate that she had communicated with the court seems to me unwarranted. This leaves the very difficult decision as to what we should do. I am conscious of the fact that we have lifted only one particular corner of this case and I am equally conscious of the fact that we are dealing with young children who need to maintain a proper relationship with their father whilst living in a different jurisdiction. I very much hope that this excursion has not caused too much damage to the parties' relationship as parents. But I am quite satisfied that if the judge had been fully appraised of the position and had he fully taken into account the letter of 2 December when dealing with a sensitive family situation and with a litigant-in-person, he would not have made an order for costs let alone an order for indemnity costs. In my judgment it is therefore open to us to exercise our discretion afresh. I respectfully agree with my Lord that the proper course here is for us, having given permission to appeal, to allow the appeal and to direct that there be no order as to costs before the judge. I also respectfully agree with the order which my Lord proposes in relation to the costs in this court. Lord Justice Moses: I agree with both judgments. Orders: Application granted. Appeal allowed. No order as to costs.

FIRST SECTION CASE OF POLESHCHUK v. RUSSIA (Application no. 60776/00) JUDGMENT STRASBOURG 7 October 2004 FINAL 07/01/2005 This judgment will become final in the circumstances set out in Article 44 § 2 of the Convention. It may be subject to editorial revision. In the case of Poleshchuk v. Russia, The European Court of Human Rights (First Section), sitting as a Chamber composed of: MrC.L. Rozakis, President,MrP. Lorenzen,MrG. Bonello,MrA. Kovler,MrV. Zagrebelsky,MrsE. Steiner,MrK. Hajiyev, judges,and Mr S. Nielsen, Section Registrar, Having deliberated in private on 16 September 2004, Delivers the following judgment, which was adopted on that date: PROCEDURE 1. The case originated in an application (no. 60776/00) against the Russian Federation lodged with the Court under Article 34 of the Convention for the Protection of Human Rights and Fundamental Freedoms (“the Convention”) by Mr Yevgeniy Vladimirovich Poleshchuk, a Russian national. He was represented before the Court by Mr S. Melnikov, a lawyer practising in Yaroslavl. 2. The Russian Government (“the Government”) were represented by Mr P. Laptev, Representative of the Russian Federation at the European Court of Human Rights. 3. The applicant complained under Article 6 of the Convention about unfair criminal proceedings against him. He also complained, referring to Article 34 of the Convention, that the prison authorities hindered his right to submit an application to the Court. 4. On 10 September 2001 the Judge appointed as Rappoteur requested the Government pursuant to Rule 49 § 2 (a) of the Rules of Court to submit factual information concerning the dispatch by prison authorities of the applicant’s letters to the Court. 5. On 30 April 2002 the Court decided to communicate the application to the Government, in so far as the complaint under Article 34 was concerned. 6. On 11 September 2003 the Court decided to communicate in addition a new complaint concerning the pressure being put on the applicant in connection with his application pending before the Court. Under the provisions of Article 29 § 3 of the Convention, it decided to examine the merits of the application at the same time as its admissibility. THE FACTS 7. The applicant was born in 1963 and lives in Yaroslavl. 8. The facts of the case, as submitted by the parties, may be summarised as follows. 9. On 26 October 1998 the applicant was convicted by the Yaroslavl Regional Court and sentenced to 13 years’ imprisonment for participation in an organised armed gang. On 22 February 1999 the conviction was upheld on appeal by the Supreme Court of the Russian Federation. The applicant serves his sentence in a correctional colony (the prison). 10. On 25 May 1999 and 14 December 1999 the applicant submitted letters addressed to the European Court of Human Rights, in which he complained under Article 6 of the Convention that he had not had a fair trial in the above domestic proceedings, to the prison’s Special Department, the office exercising censorship and general supervision over all inmates’ correspondence. On 8 June 1999 and 30 December 1999 the prison administration refused to dispatch the letters. The competent officials, the head of the Special Department major K. and the deputy warden of the prison major O., pointed out that the application to the Court would not be accepted for dispatch unless and until the applicant applied to the Chairman of the Supreme Court and to the Prosecutor General with requests for a supervisory review of his conviction, or filed an application with the Constitutional Court of the Russian Federation. The applicant complied, as he had no other means to have his mail sent outside prison. However, his applications were unsuccessful. 11. On 1 February 2000 the applicant sent an application to the Court, in which he complained of an unfair trial. He also explained that he had exceeded the six months time-limit set out in Article 35 § 1 of the Convention, as he had been prevented by the prison administration from dispatching his application earlier. 12. After the questions were put by the Rapporteur to the respondent Government under Rule 49 § 2 (a) of the Rules of Court, on 23 October 2001 the Chief Penitentiary Directorate of the Ministry of Justice of the Russian Federation (Главное управление исполнения наказаний Министерства юстиции Российской Федерации) issued a circular letter to its subordinate departments and bodies prohibiting hindering the dispatch of applications addressed to the Court. 13. On 22 February 2002 the Chief Penitentiary Directorate of the Ministry of Justice of the Russian Federation designated officials authorised to monitor the unhindered dispatch of applications to the Court from penitentiary institutions. 14. On 29 March 2002 the Deputy Prosecutor General issued a circular letter calling upon the regional prosecutors to take measures to secure unhindered exercise of the right of individual petition by detainees. It mentioned in particular that any pressure, including intimidation, discouragement or dissuasion, was unacceptable. 15. On 14 June 2002 a commission of the Yaroslavl Regional Prosecutor’s office visited the prison to conduct an inquiry into the refusal of the prison administration to post the applicant’s letters to the Court. The result of this inquiry, if any, remains unknown to the Court. 16. On 13 February 2003 the prison director classified the applicant as a persistent contravener of prison discipline, and on 26 February 2003 transferred him to a stricter security level. 17. On 4 March 2003 the applicant was transferred to another penitentiary institution, following his request based on allegations of a conflict with the prison administration. 18. At present the applicant continues to serve his sentence. THE LAW I. ALLEGED VIOLATION OF ARTICLE 34 OF THE CONVENTION 19. The applicant alleges violation of his right to submit an application to the Court. He complains that the prison administration prevented him from lodging his application with the Court and that, after his application had been lodged, he was transferred to a strict level of security. He invokes Article 34 of the Convention, which reads as follows: “The Court may receive applications from any person, non-governmental organisation or group of individuals claiming to be the victim of a violation by one of the High Contracting Parties of the rights set forth in the Convention or the Protocols thereto. The High Contracting Parties undertake not to hinder in any way the effective exercise of this right.” 20. The Court notes that this application raises two separate complaints under Article 34 of the Convention. The first complaint concerns the fact that the applicant’s letters with his original application to the Court were stopped by the prison administration on two occasions in 1999. The second complaint relates to events after his application had been lodged with the Court, when pressure was allegedly put on him. The Court will consider each of these complaints individually. A. The refusal to post the applicant’s letters to the Court 1. The parties’ submissions 21. The Government do not dispute the fact that the prison administration refused to dispatch the applicant’s correspondence on 8 June 1999 and 30 December 1999. They explain that, at the time of events, the prison staff did not have enough experience in dealing with that type of correspondence. This caused “disorder” in the manner in which the applicant’s letters were dealt with. However, they state that the applicant could no longer claim to be a victim of the alleged violation since administrative measures had been taken to improve the mechanism of sending inmates’ petitions to the Court. They refer to the circular letters which instructed penitentiary institutions not to hinder the dispatch of letters to the Court, and contend that the applicant could correspond with the Court freely thereafter. They submit, in particular, that according to the prison record four letters by the applicant to the Court were dispatched by the prison administration in 2002, and three in 2003. In addition, they report that the applicant was allowed three visits in 2003: a long-term family visit of three days as from 4 April 2003, a short term visit on 29 May 2003 and another long-term visit as from 18 July 2003. 22. The applicant maintains his complaint. He alleges that, although the Government have acknowledged the violation of his right of individual petition, he has been afforded no redress for it. 2. The Court’s assessment (a) Admissibility 23. The Court considers whether the applicant retains his status as a victim although subsequent general measures have been taken to facilitate the prisoners’ correspondence with the Court. 24. The Court takes note the steps taken by the Government to change the practices in the handling of inmates’ official correspondence. It also notes that, from 2000 to 2004, the applicant’s correspondence with the Court has not given cause for concern. 25. However, the Court recalls that “a decision or measure favourable to the applicant is not in principle sufficient to deprive him of his status as a “victim” unless the national authorities have acknowledged, either expressly or in substance, and then afforded redress for, the breach of the Convention” (see Amuur v. France, judgment of 25 June 1996, Reports of Judgments and Decisions 1996-III, p. 846, § 36; Dalban v. Romania [GC], no. 28114/95, § 44, ECHR 1999-VI; and Rotaru v. Romania [GC], no. 28341/95, § 35, ECHR 2000-V). The Court accepts that the Government, in their observations on the admissibility and merits of the application, have expressly acknowledged the violation. However, it is not convinced that adequate and sufficient redress has been afforded to the applicant in this respect. The circular letters to penitentiary institutions which the Government invoke were directives of general application, intended to prevent violations of this kind in the future. They neither concerned the applicant personally, nor did they refer to a specific violation which they sought to put right. In view of this lack of direct connection with the applicant’s case, the Court cannot accept those measures as redress capable of depriving the applicant of his victim status. 26. The Court therefore dismisses the Government’s preliminary objection. No other grounds for declaring this complaint inadmissible have been established. It must therefore be declared admissible. (b) Merits 27. The Court recalls that Article 34 of the Convention imposes an obligation on a Contracting State not to hinder the right of individual petition. While the obligation imposed is of a procedural nature, distinguishable from the substantive rights set out in the Convention and Protocols, it flows from the very essence of this procedural right that it is open to individuals to complain of its alleged infringements in Convention proceedings (see Manoussos v. the Czech Republic and Germany (dec.), no. 46468/99, 9 July 2002). The Court also recalls that the undertaking not to hinder the effective exercise of the right of individual application precludes any interference with the individual’s right to present and pursue his complaint before the Court effectively (see, among other authorities and mutatis mutandis, Akdivar and Others v. Turkey, 16 September 1996, Reports 1996-IV, p. 1219, § 105; Kurt v. Turkey, 25 May 1998, Reports 1998-III, p. 1192, § 159; Tanrikulu v. Turkey [GC], no. 23763/94, ECHR 1999-IV; Sarli v. Turkey, no. 24490/94, §§ 85-86, 22 May 2001; and Orhan v. Turkey, no. 25656/94, 18 June 2002). In the present case, the procedural right attaches to the substantive right under Article 6 of the Convention (see paragraphs 34‑38 below). 28. The Government do not dispute that the prison administration refused on two occasions to post the applicant’s letter to the Court. Consequently, the lodging of this application has been delayed by more than eight months. The Court concludes that this constituted an interference with the applicant’s right of individual petition, which amounted to a failure on the part of the respondent State to comply with its obligation under Article 34 of the Convention. Accordingly there has been a breach of this provision. B. The alleged pressure after the application has been lodged 1. The parties’ submissions 29. The Government contest that the applicant has been subjected to any pressure in response to lodging an application with the Court. They deny any connection between the transfer of the applicant to the strict security level and the case pending before the Court. The Government claim that the transfer was no more than a result of disciplinary offences committed by the applicant. They submit a list of disciplinary offences and sanctions applied to the applicant during his sentence: on 31 May 1999 he was reprimanded for smoking in a non‑smoking area; on 19 December 1999 he was subjected to a 9-day confinement in a disciplinary cell[1] for addressing prison officers in obscene language; on 29 December 1999 he was reprimanded for refusing food at meal time; on 6 April 2000 the applicant was subjected to a 15-day confinement in a disciplinary cell after he had been found to be in possession of 3 litres of alcohol; and on 13 February 2003 he was subjected to a 15-day confinement in a disciplinary cell after he had been found to have hidden undeclared money, playing cards and a packet of unauthorised pills. On 26 February 2003 the prison administration decided to assign the applicant to a high security level for his persistent misconduct. The Government supported this list by relevant copies of the prison records. 30. The applicant contests the Government’s observations, and maintains that a transfer to a stricter level of security had been intended to discourage him from pursuing proceedings before the Court. 2. The Court’s assessment 31. The Court recalls that it is of the utmost importance for the effective operation of the system of individual application instituted by Article 34 that applicants should be able to communicate freely with the Court without being subjected to any form of pressure from the authorities to withdraw or modify their complaints. In this context, “pressure” includes not only direct coercion and flagrant acts of intimidation, but also other improper indirect acts or contacts designed to dissuade or discourage applicants from using a Convention remedy. The issue of whether or not a disputed measure taken by authorities amounts to unacceptable practices from the standpoint of Article 34 must be determined in the light of the particular circumstances of the case (see, mutatis mutandis, the above cited judgments Akdivar and Others v. Turkey, Kurt v. Turkey, Tanrikulu v. Turkey, Sarli v. Turkey and Orhan v. Turkey). 32. The Court notes from the parties’ submissions that throughout the applicant’s sentence he has been subjected to disciplinary penalties for various breaches of the prison regulations, which gave grounds to apply additional disciplinary restrictions against him. The Government presented a contemporaneous official record reflecting each occasion when the applicant was subjected to sanctions. In the Court’s view, none of the disciplinary penalties or the resulting increase in his security classification reveal any arbitrariness which could in itself amount to a form of pressure contrary to Article 34 of the Convention. The applicant’s allegation that there was a connection between his application to the Court and the imposition of the penalties at issue is unsubstantiated. The Court thus finds that there is an insufficient factual basis to enable it to conclude that the authorities of the respondent State have interfered with the exercise of the applicant’s right of individual petition after he had lodged his case. 33. In the light of the above facts and considerations, the Court finds that the alleged violation of Article 34 of the Convention has not been established. It follows that this part of application must be rejected as being manifestly ill-founded pursuant to Article 35 §§ 3 and 4 of the Convention. II. ALLEGED VIOLATION OF ARTICLE 6 § 1 OF THE CONVENTION 34. The applicant complains that the criminal proceedings against him were unfair. In particular, he complains about the outcome of the trial, the wrongful assessment of evidence and the excessively severe sentence. He invokes Article 6 § 1 of the Convention, which reads, so far as relevant, as follows: “In the determination of ... any criminal charge against him, everyone is entitled to a ... hearing within a reasonable time by [a] ... tribunal...” 35. The Court notes that this application was lodged on 1 February 2000, i.e. more than six months from 22 February 1999, the date on which the Supreme Court of the Russian Federation took the final decision in the criminal proceedings against applicant. However, having established above that the applicant was prevented from lodging his application before that date, the Court does not dismiss this application for the failure to comply with the six‑months requirement set out in Article 35 § 1 of the Convention. 36. The Court, however, reiterates that, according to Article 19 of the Convention, its duty is to ensure the observance of the engagements undertaken by the Contracting Parties in the Convention. In particular, it is not its function to deal with errors of fact or law allegedly committed by a national court unless and in so far as they may have infringed rights and freedoms protected by the Convention. Moreover, while Article 6 of the Convention guarantees the right to a fair hearing, it does not lay down any rules on the admissibility of evidence or the way it should be assessed, which are therefore primarily matters for regulation by domestic law and the national courts (Garcia Ruiz v. Spain judgment of 21 January 1999, Reports 1999-I, § 28; Pesti and Frodl v. Austria (dec.), nos. 27618/95 and 27619/95, ECHR 2000-I). 37. The Court finds that there is nothing to indicate that the national courts’ evaluation of the facts and evidence presented in the applicant’s case was contrary to Article 6 of the Convention. The applicant was fully able to defend himself with the assistance of a legal representative and challenge the evidence; there had been a public hearing and the courts’ decisions were adequately reasoned. Having regard to the facts, as submitted, the Court has not found any reason to believe that the proceedings did not comply with the fairness requirement of Article 6 § 1 of the Convention. 38. It follows this part of the application is manifestly ill-founded and must be rejected in accordance with Article 35 §§ 3 and 4 of the Convention. III. APPLICATION OF ARTICLE 41 OF THE CONVENTION 39. Article 41 of the Convention provides: “If the Court finds that there has been a violation of the Convention or the Protocols thereto, and if the internal law of the High Contracting Party concerned allows only partial reparation to be made, the Court shall, if necessary, afford just satisfaction to the injured party.” 40. The applicant did not submit a claim for just satisfaction. Accordingly, the Court considers that there is no call to award him any sum on that account. FOR THESE REASONS, THE COURT UNANIMOUSLY 1. Declares the complaint concerning the stopping of the applicant’s letters to the Court by the prison administration admissible and the remainder of the application inadmissible; 2. Holds that there has been a violation of Article 34 of the Convention; Done in English, and notified in writing on 7 October 2004, pursuant to Rule 77 §§ 2 and 3 of the Rules of Court. Søren NielsenChristos RozakisRegistrarPresident [1] Prisoners confined to a disciplinary cell are kept separately from other detainees; they cannot receive visitors, receive or make phone calls, receive parcels or purchase food; their daily walk is limited to one hour.

J U D G M E N T REPORTABLE CIVIL APPEAL NO. 3038 OF 2008 Arising out of SLP Civil No. 9222 of 2007 B. SINHA, J Leave granted. Application of Order VII, Rule 11 d of the Code of Civil Procedure for short the Code in the facts and circumstances of this case, is involved in this appeal which arises out of a judgment and order dated 13.02.2007 passed by a Division Bench of the High Court of Karnataka at Bangalore. The relationship between the parties is number in dispute, as would appear from the genealogical tree Allegedly, the eldest son of Kabadi Gopalsa went out of the joint family by executing a registered Deed of Release upon taking his share in the ancestral property on or about 10.03.1918. A partition is said to have taken place between two sons of Chinnusa, i.e., Kabadi Giddusa and Kabadi Gopalsa on or about 1.05.1926. Kabadi Gopalsa died in 1947. There exists a dispute as to whether the properties in suit were divided amongst the four sons of Kabadi Gopalsa. However, admittedly, a suit was filed by Ramusa son of Gopalsa against his mother and three brothers in respect of three house properties being Item Nos. 1, 2 and 3 and the Revenue land Item No. 4 . Defendant No. 3 in the said suit was the grand father of the deceased husband of the appellant No. 1 in the present case. It is number in dispute that on or about 11.11.1952, the properties which allegedly fell to the share of Chikka Chinnusa was auction sold in favour of one Moolchand Sharma in execution of a decree passed against him in OS No. 311 of 1948-49 being Execution No. 421 of 1950-51. A preliminary decree was passed by the Trial Court declaring 2/9th share of the plaintiff. It is, however, companyceded at the Bar that the said decree was rectified declaring the share of the plaintiff to be 1/4th in the joint family property. A final decree proceedings was initiated. During the pendency of the said proceedings, Moolchand Sharma sold his land in Survey Nos. 22 and 23 admeasuring 1 acre 0.38 guntas, Survey No. 48/2 admeasuring 0.32 guntas and Survey No. 48/5 admeasuring 0.13 guntas to Munimarappa. A final decree was said to have been passed on 11.06.1955. Yet again, Ramusa executed a registered deed of sale on 30.08.1956 in favour of Vittal Sa in respect of 2 acres and 1 guntas in Survey Nos. 22 and 23, 0.29 guntas in Survey No. 47/2 and 0.13 guntas in Survey No. 48/5. Dodda Chinnusa executed a registered deed of sale on 2.09.1956 in favour of K.G. Daktappa in respect of 2 acres and 1 guntas in Survey Nos. 22 and 23, 0.29 guntas in Survey No. 47/2 and 0.13 guntas in Survey No. 48/5. By an order dated 18.06.1956, the Trial Court directed the Commissioner to demarcate the lands falling in the share of the plaintiff and allot to him. Various interlocutory proceedings were initiated and several orders were passed thereupon. As numbericed hereinbefore, the preliminary decree was amended declaring 1/4th share of the plaintiff and the defendant Nos. 1 to 3 with respect to all the properties by reason of an order dated 27.02.1963. Whereas according to the respondents, the parties had taken possession of the properties fallen in their respective shares and had been enjoying and even alienating them to the third parties, the appellant strenuously denied and disputed the same. An order of injunction was passed in the said suit being OS No. 15 of 1953 by an order dated 20.03.1963 restraining the defendant No. 2 from transferring the suit schedule properties on the premise that the joint family property had number been divided by metes and bounds. However, while setting aside the said interim order of injunction, the learned Court by an order dated 7.07.1967 observed as under On 27.02.1963, the preliminary decree was amended and 1/4th share of Plaintiff and Defendants 1 to 3 was defined. Item No. 4 of the suit property is revenue property. Defendant No. 3 grandfather of deceased husband of Plaintiff Appellant herein has sold its share in Item No. 4 of the plaint schedule property. The suit is pending till the final decree is passed. No final decree as such has been passed in this suit companycerning the 4th item of the plaint schedule. It is true that the Civil Court has to simply forward the preliminary decree to the Collector for purposes of partitioning the same and that the Civil Court has numberjurisdiction to companyrect or review the partition that may be made by the Collector. The final decree proceeding was, however, dismissed for default on or about 03.09.1974. Respondent No. 1 thereafter filed a partition suit against Respondent No. 2 in the Court of City Civil Judge at Bangalore which was marked as OS No. 6180 of 2003. The said suit was dismissed as number pressed. Appellant has filed a suit which was marked as OS No. 6352 of 2004 claiming partition in the properties, being the same as were described as Item Nos. 1, 2, 3 and 4 of the schedule appended to the plaint in OS No. 15 of 1953. In the said suit, an application for rejection of the plaint was filed by the respondents which has been allowed by the learned trial Judge and affirmed by the High Court by reason of the impugned judgment. Mr. S.N. Bhat, learned companynsel appearing on behalf of the appellants, inter alia would submit that as in the preliminary decree passed in OS No. 15 of 1953 only the share of Ramusa, plaintiff therein, namely, his 2/9th share, which was amended as 1/4th share, was declared and furthermore in view of the fact that numberdecree was passed in the final decree proceedings, the suit for partition was maintainable. The subject matter of the said suit, it was urged, was three houses and the properties which have been alienated. Whereas the house properties are said to have been divided, the alienated properties were number, as would appear from the order dated 11.06.1955 and in that view of the matter, the impugned judgments cannot be sustained. Mr. P.R. Ramasesh, learned companynsel adopted the submission of Mr. Bhat. Mr. G.C. Bharuka, and Mr. R. Venkataramani, learned senior companynsel appearing on behalf of the respondents, on the other hand, would submit After passing of the preliminary decree, numberproperty was available for partition. The properties were possessed by the companysharers independently in accordance with the respective shares held by the companysharer. There had been a division of the joint family properties by metes and bounds resulting in companyplete severance of status, which having been admitted in the plaint, numbercause of action survives for grant of a decree for partition. Defendant No. 3 Chikka Chinnusa, who remained ex-parte, unsuccessfully tried to reopen the proceedings and obtained an order of injunction pursuant to the sale effected by the companyrt in execution of a decree passed against him, but, in the year 1967, the said proceedings were dropped and thus, he is bound thereby. As would appear from the order dated 3.09.1974, severance of joint status being number vitiated by any fraud, which has resulted in companyplete division of the properties should number be permitted to be reopened at this stage. In any event, sale deeds having been executed by the companysharers from the years 1954 to 1956 and their validity having number been assailed directly, the same cannot be done in an indirect manner, the suit for partition is number maintainable. In a proceeding under Order VII, Rule 11 d of the Code, the companyrt would be entitled to look into the documents which have been annexed to the plaint and in that view of the matter, recitals made therein may also be looked into for the purpose of determining the question as to whether there had been a companyplete severance of joint status. As numbere of the properties are available in an original undivided companydition, the impugned order should number be interfered with. Order VII, Rule 11 of the Code provides for rejection of plaint, clause d whereof specifies where the suit appears from the statement in the plaint to be barred by any law. The learned Trial Judge as also the High Court proceeded to pass the impugned order relying on or on the basis of the preliminary decree dated 20.03.1963 and the appellate orders. The High Court opined that the companyclusion of the learned Trial Judge directing rejection of plaint was companyrect having regard to the provisions companytained in Section 12 of the Code read with Order II, Rule 2 thereof. It was held that numbercause of action was disclosed in the suit. Order VII, Rule 11 d of the Code has limited application. It must be shown that the suit is barred under any law. Such a companyclusion must be drawn from the averments made in the plaint. Different clauses in Order VII, Rule 11, in our opinion, should number be mixed up. Whereas in a given case, an application for rejection of the plaint may be filed on more than one ground specified in various sub-clauses thereof, a clear finding to that effect must be arrived at. What would be relevant for invoking clause d of Order VII, Rule 11 of the Code is the averments made in the plaint. For that purpose, there cannot be any addition or subtraction. Absence of jurisdiction on the part of a companyrt can be invoked at different stages and under different provisions of the Code. Order VII, Rule 11 of the Code is one, Order XIV, Rule 2 is another. For the purpose of invoking Order VII, Rule 11 d of the Code, numberamount of evidence can be looked into. The issues on merit of the matter which may arise between the parties would number be within the realm of the companyrt at that stage. All issues shall number be the subject matter of an order under the said provision. The principles of res judicata, when attracted, would bar another suit in view of Section 12 of the Code. The question involving a mixed question of law and fact which may require number only examination of the plaint but also other evidence and the order passed in the earlier suit may be taken up either as a preliminary issue or at the final hearing, but, the said question cannot be determined at that stage. It is one thing to say that the averments made in the plaint on their face discloses numbercause of action, but it is another thing to say that although the same discloses a cause of action, the same is barred by a law. The decisions rendered by this Court as also by various High Courts are number uniform in this behalf. But, then the broad principle which can be culled out therefrom is that the companyrt at that stage would number companysider any evidence or enter into a disputed question of fact of law. In the event, the jurisdiction of the companyrt is found to be barred by any law, meaning thereby, the subject matter thereof, the application for registration of plaint should be entertained. The preliminary decree which was passed in OS No. 15 of 1953 reads as under Its order and decree except against defendant No. 5 and 6 declaring the plaintiffs right to 2/9th share in the entire joint family properties. There shall be equitable division by metes and bounds of the plaintiff 2/9th share. The defendant No. 1 to 4 and 8 and 7 to deliver the plaintiff possession of 2/9th share in the said properties. 3rd defendant shall render proper accounts for the declaration of profits and rents made by him on enquiry require under order 20 rule XII regarding future amounts profits The said decree, however, was amended on 27.02.1963, as would appear from the order dated 07.06.1967, to which we have adverted to heretobefore. It is, however, beyond any doubt or dispute that a final decree proceedings was initiated. An Advocate-Commissioner was appointed. Directions were issued therein from time to time. But, indisputably, there had been numberpartition by metes and bounds. The landed property was number partitioned. In its order dated 20.03.1963, the companyrt numbericed that separate sale deeds were executed by the defendants but despite the same, an order of injunction was passed to the following effect They should number remove the earth for the purpose of making bricks and They should number companystruct anything, on the suit property. I.A. 22 is allowed. No order as to companyts. The final decree proceedings were ultimately dropped by an order dated 3.09.1974. Neither the Trial Court number the High Court had taken into companysideration the effect and purport thereof. In the aforementioned companytext, the plaint filed by the appellants herein whether deserved outright rejection is the question. Dr. Bharuka and Mr. Venkataramani have taken great pains to read the entire plaint before us as well as a large number of documents to companytend that numbercause of action was disclosed and in any event, the suit was barred by the principle of res judicata. The other limbs of arguments which have been advanced before us, viz., keeping in view the deeds of sale executed by the respondents and the companyrt auction sale which had taken place in respect of the appellants share, had number been raised before the learned Trial Judge. We may proceed on the assumption that the shares of the parties were defined. There was a partition amongst the parties in the sense that they companyld transfer their undivided share. What would, however, be the effect of a partition suit which had number been taken to its logical companyclusion by getting the properties partitioned by metes and bounds is a question which, in our opinion, cannot be gone into in a proceeding under Order VII, Rule 11 d of the Code. Whether any property is available for partition is itself a question of fact. Whether the suit would be maintainable, if the plaintiff had number questioned the validity of deeds of sale, is number the question which can be answered by us at this stage. The only companytention raised before the learned Trial Judge was the applicability of the principles of res judicata. Even for the said purpose, questions of fact cannot be gone into. What can only be seen are the averments made in the plaint. What inter alia would be relevant is as to whether for the said purpose the properties were sold by reason of any arrangement entered into by and between the parties out of companyrt whether they had accepted the partition or whether separate possession preceded the actual sale or whether the companytention that a presumption must be drawn that for all practical purposes the parties were in separate possession, are again matters which would number fall for companysideration of the companyrt at this stage. The plaintiff appellant might number have prayed for any decree for setting aside the deeds of sale but they have raised a legal plea that by reason thereof the rights of the companyparceners have number been taken away. Their status might number be of the companyarceners, after the preliminary decree for partition was passed but as we have indicated hereinbefore the same cannot be a subject matter of companysideration in terms of Order VII, Rule 11 d of the Code. One of the grounds taken in the companynter affidavit of the respondent Nos. 10, 11, 13 and 17 under Order VII, Rule 11 d of the Code is as under So far as item No. 8 of the Schedule A, the subsequent purchases have made flats and 80 have been sold to third party and the thirdparty interest have been created and third parties are number made parties before the Court. Hence, the suit is bad in law for misjoinder and number-joinder of necessary parties. Moreover, third parties interest has been created and separate khatas have been issued. What would be its effect is again a question which cannot fall for determination under Order VII, Rule 11 d of the Code. These facts require adjudication. The identity of the properties which were the subject matter of the earlier suit vis--vis the properties which were subsequently acquired and the effect thereof is beyond the purview of Order VII, Rule 11 d of the Code. Whether the properties mentioned in the plaint are available for partition is essentially a question of fact. Whether an order of injunction was obtained on the basis of a misleading statement in the earlier suit or whether they were entitled therefor are number the questions which, in our opinion, can be gone into at this stage. Moreover, it is companytended that some lands have been acquired by the Bangalore Development Authority. But, we do number know in whose favour the awards were made and even if somebody has received the awarded amount, what would be the effect thereof. We may place on record that the plaintiffs are said to be guilty of suppression of facts, as would appear from para 2 of the application filed under Order VII, Rule 11 d of the Code, but then what would be the effect of such suppression has to be determined. See S.P. Chengalvaraya Naidu dead by L.Rs. v. Jagannath dead by L.Rs. and others, AIR 1994 SC 853 What would be the effect of number-availability of the property vis--vis the companytentions of the respondents in regard to Item No. 8 is a question which requires further probe. Order VII Rule 11 d of the Code serves a broad purpose as has been numbered in Liverpool London S.P. I Association Ltd. v. M.V. Sea Success I Anr. 2004 9 SCC 512 in the following terms The idea underlying Order 7 Rule 11 a is that when numbercause of action is disclosed, the companyrts will number unnecessarily protract the hearing of a suit. Having regard to the changes in the legislative policy as adumbrated by the amendments carried out in the Code of Civil Procedure, the companyrts would interpret the provisions in such a manner so as to save expenses, achieve expedition and avoid the companyrts resources being used up on cases which will serve numberuseful purpose. A litigation which in the opinion of the companyrt is doomed to fail would number further be allowed to be used as a device to harass a litigant. See Azhar Hussain v. Rajiv Gandhi 1986 Supp SCC 315 at pp. 324-35 But therein itself, it was held Whether a plaint discloses a cause of action or number is essentially a question of fact. But whether it does or does number must be found out from reading the plaint itself. For the said purpose the averments made in the plaint in their entirety must be held to be companyrect. The test is as to whether if the averments made in the plaint are taken to be companyrect in their entirety, a decree would be passed. In C. Natrajan v. Ashim Bai Anr. 2007 12 SCALE 163, this Court held An application for rejection of the plaint can be filed if the allegations made in the plaint even if given face value and taken to be companyrect in their entirety appear to be barred by any law. The question as to whether a suit is barred by limitation or number would, therefore, depend upon the facts and circumstances of each case. For the said purpose, only the averments made in the plaint are relevant. At this stage, the companyrt would number be entitled to companysider the case of the defence. See Popat and Kotecha Property v. State Bank of India Staff Association 2005 7 SCC 510 Dr. Bharuka as also Mr. Venkataramani have relied upon a large number of decisions. We do number say that they are wholly irrelevant but what we intend to say is they are number relevant for our purpose at this stage. Relevance of the said decisions must be numbericed by the companyrt at an appropriate stage. If we make any companyment thereupon, the same may affect the rights of the parties at a later stage. We, therefore, refrain from doing so. We may, however, numberice only a few decisions of this Court. In Popat and Kotecha Property v. State Bank of India Staff Association 2005 7 SCC 510, the question which arose for companysideration was as to whether the suit was barred by limitation. It was held There is distinction between material facts and particulars. The words material facts show that the facts necessary to formulate a companyplete cause of action must be stated. Omission of a single material fact leads to an incomplete cause of action and the statement or plaint becomes bad. The distinction which has been made between material facts and particulars was brought by Scott, L.J. in Bruce v. Odhams Press Ltd. Rule 11 of Order 7 lays down an independent remedy made available to the defendant to challenge the maintainability of the suit itself, irrespective of his right to companytest the same on merits. The law ostensibly does number companytemplate at any stage when the objections can be raised, and also does number say in express terms about the filing of a written statement. Instead, the word shall is used clearly implying thereby that it casts a duty on the companyrt to perform its obligations in rejecting the plaint when the same is hit by any of the infirmities provided in the four clauses of Rule 11, even without intervention of the defendant. In any event, rejection of the plaint under Rule 11 does number preclude the plaintiffs from presenting a fresh plaint in terms of Rule 13. This Court opined that therein questions of fact were to be determined. The matter, however, was referred to a Three-Judge Bench of this Court in Balasaria Construction P Ltd. v. Hanuman Seva Trust and Others 2006 5 SCC 662. However, as numberconflict of decisions of this Court was found, it was referred back to the Two-Judge Bench again. A Two-Judge Bench of this Court in Balasaria Construction P Ltd. v. Hanuman Seva Trust and Others 2006 5 SCC 658 held After hearing companynsel for the parties, going through the plaint, application under Order 7 Rule 11 d CPC and the judgments of the trial companyrt and the High Court, we are of the opinion that the present suit companyld number be dismissed as barred by limitation without proper pleadings, framing of an issue of limitation and taking of evidence. Question of limitation is a mixed question of law and fact. Ex facie in the present case on the reading of the plaint it cannot be held that the suit is barred by time. The findings recorded by the High Court touching upon the merits of the dispute are set aside but the companyclusion arrived at by the High Court is affirmed. We agree with the view taken by the trial companyrt that a plaint cannot be rejected under Order 7 Rule 11 d of the Code of Civil Procedure. Reliance has been placed on Tara Pada Ray v. Shyama Pada Ray and others AIR 1952 Calcutta 579 wherein the averments made in the deed of sale had been taken into companysideration. Therein, however, the Calcutta High Court numbericed that the final decree proceedings need number be resorted to where the directions companytained in a preliminary decree had been acted upon by the parties. Even such a question is required to be gone into. Reliance has also been placed on T. Arivandandam v. T.V. Satyapal and Another 1977 4 SCC 467, wherein it has been held We have number the slightest hesitation in companydemning the petitioner for the gross abuse of the process of the companyrt repeatedly and unrepentently resorted to. From the statement of the facts found in the judgment of the High Court, it is perfectly plain that the suit number pending before the First Munsifs Court, Bangalore, is a flagrant misuse of the mercies of the law in receiving plaints. The learned Munsif must remember that if on a meaningful number formal reading of the plaint it is manifestly vexatious, and meritless, in the sense of number disclosing a clear right to sue, he should exercise his power under Order 7, Rule 11 CPC taking care to see that the ground mentioned therein is fulfilled. And, if clever drafting has created the illusion of a cause of action, nip it in the bud at the first hearing by examining the party searchingly under Order 10, CPC. An activist Judge is the answer to irresponsible law suits. The trial companyrts would insist imperatively on examining the party at the first hearing so that bogus litigation can be shot down at the earliest stage. The Penal Code is also resourceful enough to meet such men, Cr. XI and must be triggered against them. In this case, the learned Judge to his companyt realised what George Bernard Shaw remarked on the assassination of Mahatma Gandhi It is dangerous to be too good. Each case, however, must be companysidered on its own facts. Mr. Venkataramani has also placed reliance upon a decision of this Court in M s Kalloomal Tapeswari Prasad HUF , Kanpur v. Commissioner of Income Tax, Kanpur 1982 1 SCC 447 to companytend that even partial partition is permissible. No exception thereto can be taken but the effect thereof vis--vis another suit, it is trite, cannot be determined under Order VII, Rule 11 of the Code. We may, however, numberice that in Kashinathsa Yamosa Kabadi, etc. v. Narsingsa Bhaskarsa Kabadi, etc. AIR 1961 SC 1077, this Court stated the law, thus To sum up on a companysideration of the materials placed before the companyrt, the reference to Panchas is proved to be made voluntarily by all the parties, that the Panchas had in the first instance decided that each branch was to get a fourth share in the properties and that decision was accepted by the parties, that division of properties made from time to time was also accepted by the parties, and subsequently, when the Panchas were unable to proceed with the division, the matter was referred by companysent of the parties to Godkhindi and Godkhindi divided with the companysent of the parties the outstandings, but he was unable to divide the remaining properties. For reasons we have already stated, the division made by the Panchas and by Godkhindi is binding upon the parties.

civil appellate jurisdiction civil appeal number 1381 of 1980 appeal by special leave from the judgment and order dated the 7th july 1980 of the punjab and haryana high court in civil writ petition number. 1917 of 1980. and civil appeal number 2667 of 1983. appeal by special leave from the judgment and order dated the 8th july 1980 of the punjab and haryana high court in civil writ number 2349 of 1980. jawahar lal gupta janendralal and b.r. agarwal for the appellant. randhir jain for the respondents. the judgment of the companyrt was delivered by varadarajan j. these appeals by special leave are by the punjab university and directed against two division bench judgments of the punjab and haryana high companyrt in writ petitions 1917 of 1980 and 2349 of 1980 allowing those writ petitions without any order as to companyts w p. 2319 of 1980 was allowed at the motion stage on 18.7.1980 as being covered by the decision in w p. 1917 of 1980 which was disposed of on 7.7.1980. kulwant singh tiwana j. is a party to both the judgments and he sat with harbans lal j for hearing w.p. 1917 of 1980 and with m.m. punchi j. for hearing w.p. 2349 of 1980. in these circumstances it is necessary to state only the facts relating to w.p. 1917 of 1980 alone briefly. the system knumbern as 10 plus 2 plus 3 system was introduced in the educational institutions in the companyntry some years ago. the association of indian universities decided the equivalence of this 1023 system with the old 113 years degree companyrse system which was prevalent in some states and it suggested that in all states where the pattern of education is such as to require 14 years for the first degree i e. 113 years the new plus 2 stage of the central board of secondary education be treated as equivalent to a pass in the first year of the three-years degree companyrse or for admission to the first year of the two years degree course. this suggestion was conveyed by the association of the indian universities to the chairman of the central board of secondary education by a letter dated 18.4.1978. the appellant punjab university decided on 10.2.1977 that the 12th standard examination conducted by the boards universities under the new 1023 system by recognised as equivalent to the pre-medical pre- enginerering b.a. part i b.sc. part i b.com part i examination according to the companybination of the subjects. subsequently on 4.6.1978 the punjab university decided to treat the 11th standard of the new 1023 system as equivalent to the pre-university examination of the university. companyies of those decisions dated 10.2.1977 and 4.6.1978 were annexures p. 2 and p. 3 respectively in w.p. 1917 of 1980. these recognitions of the equivalence of those two examinations companytinued till the beginning of the year 1980. but on 18.4.1980 the punjab university decided that the first year student of the plus 2 companyrse in the 1023 system of the central boards schools who does number take a public examination at the end of the first year should number be companysidered as equivalent to the student who has passed the pre-university examination of the punjab university for joining the pre-medical pre-engineering b.a. part i b. sc. part i b.com. part i of the university. on 7.5.1980 the punjab university decided that the 12th standard examination in the new 1023 system companyducted by any recognized board companyncil university shall be treated as equivalent to the pre-university examination of the university. these decisions dated 18.4.1980 and 7.5.1980 are annexures r-2 and r-3 respectively in w.p. 1917 of 1980. petitioners 1 to 37 in w.p. 1917 of 1980 had passed the 12th standard examination in the 1023 system of the central board of education and petitioners 38 to 92 in the writ petition had been promoted from the 11th standard to the 12th standard in that system. these 92 petitioners filed p. 1917 of 1980 challenging the punjab universitys decisions annexures r-2 and r-3 dated 18.4.1980 and 7.5.1980 companytending that in view of the earlier decisions of the university namely annexures p. 2 and p. 3 dated 10.2.1977 and 4.6.1978 respectively they had joined the classes in the plus 2 companyrse with object of joining in the colleges affiliated to the university in the next class of equivalence as also engineering and medical companyleges and that the university cannumber therefore change those decisions by the subsequent decisions annexures r-2 and r-3 to their deteriment. they invoked the doctrine of promissory estoppel in regard to that ground of attack on those two decisions. the second ground of attack by the petitioners in w.p. 1917 of 1980 was that the decisions annexures r-2 and r-3 are retrospective in operation and they have taken away their vested right and that the university has no power either under the punjab university act or under any statute regulation or rule to make any regulation rule or ordinance adversely affecting their vested rights retrospectively. the defence of the appellant-university was that the decisions annexures r-2 and r-3 were taken in the place of the earlier decisions annexures p. 2 and p. 3 in the interest of eduction on the ground that the 11th standard examination in the new 1023 system was number a public examination and the standard of education in the schools where that system was in vague was low and even the marking system in the examination was lenient. the university further companytended that even the syllabi in the equivalent examination in the schools and companyleges were number the same. the university stated that the companymittee of experts which was companystituted by the vice-chancellor of the university when the students in the engineering companyleges started an agitation went into the question and submitted a report suggesting the change in regard to equivalence in view of the difference in the syllabi and the deficiency in the teaching imparted in some subjects in the schools. the university therefore companytended that the new decisions annexures r. 2 and r. 3 were taken bonafide and are only prospective in operation and that the doctrine of promissory estoppel pleaded by the petitioners in the writ petitions does number apply to the university. the decisions annexures p. 2 p. 3 r. 2 and r. 3 are of the syndicate which has power to make rules etc under s. 20 5 of the punjab university act in the same manner as the senate has similar power under s. 31 of that act. the learned judges of the division bench rejected the companytention of the petitioners before them that the syndicate has no power which the senate has under s. 31 of the act and held that the syndicate has similar powers under s. 20 5 of the act they rejected the further companytention that there is any bar of promissory estoppel against the university in regard to the. matter and however held that petitioners 1 to 37 had joined the 102 companyrse in the central schools lying within the territorial jurisdiction of the punjab university in 1978 and passed the 12th standard examination and had planned their education in a particular manner to join the colleges affiliated to the punjab university in the second year of the 3-year degree companyrse and other companyrses after passing the 12th standard examination in the plus 2 system. they found that similar is the case of petitioners 38 to 92 in w.p. 1917 of 1980 who had been promoted from the 11th to the 12th standard in the plus 2 system. they held that annexure r. 3 will deprive petitioners 1 to 37 and annexure r. 2 will deprive petitioners 38 to 92 of the right to seek admission in engineering and medical companyleges after passing the 12th standard in the 102 system and annexures r. 2 and r. 3 take away that right and are retrospective in nature. in companying to this companyclusion the learned judges of the division bench relied very strongly upon the decision of a full bench of the punjab and haryana high companyrt in punjab university v. subhash chander. the learned judges accordingly allowed w.p. 1917 of 1980 on the sole ground namely that annexures r. 2 and r. 3 are bad as being retrospective in operation without an order as to companyts and held that annexures r. 3 and r. 2 will number stand in the way of petitioners 1 to 7 and 38 to 92 respectively before them from seeking admission to higher classes or in engineering and medical companyleges on the basis of the old decisions annexures p. 2 and p. 3. the other division bench which heard w.p. 2349 of 1980 allowed that petition without any order as to companyts as being companyered by the decision in w p. 1917 of 1980. we are of the opinion that these appeals have to be allowed. the learned judges of the high companyrt allowed the writ petitions only on the ground that the new decisions annexures r. 2 and r. 3 are retrospective in operation and that they cannumber affect the writ petitioners before them from seeking admission to higher classes or in engineering or medical companyleges on the basis of tile earlier decisions annexures p. 2 and p. 3 relying mainly upon the decision of the full bench in punjab university v. subhash chander supra . we have in our separate judgment delivered today in c.a. 2828 of 1977 which arose out of that full bench decision reversed that decision and held that there is numberhing retrospective in the order challenged in that case. in that case one subhash chander was admitted to the integrated m.b.b.s companyrse in the daya nand medical companylege ludhiana in the year 1965. at the time of his admission under regulation 25 read with r. 7.1 a student who fails in one subject paper was entitled to grace marks at 1 per cent of the total aggregate marks of all the subjects for which he appeared. but in 1970 the rule was amended to the effect that the grace marks will be 1 per cent of the total aggregate marks for any particular subject of the examination in which he has failed subhash chander appeared for the final m.b.b.s. examination in 1974 and secured 106 out of 200 marks in the practical examination and 95 out 200 marks in the theory examination in midwifery which was one of the four subjects for which he appeared. at that time. he had passed the examinations in the other three subjects for which the total aggregate was 1200 marks. under the old rule he would have been entitled to 16 grace marks at 1 per cent of the total aggregate of all the four subjects namely 1600 marks. but he was allowed only 4 grace marks under the new rule being 1 per cent of the aggregate for the subject in which he had failed namely midwifery. the high companyrt accepted his companytention that amendment of the rule made in 1970 was retrospective in operation though it was made applicable to subhash chander only in 1974 merely because he had joined the integrated course in 1965 when the rule regarding the award of grace marks was more liberal. in allowing the appeal against the judgment of the full bench we have held that there was no question of the rule having any retrospective operative as it was framed in 1970 and it did number say that it was operative from any earlier date and it was applied to subhash chander only in 1974. it companyld number be stated to be retrospective ill operation merely because it was applied to subhash chander who had joined the companyrse in 1965 before the amendment was made in 1970. in the present case also the new decisions are prima facie prospective in operation and they did number become.

Mr Justice Patten : Introduction This application is concerned with six transactions involving the Bank of India ("BOI") and BCCI which took place between 1981 and 1986. In each of five successive years BCCI approached BOI and requested them to enter into an arrangement under which BCCI would deposit monies with BOI for a fixed term, usually of three months. With the assistance of the finance provided by these deposits, BOI would then grant to a company nominated by BCCI a loan for the same period. No formal lien was granted in favour of BOI over the deposits, but BCCI provided a guarantee for the repayment of the principal of the loan and accrued interest. No payments of interest were made on either side during the currency of the deposits and the loans. These arrangements came to be referred to in BOI's internal documentation as BCCI's "usual deal". They were said by those dealing with these matters at the London branch of BOI at the time to be motivated solely by a desire on the part of BCCI to improve what was described as its "earnings to advances ratio" by recording in its accounts a decrease in the amounts outstanding on loan to borrowers and thereby producing a corresponding increase in the amount of interest received relative to the sums lent as at the year end. This practice was on any view highly artificial and was referred to by BOI, both in contemporaneous documents and during the course of the oral evidence, as a form of "window-dressing" by BCCI. It was for this reason that in each of the five years in question the arrangements were timed to coincide with BCCI's year end and the preparation of its balance sheet and accounts. In 1984 (the fourth transaction) there was also a similar transaction which coincided with the period in late September when BCCI's auditors were carrying out their circularisation procedures. The liquidators of Bank of Credit and Commerce International SA ("BCCI SA") and Bank of Credit and Commerce International (Overseas) Limited ("BCCI Overseas"), who are the applicants in these proceedings, allege two things. The first is that each of the transactions was entered into by BCCI SA and BCCI Overseas to assist them and their holding company, BCCI Holdings (Luxembourg) SA ("BCCI Holdings"), to maintain the concealment of serious bad debts and losses incurred by the group on a number of customer accounts and as a result of metal trading carried out for their own account. There is no dispute about this. The conduct of BCCI (by which I refer to the group as a whole) was undoubtedly fraudulent and this is now common ground between the parties to this application. The second allegation is that BOI, by entering into these six transactions under review, knowingly participated in the carrying on of the business of BCCI SA and BCCI Overseas with intent to defraud the creditors of those companies or for a fraudulent purpose. If this allegation (which is denied) is made out, then I have jurisdiction under s.213 of the Insolvency Act 1986 to order BOI to pay compensation to the liquidators for the losses to creditors which have been sustained. BOI's case is that those who dealt with these matters at the time believed that they were assisting BCCI in a legitimate way and had no reason to think or suspect that the liabilities of the nominated borrower they were taking on for year end purposes were non-performing or, more fundamentally, that BCCI was intent on deceiving its auditors in order to produce a positive balance sheet and accounts. They deny any knowledge of BCCI's deteriorating financial position. They say that they accepted BCCI's explanation for the transactions at face value. They therefore also deny the alternative allegation that even if the purpose of what has been referred to as these "back-to-back arrangements" had been that allegedly stated by BCCI: i.e. the improvement of the apparent ratio of BCCI's earnings to advances, this was known to them in the circumstances of this case (if not always) to be an essentially dishonest practice, because it could only be achieved by the removal of bad debts and the transfer of corresponding liabilities to BOI. Shortly before the trial the Claimants obtained permission to introduce a further allegation of knowledge on the part of BOI in relation to the year end transactions. This was that BOI knew that BCCI was involved in the fraudulent manipulation of its accounts, because even if the transactions were intended to have the effect allegedly contended for by BCCI at the time, it would have been apparent to BOI that window-dressing of this kind was dishonest, because by showing a reduction in "Loans and Allowances" and an increase in "Due from Banks" BCCI was able to indicate the existence of a lower-risk profile and a greater liquidity than was in reality the case. This is also denied. The key issue on liability which I therefore have to decide is whether those at BOI responsible for entering into the transactions in question knew that they were thereby assisting BCCI to perpetrate a fraud on its creditors. It is common ground that this allegation of knowledge levelled against BOI by the liquidators must, if proved, involve a finding of dishonesty. This has led to argument about the test of knowledge and the standard of proof to be applied, which I will come to prior to setting out my findings of fact. Admissions At the start of the trial BOI made a number of admissions designed to narrow the scope of these proceedings. They relate, for the most part, to the motives and conduct of BCCI in entering into the six transactions. They are based in part upon paragraphs 1 to 9 of my judgment in Morris & ors v. State Bank of India [2003] EWHC 1868 (Ch), and it is convenient for me to set these out in full. In the paragraphs quoted I have left intact the references to the particular facts of that case, although some of them are not directly relevant to the issues in these proceedings. The relevant paragraphs state as follows: "1. The BCCI Group (which for convenience I shall refer to simply as "BCCI") was established in 1972 with the incorporation and licensing of Bank of Credit and Commerce International SA ("BCCI SA") as a bank under the laws of the Grand Duchy of Luxembourg. This was followed by the incorporation of BCCI Holdings (Luxembourg) SA ("BCCI Holdings") on 13th December 1974 and the incorporation and licensing of Bank of Credit and Commerce International (Overseas) Limited ("BCCI Overseas") in the Cayman Islands on 24th November 1975. BCCI Holdings became the parent company of BCCI SA and BCCI Overseas, but did not itself carry on any banking business. BCCI SA and BCCI Overseas were the principal operating subsidiaries and are the companies which feature in the transactions with which this action is concerned. Between them these two companies had over 110 operating branches in 41 countries and a further 18 representative offices in 17 countries at the time when BCCI collapsed in July 1991. In the United Kingdom (including the Isle of Man) BCCI SA had 24 branches, with a head office at 100 Leadenhall Street in the City of London. No group company was ever incorporated in any part of the United Kingdom, but BCCI SA carried on business as a licensed deposit-taker subject to the regulatory supervision of the Bank of England under the Banking Act 1979. 2. At the time of the collapse in July 1991 the deficiency as regards the creditors of BCCI SA and BCCI Overseas was estimated to be in the region of US $10bn. Since then, however, as a result of the actions of the liquidators, it has been possible to secure dividends of 60 cents in the US dollar for the benefit of creditors, largely funded from recoveries which the liquidators have been able to obtain against third parties. This action is part of that continuing process. The claim against State Bank of India ("SBI") is that it knowingly participated in a fraudulent scheme devised by BCCI to enable it to manipulate its balance sheet for the year ended December 1983, so as to present a false account of its assets and liquidity. I shall come to the detail of the scheme later in this judgment, but it can be briefly summarised as follows. In October 1983 SBI received an approach from a Mr Ajay Krishnan Puri, purporting to act on behalf of a company called Notan Trading and Investments Limited ("Notan"). This company was incorporated in Liechtenstein on 7th September 1982, with Liechtenstein-based directors, and had earlier that year opened deposit and current accounts with SBI. Part of SBI's disclosure comprises a certified resolution of Notan dated 28th July 1983, on headed notepaper, with a PO Box in the Sultanate of Oman given as the address of its administrative office. The registered office of the company was another PO Box number in Liechtenstein. The resolution authorised the opening of a bank account for the company with SBI and in terms empowered the bank to act on the joint instructions of Mr Puri and a Mr Ziauddin Akbar for the purpose of honouring cheques or making any other payments into or out of the account. The resolution was also signed by Mr Akbar as the authorised signatory for the Board of Directors of Notan, and the SBI standard form of request for banking facilities was signed by Mr Akbar and Mr Puri on the same day. As part of that same process both Mr Akbar and Mr Puri provided a specimen of their signatures for mandate purposes, which, in the case of Mr Akbar, gave an address at 22 Basing Hill, London NW3. 3. Mr Akbar was at the time a senior figure in the Central Treasury Division ("CTD") of BCCI in London and, as it subsequently transpired, was personally responsible for many, if not most, of the fraudulent transactions carried out by BCCI to hide its worsening financial position in the early 1980s. He was not a director of Notan and in his subsequent interviews with the Serious Fraud Office he said that Notan had been set up to assist Mr Puri to obtain a work permit. It is, however, clear that the primary purpose of establishing Notan was to assist BCCI in carrying out its fraudulent accounting practices, and the company was controlled by Mr Akbar out of the CTD in London. 4. BCCI was founded with capital from Arab investors in the Gulf states. It achieved rapid growth and, by the end of 1989, employed about 14,000 staff in more than 70 countries. Until 1988 the President and Chief Executive of BCCI was Mr Agha Hasan Abedi. During the same period he had as his deputy Mr Swaleh Naqvi, who took over as Chief Executive Officer when Mr Abedi fell ill in 1988. Having no lender of last resort, it was necessary for BCCI to maintain a high level of liquidity. By the early 1980s it had incurred significant losses through poor lending (particularly in relation to a number of borrowers in the Gulf and Saudi Arabia) and from unsuccessful metal trading on its own account. One of these borrowers was a Mr Abdul Raouf Khalil, a Saudi Arabian businessman who operated and controlled the Khalil Group of Companies. They maintained a number of accounts with BCCI which were heavily overdrawn, although it is right to add that by 1983 some (and perhaps most) of this apparent indebtedness may itself have been due to the manipulation of the accounts by BCCI with the active co-operation of Mr Khalil, as part of the wider fraud I am about to come to. 5. In order to conceal these and other losses and to maintain public confidence in the bank, BCCI embarked on a systematic and wide-scale fraud involving the manipulation of account balances, with the twin objectives of concealing losses and boosting apparent profits. Investigations have revealed that this practice was initiated by Mr Abedi and Mr Naqvi and was operated by Mr Akbar through the CTD in London. It was successful in deceiving the auditors and regulators of both BCCI SA and BCCI Overseas, together with their customers and depositors. The evidence of the liquidators, based on a report prepared for the Serious Fraud Office, is that BCCI was insolvent from at least 1983. The CTD had been established in 1977 and operated from BCCI SA's offices in Leadenhall Street until about October 1986, when it was moved to Abu Dhabi. The CTD managed and controlled the surplus funds of BCCI and was managed by BCCI SA under a management agreement with BCCI Overseas. However, the treasury activities were all booked and recorded in the name of BCCI Overseas in Grand Cayman, and BCCI SA accounted for its own funds, managed by the CTD, as inter-company debts due from BCCI Overseas. 6. Mr Akbar controlled the CTD and reported direct to Mr Naqvi. He was also the Account Officer for the Khalil Group and controlled the accounting of the Grand Cayman branch of BCCI Overseas. He eventually resigned from BCCI in 1986. On 28th September 1993 he pleaded guilty at the Central Criminal Court to 16 counts of false accounting, contrary to s.17 of the Theft Act 1968 and was sentenced to six years' imprisonment on each count, the sentences to run concurrently. Counts 13 and 14 relate to the two loan transactions with which this action is concerned. 7. Notan had both US dollar and sterling accounts with SBI. Up to the end of October 1983 the combined receipts into its US dollar accounts amounted to some $2.342m, against which there had been a payment out of just over $1m. In the same period there had been payments into its sterling accounts (including interest) of some £142,623, and payments out to a variety of payees, including Mr Puri himself, in a total sum of £53,567. Then on 5th October 1983 Mr Puri, without any prior discussion, approached SBI for a loan of US $20m, which it required for a period of three months on what is described as a spread-over basis. The loan was to be guaranteed by a prime London bank (later identified as BCCI SA) which would also deposit funds in the same amount prior to the drawdown of the loan to Notan, and for a term expiring five days after the Notan loan became repayable. Mr Puri told SBI that no lien was to be marked on the deposited funds and that the loan to Notan would be required urgently by the beginning of November. The transaction, as it eventually emerged, was that SBI agreed to provide Notan with a loan of US $20m for a term of three months, to be drawn down on 1st November 1983. Under the terms of the facility letter as amended, BCCI SA was to deposit an equivalent sum of US $20m with SBI for the duration of the loan plus four days, so as to provide the necessary funding for the entire term of the loan. It was also to provide a guarantee, on terms satisfactory to SBI, to repay the loan to Notan in the event that it was not repaid at maturity. Interest on the loan to Notan was to be at a rate of a half percent per annum above the rate of interest payable by SBI on BCCI's matching deposit. The guarantee provided for under the terms of the facility letter was executed by Mr Akbar and two other BCCI Treasury employees on or about 28th October 1983 on behalf of BCCI SA and contained an express right of set-off. In addition, on 31st October 1983, BCCI SA deposited the sum of US $20m with SBI in its account in New York with Citibank until 6th February 1984 at an interest rate of 9.3125% per annum and accounted for the deposit by debiting the sum to BCCI Overseas' nostro account at Bank of America in New York. The loan to Notan was drawn down on 1st November by SBI remitting the US $20m from its account with Citibank to an account of BCCI SA at the Bank of America in New York (No. 48586050). 8. The payment instructions from Notan received by SBI on 1st November were signed by Mr Puri and Mr Akbar, and requested the $20m to be transferred to BCCI SA's account without specifying any sub-account in the name of Notan. As I shall explain later in this judgment, one of the principal allegations made by the liquidators is that the terms of these payment instructions put SBI on notice that the monies were being routed back to BCCI for its own use beneficially, rather than being disbursed to BCCI for the credit of Notan. What is known (but is not alleged to have been known by SBI at the time) is that the monies, when received, were accounted for by BCCI SA as a transfer to the credit of an account (No. 01001279) with BCCI Overseas in the name of Mr Khalil. On 30th December the monies were then transferred from that account to a metals trading account in the name of BCCI Overseas (No. 90511109) which had been used for speculative purchases of silver and had a negative balance. 9. On 5th December 1983 SBI agreed to lend Notan a further sum of $20m on almost identical terms. The monies were disbursed on 15th December and were repayable on 1st February 1984. BCCI SA again provided the funding by prior deposit of a matching sum with SBI and gave a guarantee for the loan, including the contractual right of set-off. Its own deposit was for a period expiring on 6th February 1984. As in the case of the first loan, the monies, when drawn down, were remitted to BCCI SA's account with the Bank of America and then credited to BCCI Overseas' nostro account. They were then used by BCCI Overseas to credit the overdrawn Khalil account. As a result of this and other credit transfers from other sources, BCCI was able to convert a debit balance of US $85,280,341 into a credit balance for year end purposes of US $9,261,646.17. The auditors were prepared on this basis to treat BCCI's exposure to the Khalil Group as fully collectable and made no provision in respect of their borrowings. However, by 13th January 1984 (following the repayment and reversal of most of the credits) the Khalil account No. 01001279 had once again become overdrawn by more than US $155m. Both the Notan loans were repaid on 1st February 1984 by a transfer from BCCI SA to SBI of the sum of US $40,754,861.12, representing repayment of the sums due plus interest. On 6th February SBI paid US $40,779,147.67 to BCCI SA. The excess of the interest over that payable by Notan to SBI is accounted for by the longer term of the BCCI deposit." The admissions made were as follows: "1. BOI admits the facts found in paragraphs 1-9 of the judgment of Patten J in Morris & ors v State Bank of India [2003] EWHC 1868 (Ch.). 2. BOI has already admitted by paragraph 13 of its re-amended points of defence that pursuant to section 11 of the Civil Evidence Act 1968 Akbar must be taken to have committed the offences of which he was convicted. Those included the following counts relating to transactions nos 3 and 4 (1) Count 15: on or about the 24th October 1983 he dishonestly and with a view to gain for himself of another or with intent to cause to another concurred in falsifying documents required for an accounting purpose, namely an application to the Bank of India in the name of Maram Trading Company Limited for a loan of $60m which were false in a material particular in that a board resolution and a letter of application purported to be genuine documents signed by AR Khalil on behalf of Maram Trading Company Limited (D1/1/15) (2) Count 16: on or about the 10th September 1984 he dishonestly and with a view to gain for himself of another or with intent to cause to another concurred in falsifying documents required for an accounting purpose, namely an application to the Bank of India in the name of Maram Trading Company Limited for a loan of $75m which were false in a material particular in that a board resolution and a letter of application purported to be genuine documents signed by AR Khalil on behalf of Maram Trading Company Limited (D1/1/16)." 3. BOI further admits the factual basis for those convictions as set out at in the transcript of the proceedings before Scott-Baker J at the Central Criminal Court on 27 September 1993 (D1/2/67): BCCI makes its own deposit of its own money with the relevant bank. The money is then lent to Maram and used by Akbar for the purposes he had in mind, and the evidence shows that Akbar controlled Maram in effect. 4. BOI further admits that substantially the same fraud as those that formed the basis of Counts 15 and 16 was also committed by BCCI in relation to transactions 1, 2 and 6. In particular BOI admits that BCCI forged the signature of Khalil on the following documents: (1) the board resolution (C1/79) and letter of request (C1/77) relating to transaction no.1 (2) the board resolution (C1/182) and letter of request (C1/184 relating to transaction no.4 (3) the board resolution (C4/160) and letter of request (C4/159) relating to transaction no.6. 5. BOI further admits that monies that BOI thought it was lending to Maram were used by BCCI for its own purposes. 6. BOI further admits that BCCI fraudulently concealed from its auditors and consequently failed to record in its accounts its guarantee liabilities to BOI in respect of the loans to Maram. 7. The fifth transaction appears to have involved a mutual placement of deposits between BOI and BCCI, with no loan to Maram being involved. BOI admits that BCCI falsely accounted for BOI's placement by not recognising its liability to repay the same and interest thereon. 8. Accordingly BOI admits that the conduct of BCCI admitted above constituted carrying on of the business of BCCI for fraudulent purposes within the meaning of section 213 of the Insolvency Act 1986. 9. BOI admits that by its involvement in transactions 1-6 it unknowingly participated in the carrying on of the business of BCCI for fraudulent purposes. 10. BOI denies that it knowingly participated in any respect in any such fraud. Nothing in this Statement of Admissions is intended to derogate from the generality of that denial." It is convenient at this stage to say something more about the Central Treasury fraud referred to at the end of paragraph 3 of my earlier judgment. As indicated in that judgment, Mr Khalil and the Khalil Group maintained a number of accounts with BCCI which they used for their own trading purposes. Most (if not all) of these accounts were heavily overdrawn in the period from 1981 to 1986 and, if properly and honestly presented to the auditors, would almost certainly have called for some provision to be made. The scale of the indebtedness was increased by the use made of these accounts to conceal losses on BCCI's own metal trading. The evidence contained in the Accounting Report prepared on behalf of the liquidators indicates that metal trading originated as another method used by Mr Akbar to boost the published profits of BCCI. It was conducted through the CTD, using two accounts: a No. 1 account in the name of BCCI Overseas, used for its own proprietary trading, and a No. 2 trading account purporting to be that of Mr Khalil. This was in truth simply a second trading account of BCCI Overseas, but the device of nominating Mr Khalil as the account holder enabled Mr Akbar to switch loss-making positions from the BCCI Overseas account into the Khalil account. As of 31st October 1983 BCCI (using the Khalil account) held long-term metal positions in LME Silver and Copper valued at US $38.6m. At the same time, in the last six months of 1983, there was significant trading in these commodities through the No. 1 account, resulting in significant losses. BCCI Overseas had contracted to buy silver and copper at prices in excess of the market prices prevailing at the time when call options it had previously entered into were due to be exercised. When these options failed to be exercised, and lapsed, it was left holding long positions in the metals as at 31st December 1983 which, if resold, would have crystallised into a loss. Absent a sale, the holdings should have been marked down to their market value at the time and the resulting loss carried into the profit and loss account as at 31st December. To conceal these losses BCCI Overseas (through Mr Akbar) recorded fictitious sales, at a reduced loss or even a profit, to companies such as Notan, using the Khalil Group accounts to fund the purchases. It was then a matter of concealing, in turn, losses on these accounts, which was effected by the injection of funds from three principal sources: the back-to-back transactions with BOI, SBI and other banks; mis-recording deposits with BCCI as payments rather than as liabilities to the depositors; and the misappropriation of funds held on behalf of clients in a portfolio account (No. 20071) with ICIC, a BCCI affiliate. The back-to-back arrangements referred to were made with four Indian banks: BOI, SBI, Syndicate Bank and Punjab National Bank; and with two Swiss Banks: Banque des Échanges Internationaux and Banque de L'Union Européene en Suisse. The result of these transactions was to allow BCCI Overseas in effect to borrow money off balance sheet through companies such as Maram and Notan which were not BCCI subsidiaries or affiliates and whose financial position did not therefore feature in the BCCI Group accounts. The liquidators estimate that, out of the US $347m and £30m received by BCCI Overseas under these arrangements, some US $302m and £30m were credited to the Khalil Group accounts so as to give the false impression that the accounts were being serviced and the indebtedness repaid by the customer. The balance of US $45m was used to cover the fictitious sales of 630 lots of copper and 160 lots of silver. As appears from my judgment in Morris & ors v. State Bank of India, the loans made to Notan were facilitated by a matching deposit placed with SBI and were secured by a BCCI guarantee, but not by any formal lien. This is also a feature of the transactions involving BOI. In these and in the case of the other back-to-back transactions with banks, the guarantees were not disclosed to the auditors and the deposits were treated as free of any liability in respect of the loans. A schedule prepared by Mr Akbar as of 31st October 1983 and used by the liquidators as the basis for much of their calculations of the scale of the Central Treasury fraud shows that some US $100m was misappropriated from the ICIC portfolio account 20071. Of this some US $30m was mis-recorded as deposits with ICIC made on behalf of Mr Khalil's children and the remaining sums as credits to the Khalil Group accounts. BCCI, including BCCI Overseas, was almost certainly insolvent by 1983 and in all probability by a date even earlier than that. The period covered by the transactions in this case was therefore one in which Mr Akbar, and the CTD under his control, engaged in what must have been an increasingly desperate attempt to conceal the true financial position of BCCI as a whole by entering into verifiable transactions the real purpose and effect of which were either hidden or distorted in the books of account and other financial records presented to its auditors. Without the assistance of these transactions it is most unlikely that the pretence of solvency could have been successfully maintained for so long. The Transactions I will come to the issue of knowledge shortly, but it may be helpful at this stage to set out the structure and the mechanics of each of the six transactions under review. They can be summarised as follows: The First Transaction (i) This was arranged in November 1981 and completed on 2nd December of that year. BOI received a proposal from BCCI whereby BCCI would deposit with BOI the sum of £10m for a period of three months. The deposit would bear interest at National Westminster Bank base rate, which was then 15% per annum. BOI would then lend the same sum to a borrower nominated by BCCI at a rate of 1/8% over the National Westminster Bank base rate from time to time. Under the proposal as originally made, there would have been no documents executed by the borrower, which was not initially identified. Nor were the monies deposited by BCCI to be formally liened to BOI. The only security for the loan element of the transaction, apart from the borrower's covenant, was to be an irrevocable guarantee by BCCI in respect of the repayment of the loan. The direct negotiations in respect of these arrangements were conducted between Mr K L Samant, who was then the chief manager of the UK and European branches of BOI and was based in London, and a Mr Mewawalla, then a senior officer of BCCI at its Leadenhall Street office, who had earlier in his career been employed by BOI and had been on friendly terms with Mr Samant for a number of years. Mr Samant, after consultation with a firm of solicitors (Messrs Lawrence Jones & Co) in London, recommended approval of the transaction by the Board of BOI, and this occurred on or about 18th November 1981. The decision was notified to Mr Samant in London, by telex dated 19th November, on the basis that it would be what was described as "a one time transaction". Shortly before then, in circumstances I will come to later, the intended borrower was identified as Maram Trading Company Limited ("Maram"), a company registered in the Cayman Islands and beneficially owned by Mr Khalil. The transaction was completed on 2nd December 1981, when BCCI Overseas transferred £10m to BCCI SA via its inter-company vostro account 44100172 for onward placement with BOI in London. The transfer was recorded in the books of BCCI Overseas as an inter-bank term placement at a rate of 15%, maturing on 2nd March 1982. BCCI issued a cheque dated 2nd December 1981 in the sum of £10m drawn on its National Westminster Bank ("NW") sterling nostro account, which was sent to BOI in London under cover of a letter dated 2nd December, referring to the payment as a 3-month placement by BCCI Overseas. BOI London in turn on the same date opened a new fixed deposit account in the name of BCCI Overseas, which was credited with the £10m. On the same date a loan was granted to Maram by BOI London at a loan rate equal to the deposit rate payable on the monies received from BCCI Overseas plus 0.125%. BOI transferred the £10m under loan by a payment drawn on its own NW sterling nostro account in favour of BCCI SA for the account of Maram under account no. 01024640. The monies were received by BCCI SA in its own NW sterling nostro account (no. 41100154) and in turn credited to BCCI Overseas' inter-company vostro account (no. 44100183). In the books of BCCI Overseas the £10m is shown as credited to a new call deposit account (no. 60064019) in the name of Saudi Development and Commercial Company ("SDCC") in Jeddah, a company controlled by BCCI. (ii) The first transaction was reversed on 2nd March 1982 when funds totalling £10,372,942.22, representing the £10m loan to Maram plus accrued interest, were debited from an SDCC Jeddah deposit account at BCCI Overseas and transferred to BCCI SA London through the inter-company nostro account 44100172. BCCI SA then issued a banker's draft payable in favour of BOI, drawn on its NW sterling nostro account. On the same day funds totalling £10,369,863.02 (representing the £10m deposit by BCCI Overseas plus accrued interest) were paid to BCCI SA out of the NW sterling nostro account of BOI. These monies were credited to BCCI SA's own nostro account (41100154) in London and then credited on to the inter-company vostro account (44100183) of BCCI Overseas. The Second Transaction (i) The second transaction involved the same structure as the first, but was for £25m rather than £10m. On 22nd September 1982 BCCI Overseas transferred the £25m to BCCI SA via its inter-company vostro account for onward placement with BOI in London. The deposit was recorded in the books of BCCI Overseas as an inter-bank term placement at a rate of 11%, maturing on 24th January 1983. The money was forwarded to BOI via BCCI SA, which issued a cheque drawn on its NW sterling nostro account, which was sent to BOI under cover of a letter dated 22nd September. On the same day BOI granted a loan in the same sum in favour of Maram at a loan rate equal to the NW bank rate from time to time plus 0.125%. The loan monies were paid by means of a cheque drawn on the BOI NW sterling nostro account, made payable to "Bank of Credit and Commerce Int. Account 01024640 of Maram Trading Company Limited". BCCI SA received these funds in its sterling nostro account (41100154) at National Westminster Bank in London and credited the £25m to the BCCI Overseas inter-company vostro account (441000183). In its own books BCCI Overseas credited the US dollar equivalent of $43.87m to Mr Khalil's current account (01001279), thereby reducing the recorded overdraft liability to BCCI Overseas by a similar amount. The indebtedness on account 01001279 at the time was some US $187,068,490, but by 30th September this had been reduced to an overdraft balance of US $64,628,559 by the credit of the monies received from BOI together with two further credits from overseas banks, the first being US $10m from Punjab National Bank, the other being US $8.525m from Syndicate Bank. The Applicants' evidence is that these credits were treated as bona fide receipts from Mr Khalil, when of course they were nothing of the kind. (ii) The proposal for the second transaction was made by BCCI through Mr Mewawalla as early as July 1982, on the basis that there would be a deposit of £30m for four months on terms that BOI would make a loan in the same sum to a borrower nominated by BCCI. As in the case of the first transaction, the deposit was not to be under lien, but BCCI Overseas would provide a guarantee for the loan. Maram was eventually identified as the nominated borrower and authority was given for a loan of £30m by the Board of BOI on 9th August 1982. Shortly before the implementation of the transaction on 21st September 1982 Mr Mewawalla wrote to Mr Samant enclosing various documents (which I will come to later) and referring to the deposit and loan being in a lower sum of £25m. The arrangements were then effected in this sum. The transaction was reversed in January 1983. Funds totalling £25,826,455.49, which represented the £25m loan to Maram plus accrued interest were drawn down from a loan account in the name of Maram at BCCI Overseas (No. 11003476) and transferred to BCCI SA in London through the inter-company vostro account (44100183). A further drawdown on the Maram loan account took place on the same day to cover repayment of the Syndicate Bank loan. BCCI SA then issued a banker's draft drawn on its NW sterling nostro account, made payable to BOI. On the same day the sum of £25,816,095.90, representing the £25m deposit from BCCI Overseas plus accrued interest, was drawn from BOI's NW sterling nostro account in London and paid to BCCI SA's sterling nostro account (41100154). A credit in the same amount was then made to the BCCI Overseas inter-company vostro account (441000183). The Third Transaction (i) The third transaction took essentially the same form as the previous two, but involved a loan to Maram of US $60m, which was disbursed in three tranches of US $20m each. The three loan advances were made between 1st and 7th November 1983 (although again the name of the borrower was not identified at the outset) and repaid on 1st and 7th February 1984. Each of the advances was accompanied by a contemporaneous deposit of an equal sum by BCCI Overseas with BOI, and in a letter dated 24th October 1983, signed by Mr Akbar and a Mr Mohammed Saghir, BCCI Overseas guaranteed the loan. Again there was no formal lien executed over the deposits. As in the case of the two previous transactions, the immediate contact between BCCI and BOI took place between Mr Samant and Mr Mewawalla. Board approval for the advances to Maram was obtained on 20th October 1983, and on 24th October BOI received a formal letter from Maram requesting the US $60m loan facility and asking for the monies to be transferred to their account (No. 01024628) at BCCI in Leadenhall Street. This letter, as in the previous cases, purported to be signed by Mr Khalil. (ii) The implementation of the third transaction also took a similar form to the earlier two. On 1st November 1983 BCCI Overseas transferred the first tranche of US $20m to BCCI SA via the inter-company vostro account for placement with BOI. BCCI SA then remitted that sum from its US dollar nostro account (48586050) at Bank of America in New York ("BoA (NY)") to BOI's London nostro account (400016230) at Chemical Bank in New York ("CB (NY)"). On the same day BOI advanced the $20m to Maram at an interest rate of 0.125% above the rate payable on the funds deposited by BCCI Overseas with BOI. This advance to Maram was made by remitting the US $20m to the BCCI SA US dollar nostro account (48586050) at BoA (NY), which was then credited to the inter-company vostro account of BCCI Overseas (44100218). BCCI Overseas showed Mr Khalil's current account (01001279) as being credited with this payment. This first tranche of the loan to Maram was to mature on 1st February 1984. (iii) The second tranche of the loan was paid on 3rd November following a deposit of US $20m by BCCI Overseas, using the inter-company vostro account to transfer the monies to BCCI SA, which in turn remitted the same sum from its US dollar nostro account at BoA (NY) to BOI's own nostro account at CB (NY). On the same day the second loan to Maram took place at a similar marginal rate of interest. As in the case of the first tranche, the funds were remitted in the first instance to BCCI SA's US dollar nostro account at BoA (NY), which in turn credited the inter-company vostro account at BCCI Overseas with the same sum. This tranche of the loan was also used in the books of BCCI Overseas to credit Mr Khalil's current account. (iv) The final tranche of the loan was advanced to Maram on 7th November 1983 against a further deposit in the same sum of US $20m made to BOI in London by BCCI Overseas. The maturity date for the loan was 7th February 1984 and the same rate of interest applied. As in the case of the first two tranches, the monies used to fund the Maram loan were remitted to BCCI SA's US dollar nostro account at BoA (NY) and then credited on to the inter-company vostro account at BCCI Overseas. As also with the first two tranches, the third tranche of US $20m was credited to Mr Khalil's current account. As at 1st November 1983 this had an overdrawn balance of US $85,280,341.22, which by 11th November had been reduced to US $17,287,655.41, partly with the payments received from BOI and partly with the benefit of a further sum of US $20m obtained from SBI via Notan as a result of loan arrangements which were the subject of the proceedings in the earlier action of Morris & ors v. State Bank of India. In the same 10-day period to 11th November 1983 there were also substantial credit transfers to the Khalil account from BCCI Luxembourg, BCCI Columbo and BCCI Panama, as well as various debits to cover metal transactions carried out, it would appear, by BCCI for its own account. The net result of all this was that by 31st December 1983 the debit balance on Mr Khalil's account no. 01001279 with BCCI Overseas had been converted to a credit balance of US $9,261,646.17, which was taken into account by the auditors of BCCI when determining the net exposure of BCCI to the Khalil Group. They concluded that the loans to Mr Khalil and his companies were performing and that no provision was required to be made in respect of the net exposure. However, by 16th January 1984, following BCCI's year end of 31st December 1983, the Khalil account was again in overdraft to the tune of US $155.9m, and following the repayment of the three Maram loans to BOI, the debit balance had risen to US $245.9m. (v) The third transaction was reversed, as I have indicated, after BCCI's year end. On 1st February 1984 funds totalling US $20,498,333.33, comprising the first tranche of the loan to Maram plus accrued interest, were debited against the Khalil current account at BCCI Overseas and transferred to BCCI SA London through the inter-company vostro account. BCCI SA London, on the instructions of Mr Akbar, remitted this from its nostro account at BoA (NY) to BOI's US dollar nostro account at CB (NY). On the same day BOI remitted to BCCI SA's US dollar nostro account the sum of US $20,491,944.44, which was in turn credited to the vostro account of BCCI Overseas. In a similar way the second and third tranches of the loan, together with the BCCI deposits, were repaid on 3rd February and 7th February 1984. The Fourth Transaction (i) This was for US $75m and was implemented on 18th September 1984. The loan to Maram and the corresponding deposit from BCCI were repaid on 18th October 1984. Mr Samant negotiated the arrangements with Mr Mewawalla, which, as I indicated earlier, were described in a note of a telephone call as "their usual deal". The original terms proposed in July 1984 were that there would be a deposit and corresponding loan of US $75m for a period of three to six months, but at a lower differential rate of interest of 1/16% rather than 1/8%. In the end the 1/8% differential in interest was reinstated and the Board of BOI approved the transaction on 9th August 1984. As in the case of the earlier three transactions, the BCCI deposit was not to be under lien, but the loan to Maram was to be guaranteed. The guarantee document was provided on 10th September 1984. By then BOI had received a letter of request for the US $75m loan from Maram, signed by Mr Khalil, asking for it to cover two separate periods, from 18th September 1984 to 18th October 1984 and 18th December 1984 to 22nd January 1985. These periods correspond, as I indicated, firstly to the period during which the auditors carried out their audit circularisation procedures and secondly to BCCI's year end. The deposit of the US $75m by BCCI Overseas was made in the same way as in the case of the earlier transactions. The money was transferred to BCCI SA via the inter-company vostro account and then remitted by BCCI SA from its US dollar nostro account at BoA (NY) to BOI's own nostro account at CB (NY). On the same day the loan to Maram was made at the usual interest rate of 0.125% above the rate payable on the placement by crediting BCCI SA's US dollar nostro account at BoA (NY), with the money then being credited on to the inter-company vostro account of BCCI Overseas. As in the case of the third transaction, the US $75m was credited to Mr Khalil's current account with BCCI Overseas. The effect of this was to reduce a debit balance from US $119,798,634.74 to US $44,789,634.74. (ii) On 18th October 1984 the loan principal plus accrued interest (US $75,734,357) was debited to the Khalil current account at BCCI Overseas and transferred through the inter-company vostro account to BCCI SA. BCCI SA then remitted the money to BOI's US dollar nostro account at CB (NY). On the same day BOI repaid the deposit from BCCI Overseas by remitting the sum of US $75,726,562.50 to BCCI SA, which paid it on to BCCI Overseas via the inter-company vostro account. The Fifth Transaction (i) This was for US $50m and took place on or about 18th December 1984. It is really the second part of the transaction contemplated in the letter of request dated 10th September 1984, in which Maram asked for a loan of US $75m to cover the periods from 18th September 1984 to 18th October 1984 and 18th December 1984 to 22nd January 1985. As I have already indicated, the fifth transaction was intended, according to the letter of request and letter of guarantee dated 10th September 1984, to be essentially a repeat of the fourth transaction, in order to cover the period of BCCI's year end. No separate documentation between BOI, BCCI or Maram appears to have been executed in respect of the fifth transaction. However, the transaction as executed did not accord with the September documentation. On 18th December 1984 BCCI Overseas transferred US $50m (not $75m) to BCCI SA via its inter-company vostro account for placement with BOI. BCCI SA then followed the usual procedure of remitting the same sum from its US dollar nostro account at BoA (NY) to BOI London's nostro account at CB (NY). This transfer of funds was recorded in the books of BCCI Overseas as an inter-bank term placement at a rate of 9%, maturing on 19th February 1985. In return, BOI on the same date arranged for US $50m to be remitted to BCCI SA's London US dollar nostro account at BoA (NY) and this sum was then credited to the BCCI Overseas inter-company vostro account. This payment was made without reference to Maram and at the same interest rate of 9% as the deposit received from BCCI. The fifth transaction therefore amounted to no more than two matching inter-bank placements in the same sum and at the same rate of interest. However, in the books of BCCI Overseas the US $50m was shown as credited on 19th December 1984 to the Khalil current account (01001279) which, following the payment, was in credit as at 31st December 1984 by US $74,831,139. The monies were not shown as an inter-bank deposit and therefore as an amount due to banks, but rather as a receipt from Mr Khalil to reduce the net indebtedness on his account. As in the case of the earlier payments into that account, this had the effect of artificially reducing the indebtedness in respect of the Khalil Group accounts at BCCI Overseas and gave the auditors the impression that these were performing loans. (ii) In terms of the flow of funds the fifth transaction differed little from the others, in that the monies drawn down from BCCI Overseas through BCCI SA to BOI were channelled back to BCCI Overseas and used to improve the balances on the Khalil account. The economic effect was therefore the same. The only difference was that the US $50m was not advanced in terms as a loan to Maram, nor was it advanced at a differential rate of interest. Consequently when on 19th February 1985 the transaction came to be unwound, a sum of US $50,787,500 was debited to the Khalil current account at BCCI Overseas and transferred to BCCI London for payment to BOI at its US dollar nostro account at CB (NY), and on the same day the identical amount, representing the placement by BCCI Overseas plus accrued interest at the same rate, was paid by BOI to BCCI Overseas through BCCI SA, using the same accounts. The Sixth Transaction (i) This took the same form as the first four transactions and involved the sum of US $50m. It was first mooted in August 1985, when Mr Samant proposed that there be a loan of US $100m backed by a deposit from BCCI, to be advanced in tranches, the first of which would be drawn down by 10th September 1985 and repaid in October of that year, with the arrangements being repeated in November through to January or February 1986. He also suggested that the loan should be disbursed at BOI's Paris branch. The liquidators have suggested that this was to meet a difficulty that had arisen in January 1985, when Mr Samant attended a meeting at the Bank of England during which he was warned that transactions of this kind were neither attractive nor acceptable and were not to take place through London. I shall come to the details and implications of that meeting later in this judgment. In the event, on 12th September 1985 the Head Office of BOI sanctioned the transaction in the sum not of US $100m but of US $75m, subject to the finalisation of certain documentation with BOI's solicitors. Mr J N Raina, BOI's General Manager in London, then wrote to Mr Mewawalla confirming that there would be a transaction in that amount. There was then further delay, caused by internal discussion at BOI as to whether it should disburse the loan to Maram from its branches in Singapore, Hong Kong or New York. Again it is said that this is linked to the earlier discussions with the Bank of England. It was not until 2nd December 1985 that BCCI Overseas sent to BOI the standard form letter of guarantee in respect of the loan to Maram of US $75m with interest, together with the request from Maram, signed by Mr Khalil, for the loan. (ii) The transaction was put into effect on 11th December 1985, when BCCI Overseas transferred US $50m to BCCI SA via the inter-company vostro account. The monies were in turn transferred on by BCCI SA, in the case of this transaction to BCCI SA Bahrain via an inter-company vostro account (No. 42100667), and on the same day BCCI SA Bahrain then transferred the same sum back to BCCI SA London via the inter-company vostro account 42100667. There was then an onward transfer of the funds from BCCI SA, using its US dollar nostro account 48586050 at BoA (NY) to the BOI nostro account 400016230 at CB (NY). On the same day BOI remitted the US $50m from the nostro account at CB (NY) to BOI Grand Cayman via its nostro account 00036633 at Marine Midland Bank in New York. The loan to Maram was then advanced on the same date by BOI Grand Cayman at the usual interest rate of 0.125% above the rate payable on the placement by BCCI Overseas. (iii) BOI Grand Cayman remitted the US $50m lent to Maram to the BCCI SA dollar nostro account (48586050) at BoA (NY). It was then credited back to the inter-company vostro account (44100218) at BCCI Overseas. The monies were used to credit a current account (No. 01004910) in the name of A R Khalil, thereby giving the impression, as in the case of the earlier transactions, that the account was a performing asset. As a result no provision was made in respect of these accounts in the balance sheet of BCCI Overseas as at the 1985 year end. (iv) The loan and deposit arrangements were due to mature on 11th March 1986, but on or about 3rd March BOI requested BCCI (and it was agreed) to roll over the maturity date of the deposit for a maximum of two months, with a corresponding extension of the loan to Maram. These alterations in the arrangements were approved by BOI's Chairman on or about 5th March 1986 and were formalised by a request from BCCI Overseas (dated 10th March 1986) for an extension of the loan facility, to be guaranteed in the usual way. (v) On 12th May 1986 the transactions were reversed. Funds totalling US $50,645,833.33, representing the principal of the loan and accrued interest, were debited to a numbered overdraft account (01006003) at BCCI Overseas and transferred to BCCI SA London through the inter-company vostro account. BCCI SA then remitted this sum from its US dollar nostro account (48586050) at BoA (NY) to the BOI Grand Cayman nostro account at Midland Marine Bank. On the same day funds totalling US $50, 635,069.44, representing the placement by BCCI SA Bahrain plus accrued interest, were repaid to the BCCI SA London US dollar nostro account (48586050) at Bank of America, New York, and credited back to the BCCI SA Bahrain inter-company vostro account (42100667).. This account was then debited with the same amount in favour of the BCCI Overseas inter-company vostro account (44100218). The Test of Liability The liquidators have to show that BOI (through its relevant officers and employees) knew that the six transactions (or one or more of them) were being entered into either to defraud the creditors of BCCI or for a fraudulent purpose. They did not have to know every detail of the fraud or the precise mechanics of how it would be carried out, but clearly they did have to know, either from their own observation of what was being done or from what they were told, that BCCI was intent on a fraud. Knowledge, for this purpose, means what it says. There must have been an actual realisation on the part of BOI that BCCI would, or was likely to, engage in false accounting. A failure to recognise the truth of what was going on is not enough, however obvious that may now seem to have been. The relevant knowledge also has to be contemporaneous with the assistance that was given at the time by entering into the various transactions. Subsequent knowledge based on hindsight is not enough, nor is negligence the test of liability. Mr Hirst QC emphasised in his closing submissions that it is irrelevant whether BOI is open to criticism for slackness or negligence, however gross. The only issue is whether it knew at the time that it was participating in a fraud. I agree with that. But both sides accept that knowledge, for these purposes, includes so-called blind-eye knowledge, which exists when the party in question shuts its eyes to the obvious because of a conscious fear that to enquire further will confirm a suspicion of wrongdoing which already exists. Knowledge of this kind is part of the Claimants' case, and I dealt with the same point in paragraph 11 of my judgment in Morris & ors v. State Bank of India, where I said this: "Knowledge includes deliberately shutting ones eyes to the obvious, provided that the fraudulent nature of the transactions did in fact appear obvious to those who dealt with these matters at SBI at the relevant time. It is well established that it is no defence to say that one declined to ask questions, when the only reason for not doing so was an actual appreciation that the answers to those questions would be likely to disclose the existence of a fraud. But liability in such cases depends upon that stage of consciousness having been reached. His submission, which I accept, is that one needs to be careful to draw a distinction between a conscious appreciation of the true nature of the business being carried on and a failure, however negligent, to appreciate that fraud was being perpetrated. The case for SBI is that at no time during the course of these transactions did it in fact suspect that anything untoward was going on. The essentials of what is required in order to establish so-called blind-eye knowledge are set out in the speech of Lord Scott of Foscote in the recent decision of the House of Lords in Manifest Shipping Company Limited v. Uni-Polaris Company Limited [2003] 1 AC 469, where Lord Scott at paragraph 116 says this: 'In summary, blind-eye knowledge requires, in my opinion, a suspicion that the relevant facts do exist and a deliberate decision to avoid confirming that they exist. But a warning should be sounded. Suspicion is a word that can be used to describe a state-of-mind that may, at one extreme, be no more than a vague feeling of unease and, at the other extreme, reflect a firm belief in the existence of the relevant facts. In my opinion, in order for there to be blind-eye knowledge, the suspicion must be firmly grounded and targeted on specific facts. The deliberate decision must be a decision to avoid obtaining confirmation of facts in whose existence the individual has good reason to believe. To allow blind-eye knowledge to be constituted by a decision not to enquire into an untargeted or speculative suspicion would be to allow negligence, albeit gross, to be the basis of a finding of privity.' " I intend to adopt the same approach to the evidence in this case. Dishonesty as such is not in terms a condition of liability under s.213. But if knowledge of the fraud in either of the senses indicated above is established, Mr Hirst accepts that it must follow that BOI was dishonest. No evidence has been led to exculpate BOI on the basis that, although the bank through its officers realised what BCCI was doing, they saw nothing wrong in it, and it is not, therefore, necessary for me to consider whether that position, if established, would constitute a defence to the claim. The only defence relied on is simply a denial of knowledge. In relation, therefore, to the liquidators' primary and original claim that BOI knew that BCCI was falsely misrepresenting the six transactions to its auditors by concealing its own use of the loans made to Maram, by representing the matching deposits with BOI as unencumbered, and by concealing the existence of the guarantees, no problems of defining the test of liability exist. An awareness of the purpose to which the transactions were being put was inescapably dishonest. The same, I think, goes for the alternative plea that BOI must have realised that the improvement of its earnings to advances ratio could only be effected by the transfer of non-performing debt and the consequent improvement in BCCI's profit before tax in each year. It is common ground between all the expert witnesses who gave evidence (both bankers and accountants) that the removal of bad debts would have been impermissible even by the standards of the time, and that the auditors, if notified, would have insisted on the reversal of the transaction in the accounts or the making of suitable provision. The improvement in the ratio could only therefore have been successful if the removal of the bad debts was effectively concealed from the auditors. None of the factual witnesses suggested that they would have regarded this as an honest practice. But in relation to the new plea about window-dressing, different considerations may apply. Paragraphs 93.2 and 96F (i) and (ii) of the Re-Re-Amended Particulars of Claim ("RRAPOC") allege that even the more limited possibility of switching assets in the balance sheet by converting loans and advances into deposits due from banks would have indicated greater liquidity than was the case and was itself a fraudulent practice. The liquidators' additional case is that, even if BOI was told and believed that the only purpose of the six transactions was to window-dress the accounts in this way, this would still amount to knowing participation in a fraud, because what was contemplated was likely to mislead anyone reading BCCI's accounts and was not a practice which, judged by the standards of honest bankers at the time, operating in the City of London, could have been recognised by BOI as either honest or legitimate. Mr Hirst submits that the liquidators must prove (in relation to this plea) not only that BCCI's explanation of the purpose of the transactions disclosed a scheme which, viewed objectively, was dishonest, but also that this belief was shared by the officers of BOI to whom the explanation was given. It is important to note that this submission is not advanced as part of an argument that s.213 requires proof not only of knowledge, but also of dishonesty. It is based on the terms of the RRAPOC, which at paragraph 96A alleges that BOI knew or believed that the explanation of the improvement in BCCI's earnings to advances ratio (if given and true) disclosed a dishonest scheme on the part of BCCI. This plea therefore depends upon BOI being aware and appreciating at the time that window-dressing of the kind allegedly contemplated by BCCI was dishonest, and therefore requires the Court to focus on BOI's views about the appropriateness of what was being done. Therefore in this limited area what needs to be proved is what Lord Hoffmann in Twinsectra v. Yardley [2002] 2 AC 164 at page 170c described as a dishonest state of mind: i.e. a consciousness that one is transgressing ordinary standards of honest behaviour. Clearly that test is inapplicable except by reference to the standards of such behaviour prevailing at the time. I therefore accept Mr Hirst's submission that if liability is to be established on the basis of this new plea, conscious dishonesty in the sense I have described is an issue and must be proved. Evidence and Standard of Proof This case concerns events which took place twenty years ago. Those involved are now for the most part retired and some are elderly and unwell. None of these factors is an objection to the Court doing justice on the applications before it, but they are relevant to a consideration of the evidence upon which any decision must be based. I therefore accept that due allowance has to be made for the passage of time and the effect which that must inevitably have on the ability of witnesses to recall with any precision, or at all, conversations and events which occurred two decades or more ago. That makes all the more surprising the claims of some witnesses to have an almost perfect recall of these events, and I have approached some of the oral evidence which either contradicts or is unsupported by contemporaneous documents with necessary caution. I have also taken into account (as I did in the case against SBI) the institutional factor in all of this: i.e. a natural inclination which may exist on the part of some of the witnesses to be defensive of their own conduct and that of the bank they served. Failure to give a credible explanation of events may be due to factors of this kind rather than a perceived need to deny involvement with a fraud. I dealt with these considerations in paragraph 17 and 18 of my judgment in Morris & ors v. State Bank of India and I take the same approach in this case. Mr Hirst submits that I should apply the criminal standard of proof to the determination of the key issues of knowledge. These are, he says and I agree, allegations of great seriousness for the individuals concerned and for the reputation of BOI. It would be wrong to make adverse findings of that kind simply on the basis of the balance of probabilities. The civil standard of proof is a flexible one and recent authorities confirm that it can be adapted to meet the seriousness of what has to be proved: see, for example, B v. Avon & Somerset Constabulary [2002] 1 WLR 340. In R (McCann) v. Crown Court at Manchester [2003] 1 AC 787 (a case concerned with the making by magistrates of anti-social behaviour orders under s.1 of the Crime and Disorder Act 1998) Lord Hope of Craighead at paragraphs 82 and 83 said this: "82. … it is not an invariable rule that the lower standard of proof must be applied in civil proceedings. I think that there are good reasons, in the interests of fairness, for applying the higher standard when allegations are made of criminal or quasi-criminal conduct which, if proved, would have serious consequences for the person against whom they are made. 83. … There is now a substantial body of opinion that, if the case for an order such as a banning order or a sex offender order is to be made out, account should be taken of the seriousness of the matters to be proved and the implications of proving them. It has also been recognised that if this is done the civil standard of proof will for all practical purposes be indistinguishable from the criminal standard: see B v. Chief Constable of Avon & Somerset Constabulary [2002] 1 WLR 340, 354, para 31, per Lord Bingham of Cornhill CJ; Gough v. Chief Constable of the Derbyshire Constabulary [2002] QB 1213, 1242-1243, para 90, per Lord Phillips of Worth Matravers MR. As Mr Crow pointed out, the condition in section 1(1)(b) of the Crime and Disorder Act 1998 that a prohibition order is necessary to protect persons in the local government area from further anti-social acts raises a question which is a matter for evaluation and assessment. But the condition in section 1 (1)(a) that the defendant has acted in an anti-social manner raises serious questions of fact, and the implications for him of proving that he has acted in this way are also serious. I would hold that the standard of proof that ought to be applied in these cases to allegations about the defendant's conduct is the criminal standard." Mr Purle QC resists the importation of the criminal standard of proof simpliciter into applications under s.213. Cases like McCann are, he says, explicable on a pragmatic basis as attempts to give sensible and straightforward directions to Magistrates' Courts, which have to impose restraint orders in a quasi-criminal context. He says that I should prefer the approach of Lord Hoffmann in Aktieselskabet Dansk Skibsfinansiering v. Brothers & ors [2001] 2 BCLC 324. This was a decision of the Court of Final Appeal in Hong Kong in a case of fraudulent trading. At page 329d-h Lord Hoffmann said this: " Until the recent case of Re H (Minors) [1996] AC 563 the leading English case on the standard of proof in civil cases in which serious allegations of misconduct such as fraud were in issue was Hornal v Neuberger Products Ltd [1957] 1 QB 247. In a passage (at 266) often quoted in later cases, Morris LJ approved the dictum of Denning LJ in Bater v Bater [1951] P 35 at 37 that there must be a 'degree of probability which is proportionate to the subject-matter'. Lord Denning repeated the same formula in the House of Lords in Blyth v Blyth [1966] AC 643 at 669. In R v Home Secretary, ex p Khawaja [1984] AC 74 at 114 Lord Scarman examined all the previous cases and said the same: 'A preponderance of probability suffices but the degree of probability must be such that the court is satisfied. The judge followed this line of authority. He said (at para 5.3.1) that the civil standard of a balance of probabilities was appropriate but that 'the degree of probability must be commensurate with the occasion and proportionate to the subject matter'. He commented that in a case of fraud, this meant that in effect the standard was no different from 'beyond reasonable doubt'. In Re H (Minors) [1996] AC 563 at 586-587 Lord Nicholls of Birkenhead pointed out that if proof is required on a preponderance of probabilities (ie, a probability of >0.5 on a scale from 0 (impossibility) to 1 (certainty) ), it is inconsistent to require a 'degree of probability commensurate with the occasion'. This suggests some other degree of probability, higher than >0.5, somewhere between the civil standard and the criminal standard, which the courts have wisely never attempted to define as a point on the probability scale. The correct analysis is that the court is not looking for a higher degree of probability. It is only that the more inherently improbable the act in question, the more compelling will be the evidence needed to satisfy the court on a preponderance of probability." My own preference is for this approach, but I am conscious of the danger of over-analysis. It seems to me that although one can begin an assessment of the likelihood of Mr Samant and the other officers of BOI having been knowing parties to a fraud on the creditors of BCCI by reference to generalisations such as the improbability of bank officers becoming involved in dishonesty, the absence of any profit motive and the general standing and reputation of BOI, these factors become secondary considerations of less weight, when one comes to consider the oral testimony of the individuals concerned and to compare their explanations of what occurred, and their thinking at the time, with what is evident from the documents they actually produced and signed. Having heard this evidence, I have to decide whether it is credible, and that in large part depends upon my assessment of the witnesses themselves. The Liquidators' Case on Knowledge The liquidators' primary case is set out in paragraphs 96 to 97 of the RRAPOC. The six transactions were, they say, obviously artificial and served no bona fide commercial purpose. Their actual purpose was the fraudulent manipulation of BCCI's published results, which was achieved by suppressing the guarantees relating to the loans from BOI to Maram, thereby concealing any potential or actual liability on the part of BCCI for the repayment of the loans, and by using Maram to keep off the balance sheet what was in substance the circulation of BCCI's own money, to assist it in massaging the balance on the Khalil accounts. This enabled it to conceal the non-performing nature of those liabilities and in turn the additional indebtedness created by BCCI's own adventures on the London Metal Exchange. Even if the legal form of the transactions is respected, BCCI was able in effect to borrow off balance sheet from BOI by using the loans granted ostensibly to Maram in reduction of the Khalil debts. BOI's knowledge is said to have extended to at least three of the essential features of the scheme. They knew that the real purpose of the transactions was to be for BCCI's own purposes and not those of Maram. At the very least, BOI knew that the existing loans made to an initially unspecified borrower would be transferred temporarily from its accounts over BCCI's year end and replaced by new loans from BOI, made with the benefit of the finance supplied by the BCCI deposits. Maram (even when identified) was also known to be a nominee of BCCI and all contact between BOI and Maram was made through BCCI. BOI also knew that the loans to Maram could only be repaid by BCCI reinstating its original loans. Notwithstanding this, BCCI's liability to repay the loans to Maram was not revealed in its accounts, even as guarantor, and had the guarantee liability been revealed, full provision would have had to have been made. The liquidators also allege that BOI knew that BCCI intended to account for the deposits as free unencumbered placements and that BCCI would conceal from its auditors the existence of the guarantees. In these circumstances the liquidators contend that BOI knew that the purpose of the transactions was not that of improving BCCI's earnings to advances ratio, not least because this explanation (even if given) was implausible and untrue. The explanation of improving the earnings to advances ratio was only consistent with a dishonest scheme, because it could only be achieved by removing a bad or doubtful debt, for which provision would have to be made, from its profit and loss account. As I have said, both banking experts were agreed that this would have been a wholly unacceptable practice, even judging by the perhaps laxer standards of the 1980s. No honest bank behaved in this way. The fact that the stated purpose could only be achieved by the removal of bad debts would also have indicated, at the very least, that Maram was not a viable commercial entity of the kind portrayed in the documentation eventually produced for submission to the Head Office of BOI. It is important to recognise that the liquidators' pleaded case on knowledge (particularly in relation to the earnings to advances ratio point) is intended to deal with BOI's position on the basis of what are really two competing hypotheses. We know in fact that although Maram existed as a company and was beneficially owned by Mr Khalil, it was in effect put at the disposal of BCCI by Khalil and used by BCCI (through Mr Akbar) to perpetrate the fraud on creditors with which these proceedings are concerned. The evidence of Mr Dyson, the forensic accountant who has been involved in the investigation of these matters on behalf of the liquidators, which is unchallenged on this point and is corroborated by a witness statement from Mr Naqvi, is that Maram was at all material times controlled by Mr Akbar and that the company's share certificates, seal and company formation documents were found at Mr Akbar's home address when it was raided by the City of London police on 27th November 1991. Mr Dyson also says that Mr Khalil has stated that he never authorised Maram to borrow any monies from either BOI or BCCI, and this is consistent with what we now know of Mr Akbar's modus operandi and the evidence of the use to which the BOI loans were put. This confirms that at the time of the six transactions Maram (although undoubtedly "nominated" by BCCI) was not an existing borrower in any relevant or real sense. The transactions did not therefore involve the transfer of any existing liability from BCCI to BOI. They were (even if regarded as loans at all) new loans to Maram from BOI, which were then used to reduce the indebtedness on the Khalil accounts at BCCI. The actual fraud was therefore the use of monies circulated via the deposits with BOI to reduce the Khalil bad debts, including BCCI's own losses from metal trading. The concealment of the guarantee and BCCI's refusal to grant any formal lien over the deposits gave BCCI the additional benefit of being able to classify the deposits as sums due from banks with no corresponding liabilities. But this was in reality a bonus. The greater concern about the guarantee is likely to have been that, if disclosed to the auditors, it might prompt an inquiry into the nature of the liability under guarantee and lead to a connection being made between the payments to Maram and the reduction of the Khalil indebtedness. It would then have become clear that the Khalil accounts were (even on the face of things) being reduced only by further borrowing and provision would have had to have been made. If BOI knew that the purpose of the back-to-back arrangements, and in particular its loans to Maram, was to remove or alleviate the Khalil bad debts and so avoid provision being made, then I can see no answer to the liquidators' claim for compensation and I believe Mr Hirst accepts that. It seems to me that the same conclusion follows even if BOI knew only that Maram was a mere nominee and that the loans which it was making were for the use of BCCI and would be repaid by BCCI. This would have put BOI on notice that the whole arrangement was an elaborate fiction which can only have been designed to deceive its creditors by boosting its liquidity without revealing its corresponding indebtedness. The liquidators' additional pleading in relation to its primary case, which concentrates and is based on the hypothesis of the alleged explanation given for the arrangements (i.e. the improvement of the earnings to assets or earnings to advances ratio), is advanced to meet the defence that this justified what on any view was a quite extraordinary banking transaction and satisfied BOI that no fraud was involved. The liquidators' position is that no such explanation was in fact given and that this is just an invention by Mr Samant to conceal the fraud. But they say that even if this explanation was given, it was patently implausible and untrue and, if taken at face value, disclosed a dishonest scheme. This is because, as both banking experts and a number of the factual witnesses accepted, the earnings to assets ratio of BCCI could not be improved by transactions which would do no more than to move the amount of the loan shown in the balance sheet from "loans and advances" to sums "due from banks". The asset position would remain the same and BCCI's earnings would be reduced, because it would earn only LIBOR rate on the deposits and would lose interest at a rate of LIBOR plus 2% on the loans that were being refinanced. If the justification was the so-called earnings to advances ratio (rather than the earnings to assets ratio), the position would be no different. Any meaningful comparison of the amounts earned relative to the sums advanced would have to be based on figures averaged over the whole year and not on a snapshot of the position as disclosed in each set of year end accounts. The information contained in the year end financial statements would not allow this to be done, because the earnings shown are derived from all sources over the year, and the comparison with the single category of asset in the form of advances at the balance sheet date could not provide an average figure. Neither BCCI nor any other banks disclosed details in their accounts which distinguished between and identified the sources of earnings or details of average balances for different categories of assets during the year. For these reasons (as both experts acknowledged) an earnings to advances ratio calculated from year end financial statements was unknown as a measure of performance for banks at the time. It cannot therefore have been, and was not, say the liquidators, something which BCCI was concerned to improve by the transactions it entered into with BOI. This is confirmed by the fact that no earnings to advances ratio appears in any of the published accounts of BCCI SA or BCCI Overseas for the five years in question or at all. The Evidence of Knowledge (a) The First Transaction As already indicated, this took place over the end of 1981. No compensation is sought in respect of this transaction because the liquidators have been unable to identify what use the loans from BOI were ultimately put to. However, the transaction is important because it was the first of the six back-to-back arrangements under review and therefore the first occasion when BOI was asked to assist BCCI in this way. It therefore sets the scene and to some extent defines what was to follow. At the time in question Mr Samant was the Chief Manager of the UK and European branches of BOI, based at Telegraph Street in London. He was subsequently promoted to the position of Assistant General Manager and Deputy General Manager in charge of BOI's branches in the UK and Europe. He remained with BOI until November 1985, when he resigned and handed his position over to Mr J Raina, who had been in effective charge since June of that year whilst Mr Samant took up some accumulated leave. He is now a director of AMAM, which I believe provides financial consultancy services of some kind. It is, I think, important to note that Mr Samant was from 1980 until 1985 (as he says in his witness statement) the most senior BOI officer in the UK and Europe. He was a banker of considerable experience and is clearly a highly intelligent man. The other introductory matter worth noting, which is important as background to this the case, is that during the 1980s it was the policy of BOI (and I think many other Indian banks) to mobilise at its year end as many deposits as possible for inclusion in its balance sheet. The practice was for Mr Samant and all branch managers to contact customers and other banks as the year end approached in November and December, in order to secure as many deposits as possible. According to internal documentation the Head Office of BOI continuously monitored the growth of and fluctuation in deposits, and the existence of large-scale deposits was obviously seen as a measure of the bank's success. This practice of boosting deposits at the year end was highly artificial, because it meant that the level of deposits recorded in the accounts was attributable more to the customers' willingness to respond to the managers' campaign for funds than any independent recognition of the bank's reputation and worth in the preceding year. But the practice was well-established by 1981 and produced what can fairly be described almost as a culture, involving what was clearly a form of window-dressing in relation to the accounts. BOI is not, of course, on trial in respect of that practice, but it is difficult to regard it as either straightforward or desirable. Looked at objectively today, it would not, in my view, be regarded as acceptable. It is clear that even twenty years ago not everyone at BOI was happy about it. Mr Narayanan Vaghul, who was the Chairman and Managing Director of BOI from 1981 until January 1984, and therefore the most senior executive at the bank during that period, said that he personally disapproved of the policy of mobilising deposits at BOI's year end and did his best to discourage it. But it was well-established by the 1980s because it was used by the Indian Government (which controlled BOI) to measure the bank's performance. This had produced what he described as an obsessive and undue emphasis on deposit mobilisation which was deeply rooted in the culture of the bank. It was put to him that the practice was apt to mislead and he accepted that in relation to the figures for deposit growth. It did not, however, distort the profit and loss account or the balance sheet. Disapproval of the mobilisation of deposits was also expressed by Mr S K Mitra, then one of the Chief Managers in the International Department of BOI at its Head Office in Bombay, but he thought better of this evidence overnight and somewhat unconvincingly attempted to change his position the following day. Mr Purle put to Mr Vaghul the rather wider question of whether this practice could have encouraged managers to enter into unrepresentative transactions at the year end in order to flatter the balance sheet. I think that Mr Vaghul accepted that as a possibility, but countered that he would have questioned the branch managers if he suspected anything untoward was involved. He gave, as an example of a transaction which would not be approved of, the case of a manager who used credit on an overdraft facility to make deposits in another account. But he refused to accept that the transactions with BCCI with which I am concerned were circular because, he said, they involved genuine deposits and a genuine loan to Maram. This was a common theme amongst most of the bank's witnesses, who were keen to emphasise the legal form of the transactions, including the absence of a lien over the deposits and the absence of any other express right of recourse to the deposits as security for the guarantees and the loans. They were largely unwilling to become involved in any real analysis of the substance of the transactions, involving as they did the use of finance from BCCI to provide the loans to Maram in the first place and the absence of any known source of repayment for the loans other than their refinancing by BCCI. Reliance on legal form is not in any way impermissible or wrong, provided that the commercial realities of the transactions are also scrutinised. The assessment of risk is, after all, a prerequisite to any banking decision. The insistence by the factual witnesses that they relied on the legal form of the arrangements also has the consequence that their conduct can fairly be assessed on the basis that they were entering into an arms-length transaction with an unconnected party in respect of whom one would expect all the usual searches and enquiries to be made. But the evidence discloses that nothing of the sort in fact occurred. Mr Samant said in evidence that the origin of the first transaction was in a call he made to Mr Mewawalla in the autumn of 1981 to see if BCCI was willing to place some year end deposits with BOI. As I mentioned earlier, the two had been colleagues at BOI in India, and when Mr Samant was the Chief Officer at BOI in Singapore and Mr Mewawalla was in charge of BOI Tokyo. They had known each other well for a number of years and Mr Samant described Mr Mewawalla as a close acquaintance. Mr Samant said that most of his communications with BCCI in relation to the six transactions were with Mr Mewawalla, although he may have spoken to Mr Akbar when Mr Mewawalla was away. Mr Mewawalla was not called as a witness by either party, although he is said to be alive and well. At the time of these transactions he worked in the International Department of BCCI. Mr Dyson said that he had made substantial claims in the liquidation and during his cross-examination also stated that he did not allege that Mr Mewawalla was dishonest in relation to the transactions with BOI. Later, however, in re-examination, he said that what he meant by this was that although the liquidators believed that Mr Mewawalla was involved in the fraud, it was not possible to produce clear evidence to prove it. Mr Purle has invited me to infer that Mr Mewawalla was involved in the fraud, and I shall proceed on the basis that that is the liquidators' position. There does not appear to have been any immediate response to Mr Samant's request for a deposit, but by 12th November 1981 Mr Mewawalla had come back with a proposal. The terms of this are set out in a telex from Mr Samant to Mr G S R K Rao, who was then the Departmental Head of the International Department in Bombay. It records that BCCI was willing to place a deposit "not under lien" of £10m for three months at a rate of 15% per annum, on terms that BOI was required to lend this same amount to a borrower nominated by BCCI at 15+1/8% . There were to be no documents executed by the borrower and the only security was to be an irrevocable letter of guarantee by BCCI, the proposed terms of which are then set out in the telex as follows: "As per our recent telephone conversation we have pleasure in introducing the abovementioned customer to whom you have agreed to allow the following facilities on the terms and conditions mentioned below: Name of borrower:   Name of facility: Loan Period: Three months from date of loan Amount: Stg pnds 10,000,000 (sterling pounds 10 million) In consideration of your allowing the abovementioned facilities we hereby irrevocably guarantee the repayment on the due date of the principal amount together with interest at 1/8% over National Westminster Bank base rate. The borrower will have option to repay the loan before the due date by giving one month's notice. We thank you for accommodating the above client and look forward to the opportunity of doing business of mutual interest with you in the future. Unquote" Mr Samant goes on in the telex to recommend the proposal to Mr Rao because it would be what is described as a "pure" deposit and BOI would earn 1/8% per annum without any outlay of funds. The reference to it being a "pure" deposit is a reference to the categorisation of deposits by the Head Office of BOI for reporting purposes. In fact a deposit from BCCI would not have been (as Mr Samant accepted) a "pure" deposit. This was restricted to deposits from customers rather than from other banks. The importance of the reference in the telex is as an indication of the role played by the need to maximise deposits in motivating this transaction. The reference to interest being earned without any outlay of funds is also important because it confirms that Mr Samant knew that BOI would be at liberty to utilise the monies provided by the deposits in order to finance the loans to the nominated borrower, and Mr Samant and the other witnesses from BOI confirmed that without the use of these funds it would not have been possible to enter into the transaction. There then follows in the telex Mr Samant's explanation for what had been proposed. He said this: "BCCI is doing this obviously to show a good ratio of earnings against their advances. I do not think we should or even could go into detailed legal documentation because in the UK, no bank or licensed deposit taking company can afford to back out of its commitment in the eyes of Bank of England. I would have myself gone ahead with this transaction in view of urgency but since there have been some misgivings in the past about BCCI in Head Office, I thought of seeking your prior approval. I recommend approval without any hesitation. BCCI is a very big, aggressive institution with 45 branches in the UK." There is no note of the conversations between Mr Samant and Mr Mewawalla, and we are therefore dependent upon Mr Samant's evidence and such documents as do exist in order to try to reconstruct what passed between them. What is clear is that, if one looks at the proposals objectively for a moment without regard to what is said to have been discussed, they are on any view extraordinary. BOI, which had no real prior banking relationship with BCCI, at least in London, was being asked to lend £10m to a borrower which was to be nominated by BCCI but was not identified. There was to be no documentation for the loan (despite its size) and therefore no facility letter or loan agreement. It was to be unsecured by any charge over an asset of the borrower or the matching deposits which were to provide the funding. The only security was the letter of guarantee, the terms of which were misleading in that they indicated that BCCI had introduced to BOI a customer for a loan, whereas in fact the opposite was the case. The transaction was clearly driven by BCCI's desire to "show a good ratio of earnings against advances" and not by any decision on the part of the nominated borrower to obtain an offer of finance. Mr Samant says that he was told by Mr Mewawalla or by someone at BOI that the transaction involved replacing an existing loan to the borrower with a new loan from BOI for no apparent reason other than that BCCI wished to switch the loan to BOI. This was confirmed by the fact that BCCI would be worse off financially in that it would provide the funding for the loan via the deposit, but would earn 1/8% less on the deposit than BOI was to receive from the borrower, whose payments BCCI also guaranteed. The transaction therefore made no economic sense whatsoever and was only explicable in terms of BCCI wishing to produce better year end figures than could otherwise be achieved. I heard expert evidence from two bankers, both with considerable experience. Both Mr Challoner and Mr Wragg were agreed that the transaction outlined in the telex to Mr Rao could not have justified a positive response on the basis of the information revealed. Even if one ignores the obvious artificiality of the proposal and concentrates on the borrower, it was impossible for BOI to form any view about the purpose of the loans or the borrower's standing. Mr Wragg said that it had all the appearance and characteristics of a vehicle. Notwithstanding this, Maram (as it later turned out to be) was (on what Mr Samant says was his understanding of the arrangements) directly affected by the transaction in that it was, according to Mr Mewawalla's proposal, to terminate its existing loan facilities with BCCI and to enter into a new loan with BOI. This was not therefore a securitisation proposal in which Maram would play no part. The proposed transaction broke every rule of lending in the banker's book and that must have been obvious to Mr Samant, and for that matter to Mr Mewawalla, as experienced bankers. No-one has suggested that BOI conducted its banking business according to different rules. Neither expert had ever seen or heard of a transaction of this kind in practice, and in a letter to solicitors written the same day Mr Samant himself described the proposals as an "apparently strange deal". In these circumstances it must have been obvious to Mr Samant that this was not an ordinary loan transaction of any kind. Unlike in the SBI case, where the bank was approached by a representative of the borrower (Notan) for a loan on the basis that BCCI could not provide it at the relevant time, in this case it was BCCI which approached BOI and made no pretence of the fact that the transactions were to be put in place solely for its own benefit. The borrower took no part in the discussions with Mr Samant which led to his recommendation of the proposal to Head Office and was not even identified. There were, therefore, two obvious questions which any honest and competent banker would have asked and would have required to know the answers to. The first was why BCCI required assistance in this way. The second was the status of the borrowing which BOI was being asked to take on. According to the telex to Mr Rao of 12th November, BCCI's proposal from Mr Mewawalla was only received that day. Despite the highly unusual nature of what was proposed, Mr Samant was prepared almost immediately to recommend acceptance by BOI. No enquiries were made about the borrower, the purpose or status of the existing loans, or the reasons why there was to be such a singular lack of documentation. The passage quoted from the telex also suggests, by the use of the word "obviously", that the idea that BCCI wished to improve its earnings to advances ratio was one which Mr Samant came up with as an explanation, rather than one suggested to him by Mr Mewawalla. In an earlier statement of 7th July 1993 made to the police, Mr Samant makes no reference to the earnings to advances ratio point at all, but in his witness statement of 26th January 1998 in these proceedings he says that it was Mr Mewawalla who offered this explanation and sets out his understanding of what it meant. I shall come to this in a moment. When he was cross-examined about his discussions with Mr Mewawalla, he said that he had not immediately understood that the proposal involved the discharge of an existing borrowing. Not surprisingly, he was also puzzled as to why BCCI was prepared to forfeit a 1/8% interest differential to BOI. To use his words, he therefore went a little deeply into it, and it was then that Mr Mewawalla came up with the improvement of the earnings to advances ratio as an explanation. Mr Samant says that he did not take much cognisance of this at the time because he trusted Mr Mewawalla and BCCI as honest, but on returning to the office he consulted his colleagues as to how this could be done, and they told him that the only way was for certain existing advances to be paid off, thereby increasing the earnings on the balance sheet day as a proportion of the advances remaining outstanding. He also said, however, that Mr Mewawalla himself confirmed that the borrower to be nominated by BCCI would be an existing borrower, so that the loan would be used over the year end to reduce that borrower's indebtedness to BCCI. He accepted that the arrangements were not entered into to suit the borrower's purposes as opposed to those of BCCI, but on the basis of the BCCI guarantee BOI was happy to take on what was for it a risk-free and profitable transaction. At one point in the cross-examination the following exchange occurred: "Q. But the reason that the transaction was being suggested by Mr Mewawalla was because it suited BCCI's purposes; it was not for any purpose, that you were aware of, of the borrower itself? A. No, I was not aware of the borrower then at all. Q. But you were not aware of any other purpose of the borrower; the only purpose you were aware of was BCCI's purpose of improving its accounts? A. My own purpose was to improve the deposits and BCCI wanted to reduce their outstandings on this particular borrower, who might have been overdrawn. Q. But they are not ultimately reducing their outstandings, are they? They are simply entering into a transaction which gives the appearance of reducing them for a few weeks over the year end and then they are to be restored, are they not, and that was your understanding of the situation? A. Yes, it was going back to the account that it will restore the position, or probably they may have arranged for any other thing that the deposit will go back to BCCI. They may have meanwhile submitted a proposal to the head office to increase the limit of the borrower, because Bank of India has done it fairly often for customers whose drawings were about the sanction limit. We have requested them to go to another Indian bank but of course we did not give any guarantee for that, that is all. Q. Indeed, as you understood it, this was to be a borrowing under which BOI, as the proposal was originally put to you, would have no recourse to the borrower? A. Yes, I agree with you. In the sense that as long as BCCI guarantee was there, we are not really worried about the borrower at all." It is clear from these answers that, to use a phrase of one of the expert witnesses, Mr Wragg, the borrower added nothing to the credit standing of the transaction. Mr Wragg said that he would not have entered into the transaction on the basis proposed and that what was contemplated was unacceptable in banking terms. It was necessary to know the borrower. It was not appropriate to rely on BCCI's guarantee alone. In particular the reference to improving the earnings to advances ratio was not self-explanatory, nor was it obvious. His own analysis was that an improvement to the ratio (absent the removal of a bad debt) was only achievable if BCCI retained a flow of income from the borrower as the price of obtaining a BCCI guarantee. This was not a feature of this proposal, but even then the improvement would have been only marginal. This is the response to the proposal I would have expected from an honest and competent banker, and the liquidators are therefore entitled to ask why it was not Mr Samant's response at the time. The answer he gave was in effect that he simply accepted the explanation he was offered, thought it made sense and, because the transaction was almost risk-free and provided BOI with a £10m deposit, was prepared to go along with it. Throughout his evidence Mr Samant maintained a denial either that he thought or knew that the debts of Maram which were being transferred to BOI were non-performing or that he had reason more generally to suspect a fraud. In considering this evidence one needs, I think, to begin with the factual position in 1981 as we now know it to have been. Even by the time of the first transaction BCCI was faced with a considerable and significant deficit on the Khalil accounts and Mr Akbar had embarked on the fraud with which this action is concerned. Unlike in the case of SBI, where steps were taken to give the appearance that the application for a loan was initiated and pursued by Notan, no such pretence was practised in this case. Mr Mewawalla obviously felt able (and it must have been with Mr Akbar's knowledge and consent) to use Mr Samant's request for a deposit as an opportunity to ask for a favour in return. It is not disputed that Mr Mewawalla made it clear to Mr Samant that this was a transaction for the benefit of BCCI, which had as its purpose the improvement of its accounts or profits at the year end. It was not presented as a request by the borrower for a loan which BCCI could not fulfil, whether for capital adequacy or some other reasons. The borrower had no role of its own in this transaction and was quiescent. Mr Samant raised no objection to this because he was able to obtain the deposits he wanted, together with a modest profit on the transaction for little or no risk. BCCI provided the funding for the loan, a guarantee of repayment and would provide (as Mr Samant knew and accepted) the actual repayment of the loan by refinancing Maram's commitment after the year end. All that Mr Samant had to do was to agree to take part in the transaction and to be able to persuade Head Office to allow the transaction to proceed. Mr Samant and the other BOI witnesses were at pains to emphasise that they relied on BCCI's guarantee and therefore were less concerned about the status of the borrower. In a memorable passage in his evidence Mr Samant said this: " … but the whole point again, look, as far as the London office was concerned and head office was concerned, the whole proposal was on the guarantee of BCCI, and who the borrower was, was not really of any consequence at all in this transaction." But there is a world of difference between a loan to a borrower which, because supported by a bank guarantee, is risk-free and a transaction which, although in form a loan to a nominated borrower, is in reality and substance a loan to the bank itself. It is not possible to be certain whether it was Mr Mewawalla or Mr Samant who came up with the improvement of BCCI's earnings to advances ratio as a reason for the transaction, and ultimately it may not matter. I do not, however, believe that it came from someone in the office of BOI in London. I think that Mr Samant's use of the word "obviously" in the telex to Head Office of 12th November was designed to emphasise that this was an obvious and plausible explanation. The question is whether Mr Samant thought it was anything of that kind. There are a number of features of the evidence which are relevant to this. In the first place, it is clear that Mr Samant was not entirely at one with the explanation when he proffered it for the first time. Although he referred to BCCI wanting to show a good ratio of earnings to advances in his telex to Head Office, he wrote on the same day to the bank's solicitors, Messrs Lawrence Jones & Co, stating that the deal was required by BCCI to show increased earnings on their assets. When cross-examined about this, he said that this was a mistake and that he had intended to refer in the letter to advances rather than to assets. Secondly, there is the expert banking evidence I have already referred to, which confirms that the improvement of the earnings to assets ratio could not have been achieved in this way simply by an amendment to the balance sheet and, more importantly, that the ratio of earnings to advances was not in use at the time as a measure of performance. Thirdly, there is the manner in which Mr Samant attempted to deal with this point in his evidence. I would have expected him to have accepted that the explanation he gave to Head Office was (as we know) incorrect and to have explained why he came to be taken in by it. But what he in fact tried to do was to justify and support it as a possible explanation, when in fact it was not and could not have been correct. In paragraph 15 of his statement of 26th January 1998 he sets out an example to show what he understood the earnings to advances ratio meant and how it could be improved by transferred debt prior to the year end. In a later witness statement he reaffirmed this evidence and said that the liquidators were wrong to say that the stated objective could only be achieved by a fraud. Mr Samant was cross-examined about this. When asked whether he was surprised to learn that there was no statement in BCCI's balance sheet or even in its profit and loss account of any earnings referable to advances, and that all that was shown were total earnings from all sources, he went back to saying that there had been no reason for him to look into it and that he relied on Mr Mewawalla. He accepted whatever Mr Mewawalla said. But during August 1982, when consideration was being given to the request for approval of the second transaction, Mr Samant was asked by Head Office to send them a copy of BCCI's balance sheet for the year end 1981. On 3rd August he telexed to Mr Rege what he described as the salient features of the balance sheet, including deposits, total assets and total income. It is therefore clear that in the run-up to the second transaction he was in possession of the balance sheet for 1981, which on Mr Mewawalla's account of matters had been subject to modification as a result of the first transaction. He was then asked by Mr Purle to confirm that there were no figures in the 1981 balance sheet from which one could derive any ratio of earnings referable to deposits against the deposits during the year or any figure for earnings referable to advances. He had to accept that the figures in the balance sheet did not provide this information, but said he relied on what Mr Mewawalla had told him. When it was put to him that this could not be right, because he had actually looked at the balance sheet in 1982 and extracted figures such as the profit before tax, he said that he had only looked at the balance sheet for the purpose giving the salient figures to Mr Rege. He was then asked to look at the statement in the accounts that the operating results expressed profits as a return on average assets. It was put to him that the use of averages over the year as the basis of assessing any profit return was absolutely standard. His response once again was that he simply relied on Mr Mewawalla. Mr Purle then took him to the passage in his witness statement which I have referred to, where he seeks to explain how the ratio of earnings to advances could be improved by what was done. It was put to him that if one is dealing with average advances over the year, the only way in which the ratio of earnings to advances could be improved was by taking a bad debt off the books of BCCI. Mr Samant strongly denied that anything of the sort had been suggested to him, but accepted (as he had to) that Mr Purle was technically correct. He said that he had proceeded on the assumption that BCCI would not do anything dishonest, because their auditors would review the transaction. He also proceeded on the basis that the ratio would be calculated as at the year end and not by reference to an average over the year. Hence the explanation in his witness statement. I found all of this completely unconvincing. Mr Samant's evidence started on the footing that he understood the improvement of the ratio of earnings to advances to be a plausible explanation for what was being done. At one point in his evidence (on Day 4) he said that he thought at the time that this could be the only possible reason for the transaction. When, as I have indicated, it was put to him that it was in fact implausible and did not square with the way in which BCCI's balance sheet and accounts were prepared, he then changed his position and took refuge in saying that he simply accepted what Mr Mewawalla had told him unquestioningly. This is not, however, consistent with the fact that he looked at the 1981 balance sheet and accounts in 1982, at a time when Head Office was considering the proposal for a second transaction, and was clearly able to see from the way in which the accounts were prepared that Mr Mewawalla's explanation made no sense unless the loans to be removed were non-performing. Mr Samant gave no credible explanation as to why the points put to him and readily accepted by him during cross-examination were not obvious to him in 1982. To say that he simply relied on Mr Mewawalla is not an answer to this point. I do not believe that Mr Samant would not have looked at the 1981 accounts with these questions in his mind, particularly in the light of the questions which Head Office was raising. As I shall come to later, when I consider the second transaction in more detail, there is evidence that not everyone at Head Office was happy with the explanation which had been offered. There is an internal Head Office memorandum on which the Executive Director of BOI, Mr Shukla, has written a note (dated 2nd August) to Mr Rege, the General Manager in Bombay of the International Division, stating the Board "will require 'real' reason for this arrangement". Mr Rege is incapacitated and we have no evidence from him. But it seems reasonable to assume that the request for the 1981 balance sheet was not unconnected with the Board's desire to understand what was going on. Mr Samant said that he did not recall Mr Rege raising the query directly with him, but what he did say was that it was apparent on the figures extracted from the balance sheet that the conversion of even £25m from an advance to a bank deposit would have no real impact at all on the balance sheet. When it was put to him that the explanation he was offering to the bank did not hang together, he hesitated and merely repeated that this was the reason he had been given by BCCI. There was no attempt to address Mr Purle's question at all. On the same day (12th November) that he sent the telex to Head Office, Mr Samant also wrote to Lawrence Jones. His letter refers to a telephone conversation the previous day. This letter contains the description of the "apparently strange deal", but explains it by reference to BCCI's need to show increased earnings on their assets. It is important to note that the solicitors were not asked by Mr Samant or anyone else at BOI to comment on the desirability or correctness of what was proposed. They were asked only to confirm whether the amount of the loan would be recoverable from BCCI on the basis of the terms of the draft letter of guarantee in the event of the borrower not executing any documents. A response was required by the following day. They replied on 13th November in negative terms. They advised that the guarantee should be under seal and that the statutes of BCCI should be examined in order to confirm that the guarantee would not be ultra vires. In relation to the absence of documents from the borrower, they said this: "3. We note that so far as your Bank is concerned, you would not receive from the Borrower any signed document whatever. We comment it is exceedingly curious, and we would think most unusual, for a Bank to allow a loan facility without receiving in return any document from that Borrower. It seems to us that you would be hard put to recover the loan from the Borrower without any written documentation, and without any acknowledgment of loan. We doubt whether your Bank would be prepared to accede to such an arrangement whether or not there was any satisfactory guarantee backing you, whether from BCCI, or elsewhere. 4. We note that on the terms proposed the Borrower can repay on one month's notice, but in your turn you do not seem to have the right to repay early BCCI. Thus you might be left with £10M and be unable to place that money at even Natwest Base Rate. 5. We note that your Bank would not receive any security from the Borrower, and that the only security offered by BCCI is their guarantee. In regard to that guarantee we think that at the moment there is insufficient rights for your Bank to set-off your Bank's obligation to repay on the due date against that guarantee. By this we mean that BCCI will call for their funds which may not have been repaid to you by the Borrower and the guarantee, certainly in the form currently suggested, would in our view be ineffective as a "defence" to repayment." On 16th November Mr Samant replied to Lawrence Jones. He queried the suggestion that the guarantee would not be supported by consideration unless under seal and made the point that BCCI would not appreciate checks being made into its capacity to give a guarantee. On the question of documentation he said this: " On receipt of your considered opinion, I have discussed the matter with BCCI and they are agreeable to have a letter of request for a loan as well as any other simple security document executed by the borrower. Such borrower is likely to be a corporation (i.e. a limited company). As regards the period of deposit from BCCI and the period of advance to BCCI's customer, I had already advised BCCI that it will be the same in all respects but I am sorry I did not mention it in my letter to you. In brief, if the deposit is for three months the advance will also be for three months and there will be no option in favour of BCCI. In order to ensure there is no outlay of funds from our Bank, I have arranged with BCCI that they will lend us £10 million (which will be a deposit in our books) which in turn will be lent to the nominated customer of BCCI. If this amount is placed under our lien by BCCI, it will be reflected in their Balance Sheet and will not achieve the purpose for which this transaction is undertaken. I would, therefore, confirm that we certainly will not have the right of set off. I would, therefore, request you to draft for our Bank the minimum possible security documents to be executed by the borrower as well as by the guarantor, BCCI, as you deem fit to ensure the safety of the transaction. However, BCCI will not execute a guarantee under seal." Mr Samant was asked about this request that the solicitor should draft the "minimum possible" security documents. He accepted that this came from BCCI. When asked why it should be the minimum, he said that this meant only that the documents should be simple. But that is not what his letter said and I regard his explanation as untrue. The real oddity about this is that BCCI should have dictated the form of security to be given by the borrower at all. It simply went to emphasise how artificial this arrangement was and the extent to which BCCI was (and appeared to Mr Samant to be) in control of Maram and the whole transaction. Mr Samant's telex of 12th November and a copy of his letter of 16th November to Lawrence Jones were sent to Mr G K Rao, the Chief Manager of the International Department in Bombay. He responded on 17th November to the solicitors' advice that there would be no right of set-off. In the light of this, Head Office required there to be on record a suitable request from the borrower for the loan, stating that it would be guaranteed by BCCI. The document was to be drafted by Lawrence Jones. The telex set out two other important requirements: (i) that the borrower was to be approved by BOI, and (ii) that this was to be a one-time transaction and should not be treated as a regular arrangement. It looks from an annotated version of the 12th November telex, on which the comments of Head Office are typed, that Mr Rao and Mr Mitra recommended the proposal for consideration when it was received, but that queries were then raised. There was a note written by Mr Vaidya (one of the General Managers) on 13th November, asking whether BOI should do this for 1/8% profit. He was not in favour. There is also a note from Mr Shukla, the Executive Director, asking to discuss the matter with the Chairman and Managing Director, Mr Vaghul. Mr Rao's telex was responded to by Mr Samant on the same day. He confirmed that there would be a letter of request and resolution from the borrower company and that BCCI would execute a letter of guarantee, to be drafted by the solicitors. They would also draft a simple security document for execution by the borrower. In relation to the request for the borrower to be approved Mr Samant said this: "The borrower is a Grand Cayman company of a big Middle Eastern group banking with BCCI. The company (borrower) has only a nominal capital like any other tax haven company and its name will really signify nothing much to us." Although the telex does not say this, all the information in this paragraph came from Mr Mewawalla. Mr Samant did not yet even know the name of the borrower and had made no enquiries about it. Mr Purle put it to him that despite Head Office's request he was not concerned about this. He said that he was given the information about the borrower by Mr Mewawalla and it was good enough for him and the bank. But Head Office was not informed that the information had not been independently verified. On 18th November Lawrence Jones confirmed its advice that the BCCI guarantee should be under seal and covered by a certified board resolution. They enclosed a copy of the borrower's letter of request, but no security document. By now Mr Rao had drawn up a document summarising the points raise by Head Office in his letter of 17th November, together with the responses to the points from Mr Samant. These included the information about the borrower and the statement that the borrower would execute a security document. On the basis of these responses Mr Rege agreed to the transaction on a one-time basis and approval was given by Mr Vaidya, Mr Shukla and Mr Vaghul. Mr Samant was informed of this in terms on 19th November. Mr Vaghul said that it was for Mr Samant to identify the borrower and he assumed that this had been done. The security document was never executed, nor was the guarantee under seal. On 24th November Mr Samant sent a memo to Mr Chatterji, who was responsible for implementing the transaction at the London branch. It asks him to contact Mr Mewawalla to try to secure a guarantee under seal. If BCCI was unwilling to give a guarantee under seal, Mr Chatterji could accept a guarantee without a seal, subject to advice from Lawrence Jones. He was also asked to remind them to prepare the security document, which they appeared to have overlooked. In paragraph 9 of the note he said this: "Since the amount involved is large, please consult the solicitors at each stage and enter into the deal only after the documents are executed according to their satisfaction. I understand that 2 or 3 other banks have already completed similar deals with BCCI against a simple letter from BCCI as indicated in my telex of 12th November 1981." A copy of this document was sent to Head Office. On 26th November Mr Chatterji wrote to Lawrence Jones as requested. He had by now been supplied with a copy of the memorandum and articles of association of Maram and enclosed them, together with a copy of the draft board resolution and the letter of request. He also supplied a copy of the proposed letter of guarantee from BCCI (not under seal). Nowhere in the letter does he raise the question of the borrower's security document, nor was the board resolution of BCCI obtained. Mr Chatterji has produced a medical certificate. He is unwell and was unable to travel to London to give evidence. He did produce a witness statement dated 1st July 2002 based on the documents addressed to or initialled by him, but he says he has no independent recollection of the first transaction, which was the only one in which he was involved. His evidence is of very little assistance. It does not deal with his failure to obtain the security document, but does say that he would not expect Mr Samant or BOI to get involved in a fraud. None of this really helps me to resolve the issues in this action. Mr Samant accepted that he did not pursue the requirement for the guarantee to be under seal. But he could not explain why Mr Chatterji had not requested a board resolution from BCCI or why he had not come back to Mr Samant on the point. He would have expected Mr Chatterji to have raised with him any variation in the instructions contained in the 24th November memo. He volunteered, however, that BOI would not have provided such a resolution itself, and I can understand why. It seems to me that it would be most unusual in the case of an inter-bank guarantee for this to be requested or done. In relation to the security document Mr Samant said that he would have expected Mr Chatterji to come back to him if he had any difficulties in getting the document. He does not remember if this occurred. It is clear from Mr Chatterji's letter to Lawrence Jones that he had held discussions with Mr Mewawalla, and this is likely to have resulted in the dropping of the requests for a board resolution and for the guarantee to be under seal. It seems to me also highly probable that the security document was also abandoned as a result of the same discussions. That seems to me much more likely than that Mr Chatterji simply forgot to raise it with the solicitors in his letter of 26th November. This is confirmed by the fact that on 27th November Lawrence Jones wrote back to Mr Chatterji confirming that the documentation supplied was in order. Two paragraphs in the letter are important: "3. We agree with the Board Resolution as amended by you, assuming you are satisfied that Mr Khalil is a Director of the Company, and that you are satisfied that the Borrower Company remains properly constituted (we understand from our telephone conversation, that you are prepared to rely on BCCI on these points with which we concur). ………. 6. With reference to your penultimate paragraph, please refer to paragraph 6 of our letter of the 18th November, pointing out that the Bank of India will have no security from the Borrower Company, although you will of course have the guarantee of BCCI." It is clear from this that Mr Chatterji had spoken to Mr Mewawalla and had told Lawrence Jones that no further enquiries need be made about the capacity of Maram. Paragraph 6 is confirmation that no mention was made to the solicitors about a security document from the borrower. On the same day Mr Chatterji wrote to Mr Mewawalla, forwarding the approved drafts of the BCCI letter of guarantee and the letter of request and board resolution of Maram. No reference is made in this to any other document. The changes in the documentation expected by Head Office were not merely matters of administration which Mr Chatterji could be left to deal with on his own. It seems to me inconceivable that Mr Chatterji would not have come back to Mr Samant and informed him that Mr Mewawalla was unwilling to give the guarantee under seal or the resolution. The same goes for the security document. I do not believe that it was left out due to an oversight. The memorandum to Mr Chatterji of 24th November had been copied to Head Office to provide some assurance that the necessary precautions were being taken in relation to a transaction which had only been approved on the basis of the solicitors' advice about documents being followed. There is no evidence of anyone at Head Office being consulted about the changes agreed with Mr Mewawalla or even being informed about them. Of those at Head Office at the time, I heard evidence from Mr Mitra and Mr Rao and also from Mr Vaghul. Mr Vaidya is now deceased and Mr Rege is unwell and has provided no evidence. There is a witness statement from Mr Shukla, which was admitted on the basis that he is overseas in India, but he also produced evidence that he is in poor health and unable at the moment to travel. This medical evidence was challenged by Mr Purle, but it is not possible to take the matter beyond the doctor's confirmation of Mr Shukla's condition. His evidence is therefore contested. There are a number of recurrent themes in this evidence. As I have indicated, all the BOI witnesses were keen to stress that although the BCCI deposits provided the funding for the loans, there were no liens nor any rights of set-off, and BOI therefore relied solely on the guarantee. This evidence was partly directed to rebutting a particular aspect of the liquidators' case, which is that the reality of the transactions was that the loans were made against the deposits and ought not therefore to have been shown or characterised as free deposits by BCCI. This has echoes of a similar argument raised by the liquidators in the SBI litigation and it has a sequel in this case also, because in 1984 one of the General Managers of BOI specifically queried why the bank did not enjoy a banker's right of set-off in relation to the BCCI deposits. It is clear that BCCI was never willing to create a formal lien over its deposits. The experts were agreed that no bank creates charges over its assets, for obvious reasons of commercial credibility. But in this case the argument presented in terms to Lawrence Jones by Mr Samant was that any lien would have to be noted in the accounts and would therefore defeat BCCI's ability to treat its deposits as free placements. This in fact supports the view expressed by Mr Dyson and Mr Preece in the accountants' report they have prepared, that if under lien, the deposits would have to be set-off against the corresponding indebtedness. I shall come back to this point later in this judgment, but I mention it at this stage only to note that it is ultimately a side-issue. The real point to be made about these transactions (which none of BOI's then senior management was prepared to deal with in his evidence in terms) is that in substance, even if not in form, the transactions were circular. They all involved using BOI money to fund loans to Maram which would then be repaid with refinancing from BCCI. This is a bigger and more fundamental point than whether or not there was technically a lien or a right of set-off and therefore security from BCCI. The case against BOI is that the arrangements were, on the basis of what they knew, entirely artificial. They did not involve any real transactions with Maram at all, even though a legally enforceable loan came into existence. To use an analogy from a different branch of the law, the back-to-back transactions were all circular and preordained, and Mr Samant and BOI knew this. I have already examined Mr Samant's explanation as to why, at the time of the first transaction, he believed that the purpose of the arrangements was legitimate and not fraudulent. But what of his superiors? Mr Mitra and Mr Rao put the proposal up for consideration by the Executive Director and Chairman. Their evidence is that they saw no reason to reject it at that stage. Mr Mitra accepted that the bank was entirely dependant on BCCI's guarantee. He knew of no other case in which the borrower was to execute no documents. Nor was it obvious to him that the explanation was the improvement of BCCI's earnings to advances ratio. He said that he gave no real thought to what this meant and simply accepted it. He said that it was a window-dressing transaction. It was not something he was entirely happy about, but it was going on at the time on both sides. However, on the second day of his evidence he said that it was not window-dressing, but rather a deposit with a spread that was attractive to BOI. I regard this further evidence as unrealistic and an attempt to row back from his earlier concession that these were artificial transactions. But I am not persuaded that he had a complete picture of what was going on at the time or considered the implausibility of BCCI's explanation for the transaction. I accept his evidence that he really took what Mr Samant had told him at face value. When Mr Purle took him to BCCI's balance sheet and accounts, he readily conceded that it was not possible to extract a meaningful ratio from the information provided, but this was not an exercise he carried out at the time. As far as he was concerned, it was for others to make the enquiries. Mr Rao also had difficulty about recalling the transactions without reference to the documents. His written evidence is therefore largely a process of reconstruction and says virtually nothing about the issues which have arisen. All that he does is to produce the documents. He does, however, say that back-to-back transactions were normal at the time, and he was asked about this. It emerged that what he was referring to were money-market transactions involving the exchange of deposits, which the experts agreed was a form of window-dressing at the time. Their evidence was that window-dressing did not involve (as in this case) a transaction with a customer. The only example of this known to Mr Wragg involved Japanese banks who did transfer customer loans. But these activities did not take place in London and were not therefore subject to the same regulatory control. Nor was there any suggestion on the part of BOI's witnesses that they were aware of these at the time of the arrangements with BCCI or were influenced by them into thinking that what BCCI proposed was in any sense a normal commercial transaction. The only justification Head Office was offered was that provided by Mr Samant. Mr Rao was asked by Mr Purle about the requirement of Head Office that the borrower should be approved. He said that this was for the London branch to carry out. He was also asked about the references to the transactions being intended to improve BCCI's earnings to advances ratio. He was unable to explain how this could be achieved, and I do not believe he gave any real thought to it at the time or formed any view about its plausibility. Like Mr Mitra, it was for others to do that. I accept his evidence on these points. Mr Vaghul was also asked about his understanding of matters at the time of the first transaction. Like Mr Rao, he says in his witness statements that he has no independent recollection of the transactions and most of his evidence consists of reconstruction from the documents and assumptions by him as to what he is likely to have thought or done at the time. In his most recent witness statement he says that he would have accepted Mr Samant's explanation for the first transaction on the basis that it had been checked by senior managers at the bank. He had, he said, no reason to suppose that BCCI was fraudulently manipulating its accounts. He accepts that he gave approval for the first transaction under his delegated powers on 19th November 1981. His oral evidence was that it was likely that Mr Shukla would have been asked to talk to Mr Samant about the transaction prior to 19th November and that it would then have been discussed with him at board level. He has no recollection of such a discussion. He was, however, clear that Head Office did not accept that the borrower should execute no documents and wanted the borrower to be approved. He and the other senior executives accepted what Mr Samant told them about the borrower and assumed that if BCCI was to guarantee the loan, it was a substantial organisation. Mr Samant was left to work out the details. Of course that is not a real answer to the failure to make status enquiries of the borrower, because BCCI was not only to guarantee the loan, but also to finance its repayment. Its guarantee was therefore meaningless as a warranty of the creditworthiness of the borrower. As Mr Samant knew and Mr Vaghul should have realised, the loan would be repaid regardless of the quality of the borrower's covenant. Mr Vaghul accepted that he knew that the purpose of the transaction was to allow BCCI to take some loans off its balance sheet and to convert its liability into a contingent one under the guarantee. Unless the loan was non-performing, no provision would have to be made in the accounts for the liability, even if it was disclosed, and by the time that the accounts came to be certified the auditors would know that the loan had been repaid and the guarantee liability extinguished. Mr Vaghul was pressed by Mr Purle about Mr Samant's explanation for the transaction. He accepted that a meaningful ratio of earnings to advances would need to be based on average figures, but maintained that at the time there was no set formula or method for calculating profit ratios. One possibility was a calculation from year end to year end. Ultimately, however, he and the others acted on what Mr Samant told them. On the basis of this explanation and the security offered, they were prepared to go ahead. I think that much of Mr Vaghul's attempt to rationalise BOI's thinking on this matter is in the nature of an ex post facto rationalisation of the decision to go ahead. What he did not address in his evidence was the obvious unease on the part of some officers, such as Mr Vaidya and perhaps Mr Shukla, about what was proposed. I do not accept that this was solely attributable to a longstanding complaint about BCCI poaching BOI staff. I think that there was a genuine concern about the motives behind the transaction and its obviously unorthodox nature. But I do not believe that Mr Vaghul necessarily thought at this time that the transaction was obviously wrong or in any sense dishonest. I think that despite some misgivings Head Office was prepared on balance to allow the transaction to go ahead on the basis of the conditions set out in Mr Rao's telex and on the footing that the transaction would not be repeated. The latter condition is, I think, significant. For the purpose of the first transaction, therefore, they were prepared to accept Mr Samant's explanation at face value, despite their doubts to the contrary. As already indicated, the first transaction was completed on 2nd December 1981 by the placement of the £10m with BOI in London, maturing on 2nd March 1982. Mr Akbar signed the BCCI letter of guarantee on 30th November, referring to its having "introduced" Maram to BOI. The Maram letter of request (dated 1st December) bears the signature of Mr Khalil, with a direction to remit the loan monies to BCCI in Leadenhall Street "for credit of our £ Account No 01024640" with them. The BOI cheque of 2nd December is made out to this account and was signed by Mr Chatterji and Mr G B Sule, who worked in the Advances Department as an accountant. On the same day Mr Rao was notified that completion had taken place. The terms of this telex refer to the BCCI deposit and to BOI's "lending there against". This was relied on by the liquidators as a recognition that the deposits were, or were regarded as, security for the loan to Maram despite the earlier emphasis on there being no lien. Other internal records are consistent with this. There is an account statement for BCCI Overseas in respect of the first deposit, on which Mr Sule has written "under lien for loan". When the loan and the deposit became due for repayment, Mr Samant's secretary noted a telephone conversation with Mr Mewawalla in which he requested "both amounts payable by us and by them". The reference to "them" is relied on as indicating that the repayment of the loan and the deposit were linked, but it is also some evidence that Mr Mewawalla had no difficulty in referring to BCCI as the effective source of repayment of the loan. Maram Trading was apparently not mentioned. Mr Samant requested the figures from Mr Sule and asked him to give them to Mr Chatterji, who would speak to Mr Mewawalla. There is no record of any attempt by BOI to request payment of the loan from Maram or even to contact Maram directly in the Cayman Islands. The reversal of the entire transaction was handled in London between BOI and BCCI. After repayment had taken place Mr Samant sent a memorandum to Head Office advising them that he had "squared" the transaction between BOI, BCCI and Maram. The memo is headed "Deposit of £10m loan from BCCI and lending there against". This same description reappears in both the second and the third transaction in BOI's own documentation. Mr Samant said that Mr Sule's note about a lien was a mistake (which it clearly was), but there is a more general point to be made in respect of this material. What it shows is that Mr Samant and others at BOI did clearly look at the deposits as a source of repayment, even if technically there was no lien or even a right of set-off. Although Lawrence Jones were concerned about the security for the loan, Mr Samant was well aware that in practice there was no risk (absent perhaps the total collapse of BCCI). These arrangements were put in place to assist BCCI in the presentation of its financial position. Although a guarantee was given for the loan to Maram, it was inconceivable that BCCI (with or without a guarantee) would not ensure that the loan would be repaid. This had nothing to do with the regulatory consequences of failing to honour a guarantee in the City of London. It was simply that BCCI would not wish to renege on an arrangement of this kind, which was not in any real sense a commercial transaction, but rather a private arrangement designed to assist BCCI in a way which it would not wish to have publicly scrutinised. As already explained, BCCI was, and was always regarded as, the only source of repayment for the Maram loan, and BOI's own documentation simply recognises this. (b) The Second Transaction The first document relating to the second transaction is Mr Samant's telex to Mr Rege of 20th July 1982. It refers to recent discussions he had had with BCCI and to a proposal from BCCI for a deposit of £30m for four months at 12% per annum, with a corresponding loan to "the borrower nominated by them" at 12+1/8%. The telex goes on: " There will be a letter of request from the borrower (off-shore company), board resolution etc. The advance will be guaranteed by BCCI. We will ensure that deposit and advance will be for matching period. The entire documentation will be finalised by our solicitors. You are aware that last year, Head Office had kindly approved such a deal at my request for pounds ten million. I would recommend pounds thirty million this year because: 1) The amount will be 'pure' deposits 2) We get 1/8% interest differential without any outlay of funds. BCCI is a big, aggressive institution with 45 branches in UK. BCCI is doing this deal obviously to show a good ratio of earnings against their advances. Recommended." In response to this Mr Rege and Mr Mitra prepared a memorandum for the Board, which contains the figures extracted from BCCI's balance sheet and accounts for 1981. In paragraph 6 of that memorandum they said this: " The BCCI proposal now under consideration will result, without any outlay of funds on our part, in an income of about £12,500 (Rs. 2 lacs app.). Having regard to the attractive return and risk-free nature of the proposition, we recommend that BCCI offer be accepted." The memorandum is dated 2nd August, but looks to have been circulated to the Board on 9th August. It contains a summary of BCCI's 1981 results, which Mr Samant had also telexed and air-mailed to Head Office on 3rd August. The profit before taxation figure of US $124.7m is taken from the Consolidated Statement of Earnings in the Annual Report of BCCI Holdings. It is this document which Mr Purle put to Mr Samant (see paragraph 38 above) and which, under the heading "Operating Results", states that: "This profit expressed as a return on average shareholders' equity for the year was 20 per cent, while pre-tax profits produced a return of 2.06% on Average Assets for the year." The Board of BOI met on 9th August and approved the proposal for the loan and matching deposit over the 1982 year end on the terms set out in the memorandum of 2nd August. Prior to the board meeting Mr Shukla and Mr Vaghul had discussed and agreed to the transaction, but, as already mentioned, Mr Shukla had initially expressed doubts and had told Mr Rege that the Board would require to know the real reason for the transaction. This occurred on 2nd August. Mr Rege then contacted Mr Samant and on the same day he telexed back what he described as the "salient features" of the accounts. As I have already indicated, I am not persuaded that Mr Samant did not look at the BCCI Annual Report or that he failed to notice that the explanation given by Mr Mewawalla was inconsistent with the material available in that document. I say this because what prompted his sending the accounts material to Head Office was clearly the query raised by Mr Shukla. Mr Samant says that he did not discuss the matter directly with Mr Shukla and there is certainly no evidence that he did so. But it seems to me highly probable, and I find, that Mr Rege did raise the point with Mr Samant in their telephone conversation on 3rd August. This was, after all, the purpose of Mr Rege's call. Head Office already had the details of the transaction from Mr Samant's earlier telex and from Mr Rao's memorandum. Mr Samant said that he had no recollection of this. He said that the only explanation for the transaction was the one he had already given to Head Office. But it was of course this explanation which Mr Shukla had not accepted as real, presumably on the basis of his own consideration of BCCI's year end figures and the minimal impact which a transfer of even £30m worth of debt would have on the balance sheet figure for total advances of US $3.133bn. I consider that Mr Samant certainly did discuss this matter with Mr Rege on the telephone and that, faced with Mr Shukla's query, he was almost certain to have, and did, look at the Annual Report with those points in mind. There is no other documentation to explain what happened at the board meeting or in any prior discussions involving Mr Shukla. The board resolution of 9th August makes no mention of this matter, but simply approves the transaction on the basis of the information previously supplied by Mr Samant. During the trial Mr Hirst produced a witness statement from Mr Shukla, made on 24th November 2003, and sought permission to adduce it in evidence. I allowed it in, subject to reserving my decision on what weight, if any, to give to it. It was accompanied by the medical evidence to which I have already referred, stating that Mr Shukla (who is now 76) suffers from hypertension and has been advised not to travel. A suggestion that he should give evidence by video link was also rejected. In his witness statement he denies any dishonesty on his own part. He says that it is extremely difficult to recollect what happened, but that he may be able to reconstruct events from the documents. In paragraph 8 of the statement he refers to Mr Samant's explanation for the transaction (i.e. the improvement of the earnings to advances ratio) and says that he cannot recall his understanding of it at the time. He says that he now thinks that it means a transfer of assets from BCCI's books which would reduce the outstanding at the year end, giving a better interest spread against advances. This is the same explanation as Mr Samant gave in his witness statement. He disagrees with the suggestion that the explanation was either implausible or dishonest. In relation specifically to the second transaction and the memorandum of 2nd August, Mr Shukla says that he cannot now recall why he wrote the reference to the Board needing to know the real reason. But he says that the fact that the note is crossed through means that he had obtained a satisfactory answer from Mr Rege. He does not remember what it was. There is therefore no evidence from Mr Shukla of any positive recollection that the point was in fact answered at all, although it is clear from the documents that it was raised. I regard his statement that Mr Samant's explanation was neither implausible nor dishonest as little more than an assertion and it is inconsistent with the fact that at the relevant time Mr Shukla was far from satisfied that the explanation was either plausible or correct. Mr Vaghul, when asked about this on Day 12 of the trial, accepted that the removal of even £30m worth of loans from the balance sheet would not have any serious impact on the apparent earnings from a loan book of US $3.133bn. But that was not, he said, the central point in the decision-making process: " .... The central point in our decision-making process was not the reason why BCCI was doing this transaction, but the proposal essentially consisted of two sets. One is a loan to be given to a borrower to be guaranteed by BCCI with funds being provided by BCCI, for a matching period, to Bank of India. That proposal was standing on its own merits, regardless of the reasons advanced by the BCCI for doing this transaction. I would submit that on a hypothetical basis, if a proposal had come from Mr Samant making a proposition that: I have received a proposal to this effect, namely BCCI wants us to lend the money to a borrower to be introduced by them, for which they are willing to provide a guarantee and for which they are also willing to fund us for a matching period with an interest differential, we would still have approved of the transaction. The question of what were the objectives of the BCCI in doing this transaction to my mind are incidental to the transaction and not the central issue in our decision-making process. Q. But if you were given no reason you would want to know why on earth is BCCI doing this, would you not, to satisfy yourself that you were not getting involved in anything improper? A. Certainly, sir, we would have, and that satisfaction was provided when Mr Samant had given this explanation, which on a prima facie basis seemed to make sense to us." A little later in his evidence, however, he said this: " …. When this reasoning was given we applied a simple arithmetic, namely this is what -- I must at this stage say, sir, when we looked at that statement in 1981, we looked at that statement on the basis of a set of knowledge and beliefs which we had at that particular time, compared to the set of knowledge and beliefs which we have today. Today our knowledge and beliefs is based on the fact that BCCI committed one of the most massive frauds in the banking industry. It was hiding certain transactions from their auditors, it was not entirely truthful in whatever they were saying and some of its executives were also guilty of fraud. But in 1981, when we did the transaction, we operated on a set of knowledge and beliefs based on the fact that BCCI was a very respectable and responsible bank, based in London, which was considered to be the Mecca of the financial centre of the world, and secondly, it consisted of very competent professionals, some of whom were drawn from the Subcontinent and whom many of my colleagues knew to be very competent. And thirdly, when they make a statement there is no reason for us to believe that a respectable bank managed by responsible officials would like to make a statement which is neither truthful nor factually correct and we, looking at it from the head office, there was no reason for us to subject the statement to such intense scrutiny as is being done today on the basis of knowledge which was gained through a period of two decades." He was also asked about the discussions prior to the board resolution of 9th August. He accepted that Mr Shukla must have had doubts about Mr Samant's explanation and he thought it likely that he had a discussion with Mr Shukla and Mr Rege about it. He could not recall the details of the discussion, but he denied that he would have allowed matters to proceed if there were doubts which could not be resolved. The explanation, if any, given to Mr Shukla therefore remains a mystery. What, however, is clear is that Mr Samant's justification for the transaction was not initially accepted, even though approval was subsequently given. I shall deal later with the allegation made by the liquidators that this indicates that both Mr Shukla and Mr Vaghul were dishonest, because they must have realised that what they were being told by BCCI was untrue, but nonetheless decided to go ahead. When on 12th August Mr Samant learned that the transaction had been approved by BOI, he sent a telex to Mr Mewawalla, who was then in Bombay. It read as follows: "Dear Homi Reference our……discussion, my bank agreeable up to pounds 30 million (sterling pounds thirty million). Please keep your London office informed. I read in the press that you are painting the town red. How is Roshan? Our gang misses you both." Mr Mewawalla replied: "Many thanks yr tlx 12th Aug. Happy to know that you hv lined up arrangements as discussed. Shall conclude deal in 2nd week of Sept upon my return to Ldn. Heartiest congratulations on your promotion as DGM." I have referred to these simply to note the closeness and familiarity which existed between the two men at the time. Mr Samant then proceeded to contact Lawrence Jones. He wrote to them on 14th September, referring to BOI's intention to carry out an "exactly similar transaction" with BCCI and asking them to check the documents used on the previous occasion. The intention was to complete the transaction in about a week's time. By now Maram had been identified as the borrower. The letter of request and board resolution were prepared in the same form as before by Lawrence Jones and a complete set of the documents was sent by courier to Mr Mewawalla at BCCI. As in the case of the first transaction, he was the only person with whom BOI communicated. There was no direct contact at all with the borrower. The amount of the deposit and the loan changed, however, to £25m. There is no explanation for this in the papers and it was not referred back to Head Office. Completion took place on 22nd September and both the loan and the deposit were repayable on 22nd January 1983. Mr Samant said that he did not know why the figure was reduced from £30m to £25m. He was also asked about another curiosity. In BOI's records there is a credit advice prepared and signed by Mr Sule which records a deposit of £25m from Maram Trading. This is then shown as debited with a loan in the same amount, also to Maram. Mr Samant said that this was a mistake by Mr Sule and I accept that. (c) The Third Transaction On 7th October 1983 Mr Samant notified Head Office that he had received a proposal from BCCI for a deposit and matching loan of US $60m for a period of three to six months. The telex is in essentially the same form as the one sent to Mr Rege on 20th July 1982, including the reference to the "obvious" reason for the transaction. At the time £25m equated to about US $43m. A loan of US $60m was therefore a significant increase on the previous year. Mr Samant said in evidence that he was still meeting Mr Mewawalla regularly at this time. Maram was likely to be the borrower, but Mr Mewawalla asked him (as on previous occasions) to obtain what Mr Samant described as an omnibus sanction for the loan: i.e. one which was not limited to an identified borrower. It would then be possible to change the proposed borrower without needing to obtain further approval from Head Office. I accept that this was the basis on which Mr Mewawalla and Mr Samant sought sanction for the transactions, but it is a yet further indication of how unrelated lending was to the borrower which BCCI eventually nominated. The other point which was put to Mr Samant in relation to the third transaction was that he was aware by now that the loans to Maram were increasing with every year. This of course continued to be the case. The fourth transaction was for US $75m and the fifth and sixth transactions were for $50m, although Mr Samant had sought Head Office sanction for $100m and had been given sanction for $75m. He was asked whether this suggested the existence of a problem with the Maram debt. His answer was that this never struck him or anyone at Head Office at all, because BCCI was considered to be one of the premier banks. Although it is not possible to find, on the evidence before me, that BCCI had a dubious reputation in the City, it was clearly not in any sense a premier bank. Mr Wragg said that he would not have done business with BCCI at the time. I regard the repeated assertions of Mr Samant on this point as no more than an attempt to raise the reputation and standing of BCCI to a level which it did not enjoy at the time. I reject the suggestion that Mr Samant and BOI thought that they were dealing with an institution which had such a high reputation that no question about the appropriateness of its dealings need ever be asked. It is also clear that Mr Shukla, at least, was not prepared to take BCCI's explanation of the transaction in question at face value. It seems to me that any honest and competent banker would not fail to note the rising amount of debt in each successive year. If the real reason for the transactions was to lift this debt off BCCI's books, it must have been obvious to Mr Samant by the time of the third transaction (and probably by the time of the second) that Maram's indebtedness to BCCI was increasing. There is no suggestion that he asked for an explanation of this or was told that it was due to Maram's increased trading activities being financed at a higher level by BCCI. Mr Samant would have realised that there was a high degree of probability that the loans were not performing and that Maram's financial position had significantly worsened since the last transaction. The fact that none of these enquiries or concerns were raised, either with Mr Mewawalla or more particularly with Head Office, is, I think, some of the clearest evidence that the "obvious" explanation for the transactions was not regarded by Mr Samant as either real or relevant. It seems to me much more likely that Mr Samant realised or was told that Maram simply provided BCCI with a means of receiving back its own money to assist it in reorganising its year end results. This is, I think, confirmed by the way in which Mr Samant answered Mr Purle's questions on this subject. Faced with the suggestion that an ever-increasing amount of debt did not give the appearance of a performing loan, Mr Samant (on Day 6 of the trial) gave this explanation: "Q. That does not look like a performing loan? A. Why not? From the best of accounts at the end of the year, in fact it would be their very good account that they will try to take it out of the balance sheet because they would be confident at the end of the year that money will be given back to them because he is a good customer." That answer was of course in complete contradiction to Mr Samant's earlier evidence that he knew, even in relation to the first transaction, that Maram had no means of repaying the loans except with the benefit of re-finance from BCCI. The transaction was sanctioned by Mr Shukla and Mr Rege as early as 8th October. A typed note by Mr Mitra on the Head Office copy of Mr Samant's telex refers to Mr Vaghul's approval of the two previous transactions and the attractive returns provided by a risk-free proposition. The matter would be reported to the Board of BOI for confirmation in due course. Mr Vaghul was on leave at this time and was about to leave the bank. He was not involved in the decision to approve this transaction. When the matter was considered by the Board on 26th October, Mr Shukla chaired the meeting. The Board was asked to consider a memorandum from Mr Mitra which summarises the terms of the transaction and refers to the earlier approvals. It also contains what are described as the highlights of BCCI's operating results during 1981 and 1982. Paragraph 6 of the memorandum states: "The BCCI proposal will result, without any outlay of funds on our part, in an income of about US $18,750- to US $37,500- (Rs. 1.87 to 3.75 lacs approximately) depending on the maturity date of the deposit/advance. Having regard to the attractive return and risk-free nature of the proposition and since BCCI wanted our consent to this transaction before 11th October, 1983 this was approved by the Executive Director on 9.10.1983. We now seek the Board's confirmation therefor." Mr Shukla in his witness statement of 24th November 2003 also refers to this board meeting, but has no recollection of it. In paragraph 15 of the statement he then sets out some comments on the earnings to advances ratio and says that he did not consider this to be an irrelevant quotient at the time. He disagrees with the liquidators' case that no useful analysis of the ratio could be carried out except by reference to an average over the year, by saying that: "The motivation for mobilisation of deposit is spread by giving advances. When the earnings ratio against advances improves it gives a better spread and thereby a better position." I find this difficult to follow, but I also do not accept that this is other than an attempt to rationalise the decision taken at the time. As Mr Shukla cannot recall how his doubts about the ratio explanation were resolved in relation to the second transaction, I do not see how he can claim to be better placed in relation to his recollection of the third. I attach no weight to this evidence. On 12th October Lawrence Jones were contacted by the new manager of the London branch, Mr Raina. They were not asked for general advice and were told that there was to be an "exactly similar transaction" with BCCI, except as to amount. They were asked to check the draft documentation, which on this occasion BOI had prepared itself, based on the documents previously used. The enclosures did not reach Lawrence Jones until 14th October. Later that day Lawrence Jones telexed back their response to BOI. They again recommended that BCCI's guarantee should be covered by a board resolution, but Mr Raina rejected this as unnecessary. Lawrence Jones also stated that BOI should be satisfied about the authority of the persons who would sign on behalf of BCCI and Maram, but again Mr Raina has written on the telex that this was the responsibility of BCCI, who would have the signatures on record. Mr Samant endorsed this approach. The documents signed by the borrower and BCCI took the same form as those used for the earlier transactions, and Mr Raina in his witness statement accurately refers to it as the standard documentation. Mr Raina was also involved in drafting Mr Samant's telex of 7th October. He was asked about the reference in it to the improvement of BCCI's earnings to advances ratio. Mr Purle asked him why it was the "obvious" reason for the transaction. He said that he relied on what Mr Samant had said, but on further cross-examination he said that Mr Samant had not explained the matter to him and no detail was gone into. It became clear, as his evidence proceeded, that Mr Raina neither understood what the explanation for the transaction really was nor how it was supposed to work. I do not in fact believe that there was any real discussion at all between Mr Samant and Mr Raina on this point. Like Mr Chatterji before him, Mr Raina was only really concerned to implement the transaction which Mr Samant had negotiated with Mr Mewawalla. It seems clear to me that he had no input into the thinking behind it and based the 7th October telex, almost word for word, on the documents used for the second transaction. One novel feature, however, of the third transaction was that it was to take place in two parts or tranches, as they were referred to, of US $30m each. The first reference to this is in the letter to Lawrence Jones of 12th October, although it was not referred to in the memorandum prepared for the board meeting, and the Maram resolution and loan request referred to a single loan of $60m. However, in a letter from Mr Mewawalla to Mr Raina of 27th October reference is made to BOI's agreement to dispersing (sic) the loan not in two but in three tranches, on 1st, 3rd and 7th November. Mr Raina was asked about this. He said he could not recall why BCCI wanted things done this way, but because they did want it, BOI released the loan in three tranches of $20m each. Mr Samant said much the same thing. It seems to me highly likely that BCCI wished to arrange the drawdown of the loan over three days simply to make it less prominent, but the evidence of Mr Samant and Mr Raina on this is further confirmation of the willingness of Mr Samant to accommodate whatever Mr Mewawalla required. The US $60m was disbursed in three equal tranches on 1st, 3rd and 7th November. There then followed some correspondence from BOI to Mr Mewawalla, which is relied upon by the liquidators as further evidence of BOI's alleged willingness to accommodate BCCI's desire to conceal the link between the deposits and the loans. On 8th November Mr Raina sent to Mr Mewawalla a letter relating to the $60m loan to Maram, which set out the dates of release of the three tranches and, underneath that, the details of the three corresponding deposits. We also have copies of another letter of the same date, addressed to Mr Mewawalla, which refers to the three tranches of the loan, but contains no details of, or reference to, the matching deposits. The letters were to be sent by Mr Raina, but were prepared by Mr Dighe, who worked in the Manager's Department. His evidence was somewhat confused. He said that he thought both letters were sent, but was not sure. In his witness statement he says that the shorter letter was composed first, but in cross-examination he said that he had no actual recollection of that. He then said that both letters had been prepared at more or less the same time. He was then shown a further letter of 9th November, also to Mr Mewawalla, which contains details of the three deposits. He said that that was prepared a day later and, he thought, was sent. When Mr Purle asked him why it was necessary to divide up the longer of the letters of 8th November into two parts, he could give no reason. Mr Raina's evidence was that he does not know which of the letters was sent, but cannot think of a reason to send both types of letter. The most likely sequence of events, and the one I am satisfied did occur, was that the longer letter was drafted first, but, when sent to BCCI, was rejected by Mr Mewawalla because it did forge a link between the loans and the deposits. This is, I think, further evidence that Mr Mewawalla was a knowing party to BCCI's fraud. He then contacted BOI and arranged for the contents of the letter to be split. Separate letters were then sent, covering the loans and the deposits. Mr Samant said that he did not think it made any difference at all which of the various letters was sent, but it clearly did matter to BCCI. (d) The Fourth Transaction This began with a handwritten memorandum from Mr Samant to Mr Raina dated 21st June 1984, in which Mr Samant says that Mr Mewawalla has telephoned to say that BCCI would be interested in "their usual deal" for US $60m from 15th August to 15th November 1984 and again from 15th December 1984 to 15th February 1985. Mr Raina was asked to submit a memorandum to Head Office for approval. Mr Samant suggested that approval be sought for a sum of $75m and that: "We do it in small lots every fortnight say $20m or so - this you could discuss with Mr Mewawalla at the appropriate time." There is a signed note in manuscript by Mr Raina referring to two options: a loan and deposit from mid-August 1984 to mid-February 1985 or two periods with a break. The terms of the proposal sent to Head Office were first set out in a draft memorandum from Mr Raina dated 5th July. It contemplates a deposit and matching loan for a period of three to six months with the usual turn of 1/8%. Someone has altered this in manuscript to 1/16% and the memorandum was sent to Head Office on 26th July with this change. In paragraph 5 of the memorandum it is stated: "The loan may be disbursed in 3 or 4 tranches. But it will be ensured that the maturity date of deposit and due date of loan match, so that deposit is not repaid before loan is due and we do not need to borrow funds in the market. Further the loan will be paid on due date only." Paragraph 7(ii) states: "BCCI is a vast organisation with a large network in U.K. and it wishes to enter into these deals to show a good ratio of earnings against its advances." Head Office queried the reduction in the differential rate of interest on the loan to 1/16% and BCCI agreed to restore the 1/8% figure. By now it was 2nd August. Mr Mitra then prepared a memorandum for the Board of BOI dated 3rd August in similar form to the ones relating to the second and third transactions. Approval was sought for a deposit and advance for a matching period of three to six months. The Board was told (as on previous occasions) that the purpose was for BCCI to show a good ratio of earnings against its advances, and reference is made to similar transactions in previous years. On 9th August the Board gave its approval and Mr Samant was able to telex Mr Mewawalla on that day, telling him that "our deal cleared as discussed". On 10th August Mr Samant received a telex from Head Office confirming that approval had been given, but emphasising that "the borrower must be acceptable to you". There is no suggestion that this led to any further checks in respect of Maram. The telex also requested details of the borrower in the last three transactions "when established". Mr Raina asked Mr Dighe to respond to this enquiry and the information was sent that day. At the same time Lawrence Jones were instructed to check the documents for this "exactly similar transaction" which, as on the last occasion, had been prepared at the London branch, based on previous drafts. On 22nd August Mr Mitra submitted to the Board of BOI a report on what are described as the legal aspects of the proposed fourth transaction. This report had apparently been requested at the time of the 9th August meeting. The report refers to the role of the solicitors in each transaction and to the fact that before the first transaction in 1981 the solicitors had advised that BOI should obtain a certified copy of a board resolution from Maram and that, apart from BCCI's guarantee, the bank would have no security in relation to the deposit. No mention is made in this memorandum of the failure of the London branch to press for a security document from Maram itself or to obtain a board resolution from BCCI. The report concludes with this paragraph: "As regards the security of repayment, the Chief Manager, UK & European Branches had advised in 1981 that no bank or licensed deposit taking institution in the U.K. could afford to go back on its commitment in the eyes of the Bank of England. For all the past 3 deals BCCI's nominee borrower has been a Grand Cayman Company called Maram Trading Co. Ltd. and in each case the deposit and the corresponding advance were repaid on the common due date." At this stage Mr H N Vesuvalla, BOI's General Manager (Law), became involved. He had been at the board meeting on 9th August and there is a note in his handwriting requesting the London branch to supply him with copies of the earlier advice received from Lawrence Jones which were referred to in the report of 22nd August. On 8th September he wrote to Mr Samant querying Lawrence Jones' advice that BOI would have no right of set-off against the deposits in respect of BCCI's liability under its guarantee. He asked for the matter to be reconsidered. Mr Samant responded on 27th September. He had been away in Bombay, but on his return to London on 22nd September he asked Mr Raina to refer the matter back to Lawrence Jones. In his reply to Mr Vesuvalla he said this: " I could not agree with your views more. BCCI is not prepared to give a letter of set-off because they will not be able to show the amount as a 'free' lending to another bank. Hence the deposit is backed by a letter of guarantee. I would entirely agree with you that our Bank would be entitled to set off against the liability of BCCI under its guarantee against the deposit payable by us to BCCI. I would certainly make a reference to our Solicitors once again. But I would rather go by your considered opinion than by our Solicitors' opinion in U.K." Mr Raina referred the matter back to Lawrence Jones on 2nd October. They replied the following day. They agree that the existence of the guarantee would provide the basis of a right of set-off, but made the practical point that it would be incapable of being exercised if the deposits became due and were repaid before the date for repayment of the loan. It would therefore be necessary to ensure that the deposits became repayable on a date after the date on which the loans themselves fell to be repaid. Mr Vesuvalla's belief that a right of set-off existed, and Mr Samant's agreement with him, runs contrary, of course, to Mr Samant's insistence during his evidence that BOI had no security over the deposits. He was asked about this in cross-examination and said that he agreed with Mr Vesuvalla out of deference to him. In his witness statement he also says that the letter of 8th September from Mr Vesuvalla was a private and confidential letter written to him on an informal basis. It is quite clear to me that it was nothing of the sort. Mr Vesuvalla had almost certainly raised a query about this point at the board meeting and the Board had directed it to be looked into. It was not (as Mr Samant suggested) a private enquiry, made only out of academic interest. This episode seems to me to be an instance of Head Office expressing natural concern about their rights in relation to the deposits. Mr Samant readily accepted Mr Vesuvalla's point when it was put to him at the time, and his subsequent insistence in these proceedings that no such rights had existed and that he was simply agreeing out of respect is wholly disingenuous. By early September the London branch had been informed by BCCI that instead of a single loan and deposit extending into 1985, there were to be two loans: the first of 18th September to 18th October 1984 and the second from 18th December 1984 to 18th January 1985. This was confirmed in a letter from Maram dated 10th September 1984, purportedly signed by Mr Khalil, which begins with the words "As per our telephone conversation". Neither Mr Raina nor Mr Samant ever spoke to Mr Khalil or to anyone else at Maram and the terms of the letter were, to their knowledge, a fiction. But more important is the fact that, not being spread over BCCI's year end, the justification of improving the earnings to advances ratio, which was referred to as the reason for the transaction in Mr Raina's inter-office memorandum of 26th July and the memorandum before the Board of 3rd August, could not possibly apply. We know that the reason for having the fourth transaction in place in September and October 1984 was to cover the initial audit confirmation period. Mr Samant said that he was not aware of that, but when asked how the fourth transaction could achieve the purpose stated in the memorandum, he accepted that it could not: "Q. And the usual deal, according to what you said in your evidence before, was calculated on BCCI's part to improve its assets to advances, its earnings to advances ratio? A. Yes. Q. The first deal would not do that? A. It would not, but the second deal would do and they were prepared to do both the deals, so I presume that if only the first deal is done, they would not have done the second deal in any case, because that is how -- Q. Why do you refer to the first deal as being part of the usual deal; it is not, is it? A. It is not usual in the sense that is how he mentioned. It only means that: this is the kind of deal, the way that you did it all along, that we will give you a deposit and you give an advance to our customer. I am not so precise in this handwritten note on the basis of what he mentioned to me. It is not verbatim mentioned, because these are only the points which are mentioned." A little later this exchange occurred: "Q. Did you discuss with Mr Mewawalla the purpose of this transaction? A. No, I did not, because as far as I was concerned, my purpose was to have the deposit and his purpose, he had already mentioned that: it will improve my ratio. Q. What on earth was the purpose of having it two periods, one from August to November and then from December to February? A. He is straightaway putting the two proposals together, so my purpose is sufficiently served by the second. Q. Is that really it, Mr Samant, that you thought the second proposal squared with what had been done previously, so, therefore, you did not have to ask any questions about the first? A. Yes, there was no reason for me to ask, because as far as Mewawalla was concerned, now, I was sure he was an extremely honest man and BCCI, we never thought would do anything which was not honest and correct. Q. You have said that on several occasions, Mr Samant, but I suggest to you that you, certainly by this stage and I would suggest from a very early stage, appreciated that this was a dishonest transaction that BCCI was indulging in. A. I did not know, nor did anyone from head office, who were always in sort of absolutely in knowledge of most of the banks that they dealt with." Mr Raina says in his witness statement that the memorandum to Head Office sent in July would have been approved by Mr Samant. Mr Samant in his own supplementary witness statement refers to the memorandum of 26th July as describing the transaction in much the same way as previous transactions and repeats by reference his earlier comments on the objective of improving BCCI's earnings to advances ratio. I am afraid that I do not accept or believe the evidence given by Mr Samant in cross-examination. I regard it as no more than an attempt by him to provide an explanation for the fourth transaction once Mr Purle had pointed out the obvious inconsistency between the timing of the transaction and the explanation offered in the memorandum of 26th July. That point was, in my judgment, as obvious to Mr Samant then as it is now and it indicates a willingness to accommodate BCCI without any regard to the supposed justification for the transactions, and indeed in the knowledge that the explanation originally offered could not apply. (e) The Fifth Transaction This was intended (and was referred to in Mr Samant's note of 21st June) as the second part of BCCI's "usual deal" involving a deposit and matching loan of US $60m. As already indicated, the first part of the transaction (the Fourth Transaction) was implemented on 18th September 1984 and repayment occurred on 18th October. In Maram's letter of 19th September 1984 the request was made for a loan of US $75m for the periods from 18th September to 18th October and from 18th December to 22nd January 1985. In the event, however, the fifth transaction took the form of an exchange of deposits in the sum of $50m between BOI and BCCI, notwithstanding the loan request of 10th September and a Maram board resolution of the same date, referring to the request for the two loans. As mentioned earlier in this judgment, the transfer of funds to BOI on 18th December was recorded in BCCI's books as an inter-bank placement at a rate of 9%. This sum was then lent back to BCCI at the same rate of interest. There is no internal BOI documentation which explains why the fifth transaction took this form and why the "usual" arrangements of a loan and matching deposit were not repeated. In his witness statement of 26th January 1998 Mr Samant says that he has no recollection of the fifth transaction and provides no explanation for what was done. But he says this: "[It] would have been carried out for the same purpose, namely, to increase BOI's deposits for balance sheet purposes. What BCCI did with BOI's deposit of US $50m was not something that BOI could enquire about." This of course misses the point. The real question which arises from the fifth transaction concerns BCCI's purpose in carrying it out. Just as the fourth transaction (not being over the year end) could not have improved BCCI's earnings to advances ratio, neither could the fifth transaction. On the face of it no debt was transferred. All that BCCI had to show from the transaction was a loan to BOI. In cross-examination Mr Samant repeated that he had no real recollection of the transaction, although he accepted that he would have been aware at the time of the reasons why things were done in this way. He said he had been away from 10th August until 27th September, but as of 10th September Maram had written requesting a loan in December. Both he and Mr Raina suggested that the absence of a loan was probably due to the borrower not wanting a further advance. But this is nonsense. None of the transactions involving Maram were motivated by any desire on the part of the borrower for a loan. It was the essence of the scheme, as put forward by BCCI, that Maram had an existing loan which was to be transferred temporarily over the year end. Mr Samant (as he accepted) was well aware of this at the time. Mr Samant was also asked how the fifth transaction squared with the objective of improving BCCI's earnings to advances ratio. He said that he assumed that BCCI (like BOI) wanted to improve its deposits. He accepted, however, that he had not sought board approval for an exchange of deposits in the sum of $50m. He regarded what was done as a simple money market transaction for which no further approval was necessary. I find Mr Samant's explanation for this transaction unconvincing. For the reasons already given, I regard his suggestion that there was no loan because Maram did not want one as no more than an attempt to find some justification for the transaction, however implausible. I do not believe that Mr Samant thought that this was the real reason. At this point in his evidence he was clutching at straws. The past history of these transactions indicates that any significant change in the structure of the dealings would have involved discussion between Mr Mewawalla and Mr Samant, and this would have been no exception. The real reason for the change is difficult to ascertain. The necessary Maram documentation was already largely in place. One possibility is that by now those at BOI who were dealing with the transactions simply abandoned any pretence that the advances they were making were payments to Maram rather than to BCCI. This was put to Mr Samant, but denied. The importance, however, of the fifth transaction is that those at the London branch felt able to jettison the arrangements, as put to and authorised by the Board of BOI, and simply to lend the $50m deposit money back to BCCI. No explanation appears from the documents to have been sought from Maram or BCCI as to why no debt was to be transferred. Mr Samant's explanation that this became a straightforward money market transaction is also inaccurate. As with all the other transactions, BOI utilised the BCCI deposit money in order to make the loan. This was no exception. The $50m deposit with BCCI was made with the foreign currency which it supplied. The money was simply lent back. On no view was this an ordinary money market transaction and neither banking expert was prepared to treat it as such. The evidence is that banks did in the earlier 1980s conduct window-dressing transactions in the form of short-term deposits and loans from the money market. But these transactions did not involve exchanges of matching deposits between the same parties. Mr Wragg said that the fifth transaction was not really what he would describe as a form of window-dressing. Most window-dressing designed to improve a bank's liquidity was genuine and economic. It involved deciding what to do with available assets at a year end. Deposits obtained on the money market would usually be placed with another bank and differentials in the interest rates payable on the amount deposited and the amount borrowed could be mitigated by a process of "mismatching": i.e. placing the deposit for longer than the period for which the deposit was taken. BOI could not do this because it never had the necessary resources. It was dependent on using the BCCI deposits. It could therefore only ever lend back to BCCI, or to a nominee of BCCI, on terms which would secure for it a positive return over the same period. The transactions were entirely circular and the fifth transaction is perhaps the most obvious example of this. The Bank of England Interview On 31st January 1985 Mr Samant and Mr Raina were called to a meeting at the Bank of England with Mr Atkinson. There is a detailed note of this meeting, taken by the Bank of England, which Mr Samant accepts as accurate. The meeting was called to discuss fluctuations in the balance sheet of BOI and what is described as "the reciprocal transaction with BCCI". The note records: "Samant admitted that these transactions were 'window dressing', and that they had had such an arrangement with BCCI for the past three years (at HO's instigation, naturally!). JBCA warned B of I that such transactions were neither attractive nor acceptable, saying that whilst many banks indulged in window dressing, there were limits. He told Samant to warn Bombay not to indulge in such practices through London." Mr Samant said in evidence that the description of "window dressing" came from Mr Atkinson, but he accepted it. It was put to him that the reciprocal transaction with BCCI referred to in the note must have been the December 1984 exchange of deposits (the fifth transaction) and that the reference to BOI having had "such an arrangement" with BCCI for the past three years indicated that Mr Samant had told them that the earlier transactions took the same form. Mr Samant denied this. He said that he explained to Mr Atkinson how BCCI provided a deposit and BOI granted a loan to one of their borrowers with the benefit of a BCCI guarantee. When it was put to him that there was no record in the note of any mention of Maram in the previous three years of transactions referred to, he said that he did not necessarily mention Maram by name, but did explain that the transactions involved a nominated borrower. I am not satisfied by this account of the meeting and I do not believe it. The note kept of the 31st January meeting is extremely detailed and indicates a high level of dissatisfaction with a number of aspects of BOI's lending. It seems to me most unlikely that, had Mr Samant in fact explained to Mr Atkinson how the earlier transactions had been structured, this would not have been recorded. The language of the note strongly suggests that Mr Atkinson was led to believe that the earlier transactions with BCCI consisted of mutual exchanges of deposits. It is, I think, significant that Mr Samant did not suggest in evidence that he told Mr Atkinson that the earlier arrangements involved taking an existing loan off BCCI's books or that he told Mr Atkinson the ostensible reason for doing this. I think that the disclosure of those facts would not have gone unrecorded. Mr Raina said that he did not remember Maram being mentioned at all at the meeting. What I believe Mr Samant did was to considerably understate the arrangements between BOI and BCCI and to avoid any mention of the involvement of Maram or the transfer of debt. Some corroboration for this can be found in the fact that he told the Bank of England that the transactions with BCCI were entered into at Head Office's instigation. This statement was, to Mr Samant's knowledge, untrue. Yet he had no difficulty about attempting to transfer responsibility for his actions to Bombay. He denied saying this and suggested that all that he had told Mr Atkinson was that the transactions had been approved by Head Office. I do not believe that evidence either. Finally, when he was asked whether he passed Mr Atkinson's warning on to Bombay, he said that he could not remember. There is, however, no documentation to indicate that the warning was passed on and Mr Mitra's evidence was that he had no recollection of being told about it. (f) The Sixth Transaction This began with a telex from the London branch to Head Office on 30th August 1985, recommending approval for a deposit from BCCI of US $100m and a matching loan to a nominated borrower in the same sum at a differential rate of interest of 1/16%. The telex indicated that the loan might be advanced in tranches or as a single sum. The modus operandi was to be the same, but the loan might be disbursed at BOI's Paris branch. Mr Samant left BOI on 30th June 1985 and said that he had no personal knowledge of this transaction. Mr Raina took over from him as Chief Manager of the UK and European branches of BOI from that date. Despite the warning given at the meeting with the Bank of England, he recommended the transaction for approval. It seems to me that there are only two possible conclusions to draw from this. Either the warning given at the meeting was regarded by Mr Raina as limited to mutual exchanges of deposits because this was the only type of transaction discussed at that meeting or Mr Raina simply decided to disregard the warning and recommend approval. Mr Raina gave evidence which suggests that the former is the more likely explanation. He said that he regarded the mutual exchange of deposits as a different sort of transaction from those involving a deposit and matching loan. But this, of course, is further evidence to support my earlier view that Mr Samant did not disclose to the Bank of England the true nature of the earlier transactions with BCCI. The source of the suggestion that the loan should be disbursed in Paris is not clear. Mr Raina said that it came from Head Office, but I am not persuaded of this. It looks as if the suggestion came out of the London branch, because on the copy of the telex received at Head Office Mr Rao has written: "No - because of restrictions" against the reference to the Paris branch. On 4th September Head Office telexed back to Mr Raina querying the 1/16% differential and asking for the usual 1/8%. More importantly, it also asked Mr Raina to advise on the nature of the business of Maram, its owners, directors, net worth and the purpose of the advance. There is also a manuscript note on the telex written by Mr Mitra, which refers to a previous enquiry from the Reserve Bank of India ("RBI") requesting the same particulars. Mr Raina did not see this note, but he was told about the RBI enquiry in a telephone conversation with Mr Mitra on 30th August. Mr Mitra had been telephoned by Mr Sarma of RBI earlier that month and asked for details about Maram. Mr Mitra then passed the request to Mr Raina. These enquiries appear to have been part of RBI's periodical inspection of the London branch rather than a result of any specific concern, but they were regarded by Mr Mitra as important. On the copy of the telex received in London Mr Raina wrote some notes, referring to these enquiries from Head Office and the RBI. He has referred to the business of Maram as "investing in property and trading activity in the US and other places" and the purpose of the loan as "short term trading requirements". This information was then sent to Mr Mitra at Head Office on 5th September, who said that he passed it on to Mr Sarma. Mr Purle asked Mr Raina where he got the information from. He said that it came from Mr Mewawalla. No other enquiries were made. At the same time Mr Raina couriered to Head Office copies of statements of the financial position of Mr Khalil and Maram as at 31st December 1980, which had also been supplied by Mr Mewawalla. Mr Rao wrote on them the following comment: "Too old to gauge the scale of present activities". What is more, the financial information on Maram nowhere indicates that it was involved in any trading activities at all, or that it could afford to service and repay loans in the order of $100m. It is shown as a $100 company whose assets comprised three properties in Florida and in London SW7, valued at a cost of US $1.284m. Mr Raina accepted that BOI was entirely dependent upon the BCCI guarantee. On 10th September Mr Mitra summarised BCCI's latest proposal in a memorandum for the Board of BOI. He included what he had been told by Mr Raina about Maram and the purpose of the advance. His recommendation in paragraph 8 of the memorandum was that: "In view of the past satisfactory experience, good relationship with BCCI, a margin of 1/8% without any outlay of funds and safety of advance, the Manager, London Branch who is also the Acting Chief Manager, UK & European Branches has recommended sanction of a limit of USD 100 m.." On 12th September the Board approved the transaction, but Mr Tiwari, the new Chairman of BOI, is recorded as emphasising that the London branch was to ensure that there was compliance with legal formalities and local regulations. What is so striking about the sixth transaction is the circumstances in which it took place. The Bank of England had warned Mr Raina and Mr Samant in unequivocal terms that window-dressing of the kind disclosed by the fifth transaction was not to be repeated in London. RBI had also requested information about Maram and the transactions with BCCI of a kind which BOI itself had never sought or been concerned about. The position of Mr Samant and the other BOI witnesses had been that they relied on the BCCI guarantee to secure repayment of the loan, knew that Maram could only repay by refinancing from BCCI and, most important of all, knew that the only reason for the transaction and the temporary reorganisation of the loan to Maram was BCCI's own need to improve its balance sheet. Both Mr Samant and Mr Raina knew, and Mr Mitra must have realised, that Maram had no purpose as such in seeking the loans and in fact did not seek the loans from BOI in any real sense at all. Everything was arranged by and for the benefit of BCCI. Therefore although it is perfectly understandable why RBI should have sought particulars of the loans to Maram recorded on BOI's books, the information given by Mr Raina was positively misleading. It was unverified and was also untrue. To answer RBI's questions fully and frankly would have necessitated disclosure of the rationale behind the arrangements with BCCI as a whole. But there is nothing to suggest that this was done, any more than it was in relation to the Bank of England earlier that year. The strong impression one gets from the background circumstances to this transaction is that the regulators, both in England and in India, were by now becoming concerned. Mr Atkinson had issued his warning in January and we know from the disclosure in the State Bank of India case that in December 1985 RBI had expressed concern in a circular about foreign currency loans being made by Indian banks over the year end to offshore companies connected to a foreign bank which provided matching funds and a guarantee for the loan. RBI was concerned that the Indian banks involved had made no enquiries about the credit status of the borrower nor were aware of the real objectives of the foreign bank in obtaining their participation. Mr Mitra says that he cannot recall any advice being given by RBI and enquiries made of RBI itself have not produced a copy of the circular. But it is clear from the evidence in the SBI case that such a warning was given and equally clear that what prompted it were the transactions with BCCI carried out by BOI, SBI and the other Indian banks I have already mentioned. The RBI warning must have been given to, and received by, BOI late in 1985 or early in 1986, even if Mr Mitra now has no recollection of it. The now increasing concern of the regulators may be the explanation for what followed in relation to the disbursement of the loan. Although approval was sought in the sum of US $100m, Mr Tiwari limited the sanction to $75m, adding the reference to the need to comply with local regulations which I have mentioned. Mr Raina said that he told Mr Mewawalla that only $75m would be available, but this apparently caused no obvious disappointment or concern at any possible interference with Maram's trading plans. At this time Mr Mewawalla and Mr Raina were still in regular contact. There is evidence of a lunch in London at which Mr V C Joshi, the new Chief Manager, was introduced to BCCI and at which Mr Samant was also present. There was then a series of telexes out of the London branch, exploring the possibility of making the loan to Maram from BOI's branches in Singapore, Hong Kong and finally New York, using the Grand Cayman branch. When Mr Raina was asked about the reason for this, he said that the instructions came from Head Office. He did not know why it was done and in any event he handed over the arrangements for the completion of the transaction to Mr Joshi, who was appointed Chief Manager of the UK and European branches with effect from 12th September 1985. Mr Joshi (against whom no allegation of knowledge or dishonesty is made) said that he was not told of the purpose of the sixth transaction and did not know why suggestions were made to route the loan through the other overseas branches. Mr Mitra was also asked about the reasons for routing the loan through BOI's branch in the Cayman Islands. He began by saying that he thought it was because Maram was a Cayman company. When asked why all the previous loans had been made through the London branch, he the said that it had something to do with saving tax. I find neither of these explanations at all convincing and Mr Mitra's evidence on this showed every sign of a hurried attempt to find some justification for using the Grand Cayman office. On 2nd December 1985 Mr Joshi sent a telex to Mr Mitra, asking for Head Office sanction for an amendment to the transaction approved earlier. The transaction was now to be for $50m and to be disbursed by BOI's New York branch through the branch in Grand Cayman, but with the deposits being made by BCCI in London and then used by BOI to fund the Cayman branch. The 1/8% differential was to be earned by the branch in Grand Cayman. Mr Joshi said in the telex that any delay in sanctioning these proposals might result in the loss of the business. Mr Mitra typed a note to Mr Joshi on the telex he received. It stated that Head Office might agree to the proposal, but that the London branch should arrange with BCCI for at least $20m-25m of the deposits to be placed at the Cayman branch. This message was then telexed to London on 3rd December. The New York branch (unlike the London branch) also required Maram to execute a form of general security agreement for the loans, which was done on 11th December. Even allowing for the passage of time and the fading of memory which that inevitably brings, I would have expected Mr Mitra, in the light of his apparent recollection of other aspects of this transaction, to be able to give some plausible explanation for his request that at least part of the deposit should be placed in Cayman. All that he was able to say was that he noticed that Maram was registered in Grand Cayman and therefore thought that it would be good to obtain deposits from Maram or BCCI at that branch. The cross-examination on this point (on Day 11 of the trial) went like this: "Q What I am asking is why you were suggesting that deposits of at least $20 to £25 million should be place at Cayman Islands branch and I am suggesting to you that that can have no tax purpose behind it, can it? A. No, sir, it would have maximised our deposit. Q. But your deposits are maximised whether they are in Cayman Islands or London or elsewhere, are they not? A. Yes. Q. So that does not explain that suggestion? A. No, actually, since I said I think yesterday I was talking about it, since we are going there, if we can get some deposits from Maram through BCCI, because Maram was also, it is noticed that it is registered at Cayman Islands, so this is the idea, if we can get it is better for us. Q. So you are now talking of getting some deposits from Maram; is that what you are saying, not from BCCI, but from Maram? A. BCCI, Maram, whoever puts it, we would like to use that $20 to $25 million. Q. Who is it that you are expecting to get deposits from, Maram or BCCI? A. We have used the word "BCCI" here. BCCI can do it through Maram or BCCI's presence there, they work in all these places, I think, so they could have done it. It is just a thought coming from the person who prepared it and I agreed with that, and I signed it also. Q. When you said that BCCI could do it through Maram, that suggests that BCCI could do with Maram whatever it wants? A. No, I did not say that. I did not mean that. It came to our mind -- first it originated from the person who prepared this note -- I cannot find a signature here -- it came from him: it is a good idea if we get another $20-$25 million deposit there, which would help us to maximise our deposit. Q. But it is part of the arrangement that is here being varied, is it not, that BCCI will place deposits? A. We said to arrange, that you should arrange. Whether they place it or not, that also I cannot remember now. And it is also in here somewhere, because it is my general manager's handwriting, "if possible"." I do not accept the truth or accuracy of any of this evidence. If Mr Mitra's position was that he could not recall the reason for his request, he could have said so. As it is, he chose to give a series of inconsistent and wholly implausible reasons for what was done. Even if one takes his explanation at face value, it reveals an appreciation on his behalf that Maram and BCCI were almost interchangeable. Although, at the request of BOI, the loan and matching deposits were extended by two months to May 1986, no further transactions of this kind with BCCI took place. Conclusions on Knowledge The liquidators' allegations on knowledge are made in wide terms against a number of different individuals, and this was the subject of criticism by Mr Hirst. In relation to the first transaction the liquidators say that both Mr Samant and Mr Chatterji knew that they were participating in a fraud. Allegations of dishonesty are also made against Mr Vaghul and Mr Shukla. When one comes to the second transaction, an allegation of dishonesty is also made against Mr Raina (who had by then replaced Mr Chatterji). A case of dishonesty is maintained against Mr Samant, Mr Vaghul and Mr Shukla, but it is not suggested that the other members of the Board or the other senior executives of BOI were involved. To this list the liquidators add Mr Mitra, who they say was dishonest in relation to the sixth and last transaction. In defence of BOI's position Mr Hirst made a number of general submissions which I need to deal with before coming to the specific transactions. Primary amongst these was the obvious but important point that the transactions were well documented both externally and internally. BOI has, for example, preserved the reports and memoranda to the Board on which the comments of the senior officers are recorded. This is not, he says, a case involving some kind of secret conspiracy behind the scenes, in which false documents were produced to give the transactions a semblance of legitimacy. Mr Samant's telexes in which he openly discusses BCCI's purpose and aims are, he submits, quite inconsistent with the allegations of dishonesty levelled against senior management and the Board or with the suggestion that Mr Samant knew that he was assisting in the perpetration of a fraud. In the same vein he points to the involvement of Lawrence Jones. Mr Samant was in the first transaction quite open about the unusual nature of what was proposed and the solicitors, though concerned about the detail of the arrangements, saw nothing fundamentally wrong with them. These factors are plainly important in a consideration of the role of Mr Samant and others at BOI in the transactions, but they are not, in my judgment, conclusive. As I have already indicated, Lawrence Jones were not asked to scrutinise the reasons given for the transaction. Their role was merely to ensure that BOI was properly protected. BCCI could only have perpetrated the fraud on its creditors through what appeared to be legitimate transactions. The modus operandi of obtaining loans through a real corporate borrower, but one which was manipulated by BCCI, necessarily involved both BCCI and its nominee entering into the back-to-back arrangements which are a feature of this case and of the case involving SBI. It is not the liquidators' case that these transactions were fraudulent shams in which all the parties in concert deliberately set out to deceive BCCI's auditors and creditors. It is not even alleged that BOI was aware that BCCI had actually forged the documents which purported to emanate from Maram or, in the case of SBI, from Notan. But it is alleged that the Indian banks knew or suspected that the transactions they were entering into were artificial and circular and were intended to allow BCCI to deceive its auditors and creditors by recycling its own money for its own use and, in the case of the BOI transactions, by removing debts temporarily from its books over its year end. Loan transactions with a regulated bank have to be documented. It would have been impossible for BCCI to have asked the banks it dealt with to produce no documentation whatever, nor could its purposes have been advanced by doing so. In order to satisfy (and to deceive) its auditors about what it had done with the money used to inflate the Khalil accounts, it had to produce documentation evidencing the deposits it had placed with BOI free of any lien. What it did not wish to produce to its auditors was documentation linking those deposits with the monies used to reduce or eliminate the debit balances on the Khalil accounts. Both accounting experts agree that disclosure of that link would have led the auditors to reverse the transactions and to make provision for the Khalil debts. Some documentation of the loan was, however, inevitable. The objective must have been to reduce it to the minimum. For its part, BOI needed to record the transactions it had entered into. Mr Samant could not approve loans of the size involved in this case without reference to Head Office. That would have been obvious to Mr Mewawalla, as a former employee of the bank. He would also have known that any reference to Head Office would be recorded internally by BOI, particularly when a reference was made to the Board. That difficulty could have been catered for (as it was in the SBI case) by setting out to deceive the bank into believing that it was entering into a genuine loan to a company, albeit with the support of a BCCI guarantee. That presented the obvious risk that a prudent bank would still require to investigate the creditworthiness of the borrower and the purpose of the loan, but BCCI obviously calculated that this risk could be managed by offering the bank the comfort and security of a BCCI guarantee, and this proved to be correct. Neither BOI nor SBI properly investigated the status of the borrower. Both banks were so attracted by the offer of an essentially risk-free transaction that they failed to carry out any effective investigations into the borrower or the purpose of the loan or, in the case of BOI, any real investigation at all. At this point, however, the similarity between the two cases ends. What is so striking about this case is the extent to which Mr Samant was aware of the circular nature of the transactions he was participating in. He accepted, as I have mentioned, that during the course of the first transaction he knew that its sole purpose was to improve the presentation of BCCI's accounts. It was neither put to him nor believed by him to be a case of a borrower seeking a loan, who could not be accommodated by BCCI. Even at face value, the borrower had an existing loan which BCCI (not the borrower) wished to move to BOI for its own year end purposes. The real significance, therefore, of the documentation is not that it existed, but rather what it indicates about Mr Samant's own thinking at the time. Mr Hirst's submission is that the references in Mr Samant's telex of 12th November 1981 to what BCCI was "obviously" intending to achieve, and in his letter to Lawrence Jones of the same date to "this apparently strange deal", are the best evidence that he was not then privy to a fraud. Many of the indicators of fraud relied on by the liquidators are set out in the telex. It is, he submitted, impossible to conclude that Mr Samant could have referred to the transaction in these terms if he had believed or suspected that it was at all dubious. I accept that Mr Samant's instant reaction to Mr Mewawalla's proposal was to query its purpose. As an experienced banker he was obviously surprised to receive a proposal to lend a substantial sum of money to an unidentified borrower who could provide no security of its own, little or no documentation, and would depend upon BCCI for the finance necessary to repay the loan after the year end. It would have been obvious from the start that this was not an ordinary loan proposal, and Mr Mewawalla's close relationship with Mr Samant would have made it impossible for him not to have given Mr Samant an explanation of what the purpose of the transaction really was. This is why, in my judgment, Mr Samant knew from the outset that the transaction had as its only object the improvement of BCCI's balance sheet or accounts. The wholly uncommercial nature of the transaction, when viewed from BCCI's perspective, merely served to confirm this. The other side of this is that Mr Mewawalla obviously regarded Mr Samant as someone who would respond positively to BCCI's proposals. It is clear from the expert evidence that most banks operating in the City of London at the time would not have entertained them. It is impossible not to notice that most of the banks who participated in these so-called back-to-back arrangements were Indian banks. There may be a number of reasons for this, but in the case of BOI there were two factors which made them an obvious choice as a counter-party. The first is that there were close personal ties at an individual level between the officers of the bank. BCCI had recruited staff from BOI and other Indian banks, and Mr Mewawalla and Mr Samant were close friends. The second is the culture I have referred to, which was endemic at BOI and perhaps at other Indian banks at the time, of taking deposits to boost the bank's performance figures at its year end. It was unlikely that BOI would reject a proposal merely because it had a window-dressing purpose. For the reasons already given, it is not possible to say with certainty whether it was Mr Mewawalla or Mr Samant who attributed the object of the transaction to the improvement of BCCI's earnings to advances ratio. If it was Mr Mewawalla who provided the explanation, it may also be the case that this was something he got from Mr Akbar. However, for reasons which I will come to in a moment, the precise source of the explanation does not matter. I have decided that it is not open to me, on the evidence, to find with the degree of certainty required that there was anything amounting to an outright conspiracy between Mr Mewawalla and Mr Samant from the start, in the sense that Mr Samant was told the full details of BCCI's actual plans, including its intention to suppress the guarantee from its auditors. I am also prepared to accept that in the telex and the letter to Lawrence Jones of 12th November 1981 Mr Samant provided the solicitors and Head Office with an explanation which had been suggested to him by Mr Mewawalla at their meeting and not critically examined by him at the time. To that extent it was an accurate account of what was proposed. But it has to be realised that any other approach to Head Office would have been hopeless. However lax the lending practices of the bank may have been, Mr Samant knew that the senior managers at Head Office would have queried, and would not have accepted, an ostensible loan proposal of this kind. They would have treated it as suspicious, for the very same reasons that Mr Samant would have queried it. It was therefore put to them (as it had to be) as a risk-free window-dressing transaction which had the benefit of increasing the bank's "pure" deposits and providing a 1/8% return with no outlay of funds. The eagerness of Mr Samant to have this business is apparent throughout the course of all the transactions he was involved in. I have formed the view of him, which is apparent from the documents in evidence I have referred to, that he was primarily concerned with the need to mobilise deposits regardless of the risks involved. I believe that he was an able but ambitious man who probably saw the introduction of the BCCI deposits as proof of his success in the eyes of Head Office. I have little doubt that both he and Mr Mewawalla had much to gain from the success of these transactions in terms of their careers. There is no suggestion that they received any direct financial benefit. Mr Purle does not suggest otherwise. But Mr Samant was clearly anxious to accommodate BCCI's wishes at every turn, even though this involved dropping a number of the recommendations made by Lawrence Jones and on occasions ignoring or failing to implement the instructions of Head Office. I have set out the instances on which this occurred in my analysis of the six transactions. But it is a constant feature. It is enough to mention Mr Samant's request to Lawrence Jones in the first transaction to draft the minimum possible security documents, his failure to pursue the request for a guarantee under seal, and his failure to carry out any proper investigation into the borrower, despite Head Office's request for that to be done. The same approach seems to have infected Mr Chatterji, who did not obtain the security documents requested. For the reasons already indicated, this was almost certainly influenced, directly or indirectly, by Mr Samant's decision to comply with whatever conditions Mr Mewawalla and BCCI chose to impose. I have found Mr Samant to be an unreliable and, I am afraid, untruthful witness, but I am prepared to recognise the existence of some doubt as to whether he had reason to question the improvement of BCCI's earnings to advances ratio as a plausible explanation for the arrangements during the course of the first transaction. My own view is that on the balance of probabilities he must have entertained some cause for concern about it even at that time, if only because Head Office itself was clearly unhappy. They were only willing to sanction the transaction if the status of the borrower was confirmed and it was to be a one-off transaction. This gives every indication of real unease on their part. For the reasons set out in paragraphs 53 and 54 of this judgment, I have rejected the allegations of dishonesty made against Mr Vaghul and Mr Shukla in relation to the first transaction, but it is clear that they were not persuaded that BOI should repeat the arrangements and that, at the very least, doubts existed about the explanation which Mr Samant and BCCI had offered. However, any doubts that exist as to Mr Samant's state of knowledge are, in my judgment, resolved by the second transaction. Despite having been told by Head Office that the first transaction was to be one-off, he felt able to make an enthusiastic recommendation in July 1982 for a similar arrangement involving not £10m but £30m. Mr Shukla's query about the real reason for the transaction prompted him to produce the 1981 accounts and, as I have already found, I am satisfied so as to be sure that Mr Samant looked at that material and did see and did realise that an improvement in the earnings to advances ratio could not be achieved by the removal of loans over the year end. He also realised that only a transfer of non-performing debt would have any significant effect. I therefore have no real doubt that Mr Samant knew from this time on, even if had not occurred to him before, that the purpose of the transaction was considerably more complicated, and certainly more suspicious, than he may at first have supposed. These suspicions must have been increased by his knowledge that Maram was of no real significance in the transaction and that the loans would be repaid by BCCI. The circular nature of the transactions was already apparent to him, and the removal of the only suggested justification for them can have left him, and I believe did leave him, in no real doubt that he was in all probability dealing with a fraud of some kind. The matter was put really beyond doubt when in 1984 the fourth and fifth transactions occurred at a time and in a form respectively which made it obviously impossible for the alleged purpose to be achieved. My finding that Mr Samant had relevant knowledge at the time of the second transaction is supported by his subsequent handling of the remaining transactions, up until his departure from BOI in 1986. I am prepared to accept that Mr Samant did not raise his suspicions with Mr Mewawalla or seek to have them confirmed. It seems to me much more likely that he chose simply to ignore them and to make no further investigations. Although he had knowledge in the blind-eye sense necessary to find liability on this application, any attempt to pursue serious enquiries about the use which BCCI was making of the arrangements was likely to lead to the loss of the business. It is clear that so keen was he to get in the BCCI deposits that he was prepared to close his eyes to what he knew was staring him in the face and to adopt a completely passive and uncritical role in accommodating BCCI. What Mr Samant did was to treat these transactions as routine. Each year the same proposal was made, although in ever-increasing sums. The proposal was forwarded to Head Office, using the same format and almost identical language. Lawrence Jones were instructed, but this became no more than a formality. Drafts of the necessary Maram documents were now prepared in-house by the London office and merely sent out to Lawrence Jones for approval. No time was spent on any enquiries as to why the size of the deposits and loans was increasing. The transactions were processed very quickly and any requirements of BCCI were rapidly complied with. A striking example of this was the revision of the letters in 1983 to separate the details of the loans from the deposits. As I said earlier in this judgment, the explanation for the transactions and the part played by the borrower became irrelevant. It was simply a matter of getting in the BCCI deposits and handing the same money back. Although Mr Samant denied it, the transactions came to be regarded, and really to be dealt with, as little more than an exchange of deposits, and of course in substance they were no different. Perhaps the most striking piece of evidence in this case is the note of the Bank of England interview with Mr Samant and Mr Raina which took place in January 1985. I have taken the view that Mr Samant did not make it clear to the Bank of England precisely what form the earlier transactions took. But whether or not this is the case (and Mr Samant's evidence was that he did mention the loan to a nominated borrower, coupled with the BCCI guarantee), it is clear that the Bank of England officials told Mr Samant and Mr Raina that no further such transactions were to take place in London. Notwithstanding this, there is no evidence to show that Mr Samant did pass this warning on to Head Office, and Mr Raina in August 1985 proposed a yet further transaction of the same kind. This merely confirms the view I have already formed that Mr Samant and, after his departure, Mr Raina continued with their drive to obtain deposits, regardless of the obvious concerns about what they were entering into. I am therefore satisfied that Mr Samant did have knowledge in the relevant sense, at least from the time of the second transaction. Although I found Mr Raina's evidence unsatisfactory in a number of respects, his role and knowledge is less clear in the case of the first five transactions and I make no adverse findings against him in respect of them. It is, I think, arguable that he continued to deal with the sixth transaction in the same vein, but for the reasons which I will come to later, his precise role and state of knowledge may not matter in assessing whether the sixth transaction was causative of any loss, because of the way in which the claim has been quantified. I do, however, need to deal with the position of the more senior bank officers. By the time of the second transaction Mr Shukla had doubts about the reason given. I have explained my grounds for rejecting the evidence contained in his recent statement, but there is no real other evidence which indicates how his concerns were met. Mr Vaghul (who was not involved after the second transaction) said that the proposals were not subjected to the degree of scrutiny which might be expected today. He believes that Mr Shukla must have been given a satisfactory answer to his query, but does not know what it was. I do have real concerns about the way in which these transactions were handled by BOI's Head Office, and in relation to the first and second transactions they reflect very badly on Mr Vaghul's management of the bank. There was understandably real unease with the first transaction, but the condition of approval that it should be a once-only transaction seems to have been ignored for no good or apparent reason in subsequent years. Mr Shukla expressed the concerns I have mentioned, but again they did not prevent the second and third transactions from going ahead. There is no evidence, and it is not alleged, that Mr Samant told them a convincing lie in order to gain approval for the transactions, and his evidence is that he did not speak to them. I accept that. It is therefore more likely that they simply allowed their doubts to be overcome by preferring to rely on Mr Samant's judgment in the matter. Although the transactions (except the first) were approved at board level, this was merely to give authority to the London branch to proceed with the transaction. The decision whether to go ahead was then a matter for Mr Samant. No-one suggests that the Board of BOI was in any sense dishonest, and I am not satisfied that a case of knowledge and dishonesty is made out, to the requisite standard of proof, against either Mr Shukla or Mr Vaghul. I think that they looked to Mr Samant to scrutinise the proposals and were content to accept his recommendation. Once the first and perhaps second transactions had been completed without any apparent problems, approval by the Board seems to have been obtained very quickly, almost as a matter of routine. It was only in relation to the sixth transaction that problems began to occur, due in all probability to the interest which the regulators had begun to show in the arrangements. But BOI by then had a new Chairman (Mr Tiwari) and I know really nothing about his involvement in the decision to approve the sixth transaction. Mr Mitra's evidence about that transaction was clearly unsatisfactory, but the decision to give approval was not his and I am not able, on the evidence, to find that he had the insight necessary to give him the knowledge which Mr Samant himself had. Attribution My findings on knowledge give rise to an issue about attribution. Is it enough that Mr Samant, rather than Mr Vaghul, Mr Shukla or the other members of the Board of BOI, had knowledge in the requisite sense that the transactions were being entered into for a fraudulent purpose? Mr Hirst submits that knowledge on the part of Mr Samant is not sufficient to fix BOI with liability under s.213. It is, he says, necessary to show actual knowledge on the part of at least Mr Vaghul and perhaps even the entire Board. The liquidators' case is that under general agency principles the knowledge of Mr Samant is to be attributed to BOI, because it was Mr Samant who was authorised to negotiate the terms of the transactions, to make recommendations to Head Office, and to give effect to Head Office approval by entering into the transactions. His knowledge acquired in so acting is attributable to the bank. There is a long history to the attempts of the Courts to define the circumstances in which a company will become criminally or civilly liable for or through the acts of its agents. Everyone is familiar with the so-called "directing mind and will" theory, based on a passage in the judgment of Viscount Haldane LC in Lennards Carrying Co Ltd v. Asiatic Petroleum Co Ltd [1915] AC 705 at page 713, where he said this: "My Lords, a corporation is an abstraction. It has no mind of its own any more than it has a body of its own; its active and directing will must consequently be sought in the person of somebody who for some purposes may be called an agent, but who is really the directing mind and will of the corporation, the very ego and centre of the personality of the corporation." But as the Court of Appeal pointed out in El Ajou v. Dollar Holdings Plc [1994] 2 AER 685, the identification of the relevant person does not depend purely on an examination of the company's statutes or articles of association or even the formal contractual relationship between the company and its agents or employees. It may also require one to consider how matters were actually arranged and through whom the company's powers were in fact exercised. This may also lead to the result, referred to by Hoffmann LJ in El Ajou (at page 706e), that different persons may for different purposes satisfy the requirements of being the company's directing mind and will. In relation, however, to certain forms of statutory liability, particularly where a criminal offence is involved, the normal principles of attribution may require to be modified to meet an argument that the imposition of liability is contrary to or inconsistent with the purposes of the statute. Conversely, even where the conventional principles of attribution would not impose liability on the company for the acts of particular agents or employees, the statute may nevertheless do so. Mr Hirst reminds me in this context that regard must be had not only to s.213 of the Insolvency Act 1986 but also to the parallel criminal sanction contained in s.458 of the Companies Act 1985. But both he and Mr Purle accepted that the most recent and authoritative statement of principle is that set out by Lord Hoffmann in the judgment of the Privy Council in Meridian Global Funds Management Asia Ltd v. Securities Commission [1995] 2 AC 500. This case concerned the liability of Meridian, a substantial Hong Kong investment management company, for the actions of its chief investment manager and a senior portfolio manager, who had masterminded between them the takeover of a New Zealand company, using that company's own assets to fund the purchase. This required bridging finance, and the managers arranged to do this by using funds under Meridian's control in order to acquire the shares. Under the New Zealand Securities Amendment Act 1988 persons who become what is described as a "substantial security holder in a public issuer" must give notice of that fact to the public issuer and also to the Stock Exchange on which the shares are listed. The purpose of the legislation was to give the boards of target companies notice of an imminent raid. It was conceded that Meridian did become a substantial security holder within the meaning of the 1988 Act and that no such notice had been given. But the company denied liability for the breach of the duty to give notice, on the basis that the board and the managing director were unaware of the use of its funds to acquire the shares in the New Zealand company and that the knowledge of the investment officer and portfolio manager could not be attributed to the company. Both the Privy Council and the Court of Appeal of New Zealand rejected that submission. Lord Hoffmann began his analysis by describing what he called the rules of attribution, under which the acts or omissions of individuals are deemed to be those of the corporate entity they act for or represent. These are usually to be found in the company's articles of association, but extend to include the general principles of agency and vicarious liability. Lord Hoffmann then turned to consider the applicability of these rules to cases of criminal liability. At page 507 B-F he said this: " The company's primary rules of attribution together with the general principles of agency, vicarious liability and so forth are usually sufficient to enable one to determine its rights and obligations. In exceptional cases, however, they will not provide an answer. This will be the case when a rule of law, either expressly or by implication, excludes attribution on the basis of the general principles of agency or vicarious liability. For example, a rule may be stated in language primarily applicable to a natural person and require some act or state of mind on the part of that person "himself," as opposed to his servants or agents. This is generally true of rules of the criminal law, which ordinarily impose liability only for the actus reus and mens rea of the defendant himself. How is such a rule to be applied to a company? One possibility is that the court may come to the conclusion that the rule was not intended to apply to companies at all; for example, a law which created an offence for which the only penalty was community service. Another possibility is that the court might interpret the law as meaning that it could apply to a company only on the basis of its primary rules of attribution, i.e. if the act giving rise to liability was specifically authorised by a resolution of the board or an unanimous agreement of the shareholders. But there will be many cases in which neither of these solutions is satisfactory; in which the court considers that the law was intended to apply to companies and that, although it excludes ordinary vicarious liability, insistence on the primary rules of attribution would in practice defeat that intention. In such a case, the court must fashion a special rule of attribution for the particular substantive rule. This is always a matter of interpretation: given that it was intended to apply to a company, how was it intended to apply? Whose act (or knowledge, or state of mind) was for this purpose intended to count as the act etc. of the company? One finds the answer to this question by applying the usual canons of interpretation, taking into account the language of the rule (if it is a statute) and its content and policy." Applying these principles to the 1988 statute, Meridian was held to be liable for the acts of its managers, who (albeit without the knowledge of its board) used its funds to acquire the shares: " Once it is appreciated that the question is one of construction rather than metaphysics, the answer in this case seems to their Lordships to be as straightforward as it did to Heron J. The policy of section 20 of the Securities Amendment Act 1988 is to compel, in fast-moving markets, the immediate disclosure of the identity of persons who become substantial security holders in public issuers. Notice must be given as soon as that person knows that he has become a substantial security holder. In the case of a corporate security holder, what rule should be implied as to the person whose knowledge for this purpose is to count as the knowledge of the company? Surely the person who, with the authority of the company, acquired the relevant interest. Otherwise the policy of the Act would be defeated. Companies would be able to allow employees to acquire interests on their behalf which made them substantial security holders but would not have to report them until the board or someone else in senior management got to know about it. This would put a premium on the board paying as little attention as possible to what its investment managers were doing. Their Lordships would therefore hold that upon the true construction of section 20(4)(e), the company knows that it has become a substantial security holder when that is known to the person who had authority to do the deal. It is then obliged to give notice under section 20(3). The fact that Koo did the deal for a corrupt purpose and did not give such notice because he did not want his employers to find out cannot in their Lordships' view affect the attribution of knowledge and the consequent duty to notify. It was therefore not necessary in this case to inquire into whether Koo could have been described in some more general sense as the "directing mind and will" of the company. But their Lordships would wish to guard themselves against being understood to mean that whenever a servant of a company has authority to do an act on its behalf, knowledge of that act will for all purposes be attributed to the company. It is a question of construction in each case as to whether the particular rule requires that the knowledge that an act has been done, or the state of mind with which it was done, should be attributed to the company. Sometimes, as in In re Supply of Ready Mixed Concrete (No. 2) [1995] 1 A.C. 456 and this case, it will be appropriate. Likewise in a case in which a company was required to make a return for revenue purposes and the statute made it an offence to make a false return with intent to deceive, the Divisional Court held that the mens rea of the servant authorised to discharge the duty to make the return should be attributed to the company: see Moore v. I. Bresler Ltd. [1944] 2 All E.R. 515. On the other hand, the fact that a company's employee is authorised to drive a lorry does not in itself lead to the conclusion that if he kills someone by reckless driving, the company will be guilty of manslaughter. There is no inconsistency. Each is an example of an attribution rule for a particular purpose, tailored as it always must be to the terms and policies of the substantive rule." (511C - 512B) Mr Hirst submits that the approach in Meridian requires one to identify the person who authorised the transaction in accordance with the system of authorisation operated by the company in question. It would be wrong, he says, to impose liability on BOI, where the person who has the authority to, and does, authorise the deal does not possess the relevant knowledge, but someone more junior does. Viewed from the company's point of view, one can see the attraction of that proposition, but it does not, in my judgment, represent the law. Nor, as I shall explain a little later, does it apply to the facts of this case. As Lord Hoffmann emphasised in Meridian, the primary rules of attribution, based on factors such as the scope of the agent's authority, may require to be modified either restrictively or liberally in order to accommodate the statutory purpose of the legislation which imposes the liability. A good example of this is the decision of the House of Lords in In re Supply of Ready Mixed Concrete (No. 2) [1995] 1 AC 456, which he referred to. This was a case in which a restrictive arrangement in breach of an undertaking given to the Restrictive Practices Court was entered into by executives of the company, contrary to express instructions given to them by the board of the company that no such arrangements were to be made. Notwithstanding this, the company was held liable for contempt, based upon the actions of its employees. The need to secure compliance with the undertaking was held to override the lack of authority given to those who breached the undertaking. Similarly, in McNicholas Construction Co Ltd v. Customs and Excise Commissioners [2000] STC 553 a construction company was held liable for the evasion of VAT caused by claims for input tax relief in respect of payments made for the supply of labour by sub-contractors. It transpired that many of those VAT invoices issued by sub-contractors to the company were for services which had not in fact been supplied and that the company's site managers had been involved in the fraud over a long period. Nevertheless the Court held that the site managers' dishonesty was attributable to the company. The dishonest nature of the actions meant that attribution could not be achieved through the more conventional medium of the ordinary rules of agency or vicarious liability. But the need to ensure compliance with the Act overrode that objection. At page 574 Dyson J said this: " 48. In my view, the tribunal were correct in attributing the acts and knowledge of the site agents to the company. I start with ss 60(1) and 77(4) simply because the tribunal's reasoning is directed to those provisions (see p 10, para 24). The policy of those provisions is to discourage the dishonest evasion of VAT, and to give the commissioners an extended period in which to make assessments where VAT has been lost as a result of the dishonest evasion of VAT. That policy would be frustrated if the acts and knowledge of all those employees who have a part to play in the making and receiving of supplies were not to be attributed to the company for the purposes of ss 60(1) and 77(4). If the only persons whose acts and knowledge may be attributed to a company are those who are responsible for running the affairs of the company as a whole, and those involved in its VAT activities, then the policy to which I have referred would be seriously undermined. As Mr Parker points out, it would encourage those prepared to engage in fraud or turn a blind eye to set up separate VAT accounts departments for that purpose. Moreover, it would discriminate against small companies that do not have separate accounts departments insulated from what happens on site or in contracts departments. 49. I would hold, therefore, that the acts and knowledge of all those employees of a company who have a part to play in the making and receiving of supplies, as well as those involved in its VAT arrangements, are to be attributed to the employing company for the purposes of ss 60(1) and 77(4)." The judgment in the McNicholas case is important because it deals, as part of the analysis, with the argument commonly raised that it would be wrong to visit the company with the consequences of its employees' unlawful conduct, when it is itself a victim of the same dishonesty. This principle is translated in some of the earlier authorities into stating that the employee's or agent's knowledge of his own fraud or breach of duty is not to be imputed to the company: see, e.g., Re Hampshire Land Co [1896] 2 Ch 743. It therefore operates as an exception to the general rules of attribution. But it is clear from the decisions in McNicholas and in In re Supply of Ready Mixed Concrete (No. 2) that it will not override attribution as a matter of law where the policy of the Act, to be effective, requires liability to be imposed. Mr Samant did have delegated authority to lend up to £200,000 unsecured without seeking Head Office approval. For sums of the order of £10m or more, not even the General Manager (International) at Head Office could give the necessary sanction. The proposal needed to be referred to the Board. This was of course the procedure adopted in each of the six transactions under review, although in the case of the first transaction Mr Vaghul seems to have approved it under delegated powers. In the present case, however, the scheme of delegation gives an incomplete picture of what was done. At the time when most (if not all) of the transactions were put up for approval, the borrower had yet to be identified. In the case of the second transaction Mr Vaghul explained that, to avoid putting the matter to the Board again, Mr Samant was given what he described as blanket permission to go ahead with a borrower nominated by BCCI. It is also clear from the evidence that the approval of the transactions was no more than that: i.e. an authority to Mr Samant to lend to the nominated borrower on the terms he had negotiated and agreed. Approval was often given some time in advance of the completion of the transactions and detailed matters such as the investigation of the borrower's purpose or status and the documentation for the transaction were left to Mr Samant to deal with. Head Office or board approval was not an instruction to carry out the transaction. Mr Samant retained an obvious and necessary discretion whether to go ahead. This was the basis of the approval given in the second transaction and, after that, board approval seems to have been given rapidly and almost as a matter of course. It is clear, as I have found, that senior executives and the Board were content to take Mr Samant's assurances at face value and to leave it to him to satisfy himself that it was proper for BOI to go ahead. In these circumstances he was, at the time of each of the first five transactions, the person who, in Lord Hoffmann's words, had the authority to do the deal. It is common ground that s.213 is capable of applying to a company in the position of BOI. Although it applies to the same conduct which under s.458 of the Companies Act can lead to the imposition of a criminal penalty, the purpose of s.213 is to enable the liquidator to recover compensation from those who have knowingly assisted the fraudulent conduct of a company's business. I do not, therefore, have to decide what are the precise limits of criminal liability under s.458. The only question I have to decide is whether Mr Samant's knowledge is to be attributed to BOI so as to found liability under S.213. In my judgment, it is. It seems to me that to allow BOI to shelter behind an argument that the only relevant knowledge was that of the Board would be to defeat the policy of the Act. It would allow banks such as BOI, which choose to rubber-stamp the recommendations of their senior managers without ensuring that all proper and due diligence has been carried out, simply to sidestep liability by relying on their own ineptitude. The Board of BOI had, through Mr Shukla, a real concern about the purpose of these transactions at the time of both the first and the second transactions. But they were content to delegate the supervision of the transaction and the ultimate decision whether to proceed to Mr Samant. Despite their own misgivings they chose to rely on his judgment. I cannot see how in those circumstances they should be entitled to deny responsibility for the decisions which he made. The consequence is that BOI is liable to contribute to the losses to creditors which would have been avoided but for these transactions, and I will so order. Given my primary finding against Mr Samant, it is unnecessary for me to consider the liquidators' new and alternative claim that was introduced by way of amendment. It does not arise. Quantum The power of the Court under s.213(2) to order a contribution to be made is framed in wide terms, but there has on authority to be some nexus between the loss caused to creditors as a result of the fraudulent trading and the contribution which the knowing party is required to make: see Morphitis v. Bernasconi [2003] 2 BCLC 53. I am not persuaded that the Court has jurisdiction to, or should, exercise this power so as to make a punitive award unconnected to and disproportionate to the loss which the Respondent can properly be regarded as responsible for. That said, any award, although essentially compensatory in nature, can only be a reasonable approximation to the damage which the Respondent's conduct has caused or contributed to. This calculation is not and cannot be a matter of exact science and some elements of it will inevitably be broad-brush. Ultimately it is a matter of judgment whether the end figure represents reasonable compensation proportionate to BOI's role in this matter. The liquidators' case is that, had the true financial position of BCCI SA and BCCI Overseas been disclosed in the audited accounts for any of the years 1982, 1983, 1984 or 1985, then BCCI would have been unable to continue to operate and to take deposits. As it was, BCCI continued to trade until 1991, when it was shut down by the regulators. At the date of its liquidation the deficiency was in the region of US $10bn and the depositors can only be compensated in full if the whole of that deficiency is made good. BOI's expert contends that the loss actually caused by the five back-to-back transactions is limited to loss of interest by BCCI amounting to US $45,626. These two figures therefore represent the maximum and minimum amounts of compensation payable, but neither is a realistic assessment of what the amount of contribution should be. The liquidators' pleaded claim is that the relevant loss attributable to BOI's assistance comprises three elements: i) cash dividends paid by BCCI Overseas out of its reported profits. These are said to amount to US $65m in 1982, $75m in each of 1983 and 1984, $40m in 1985, $22m in 1986 and $35m in 1987. These total US $312m; ii) cash dividends paid by BCCI SA in 1985 and 1986 of US $12m and $7m respectively; and iii) a proportion of the losses sustained by BCCI Overseas and BCCI SA in the years following the false accounts. The Court is invited to order a contribution of at least US $128.95m or $109.67m, depending on which of two alternative methods of calculation is used to compute BOI's liability for the losses to depositors. Dividends The position about dividends was further particularised in a letter from Lovells to Penningtons dated 28th November 2003, which Mr Dyson dealt with during his evidence on quantum. In relation to BCCI Overseas, dividends were declared and paid for all five years from 1981 to 1985. In each year at least one interim dividend was paid in addition to the final dividend of the year in question. So for 1981 two interim dividends were paid, the first being US $25m in June 1981 and the second $15m in August of that year. A final dividend of $5m was paid on 17th June 1982. For 1982 there was an interim dividend of $20m paid in December 1982 and a final dividend of $45m, which was paid on 19th January 1983. This is the first dividend included in the liquidators' claim. Mr Dyson was challenged by Mr Hirst about the 1982 dividend of $65m on the basis that no claim is being advanced for losses attributable to the first transaction at the end of 1981. Mr Dyson said that he was prepared to drop the claim for the 1982 dividend. That concession was plainly based on a misunderstanding by Mr Dyson of what the 1982 dividend related to. Although the first part of it was paid on an interim basis in December 1982, it was attributable to the profits in the year ending December 1982, which were affected not by the first transaction but by the second. I am not prepared to accept that concession. Mr Hirst's other preliminary point concerned the claim for the 1987 dividend. This, as Mr Dyson accepted, is not related to any of the six transactions. He said that it was included because the business of BCCI continued after 1985 right through to 1991, and the dividends in those subsequent years had been included in the claim as consequential upon the false accounts in the years up to 1986, which allowed BCCI to remain in business. Mr Hirst reserved his right to submit that these subsequent dividends were based on audited accounts which were not influenced by any arrangements with BOI, but in the end none of this proved to be necessary. The real difficulty about the claim based on dividends is that there is no evidence that they caused any loss at all to the creditors of BCCI. As Lovells made clear in their letter, the documentation available to the liquidators in London and Grand Cayman does not evidence payment of some of the interim dividends of BCCI Overseas or the payment of the two dividends by BCCI SA. But beyond this it is common ground that any dividends paid by the company were paid to BCCI Holdings. What the accounts of BCCI show is that monies credited to BCCI Holdings as dividends were then reversed or matched by corresponding transfers back to the BCCI Group. So, for example, the US $40m interim dividend paid on 11th October 1983 is matched by two countervailing entries, each of $20m. A similar pattern emerges in relation to subsequent payments. Sometimes the reverse entries are designated as subscriptions for shares. On other occasions there are transfers to what is described as BCCI Luxembourg. Mr Dyson made the point in evidence that although BCCI Holdings credited the dividends back in the way I have described, the nature of the payments changed in the process. But he accepted that the net effect of these entries, even assuming that the dividends were ever paid, was that from the creditors' point of view nothing changed. No actual cash left BCCI SA and BCCI Overseas. In these circumstances it seems to me inappropriate to base any order for contribution on the dividends declared by these companies, even assuming that they were ever paid. Other Loss The back-to-back arrangements entered into between BCCI and the Indian and Swiss banks that I have referred to allowed BCCI to remain in business. That remained the position until 1991. But the liquidators have to concede that to visit BOI with liability for all the losses which occurred in that period would be disproportionate. They have therefore limited the losses claimed for to the trading losses in the financial years 1983 to 1985 inclusive, and they seek by way of contribution a proportion of those losses by reference to a formula which is designed to limit liability in the three relevant years to losses caused by the treasury frauds (as opposed to other fraudulent activities), taking into account the contribution to those losses by the other banks and by Mr Khalil. The formula is A/B x C, where A is the amount of funding provided to BCCI by BOI via Maram in any particular year; B is either (a) the total amount of back-to-back loans obtained by BCCI from parties whom the liquidators allege had knowledge of the frauds in each year, plus Mr Khalil's deposits, together with a false audit confirmation, or (b) the amount assumed to be needed by BCCI to fund the losses, expenses and fictitious profits on the Khalil accounts; and C is the further loss incurred in the 12 months following the year end of each relevant back-to-back transaction caused by the treasury frauds. Taking those years as 1983, 1984 and 1985, the calculations are therefore based upon losses sustained as a result of the second, third, fourth and fifth transactions. The calculation of losses due to the treasury frauds has been carried out using what are referred to as the Akbar Schedules. These are records kept by Mr Akbar of the transactions used to conceal the losses on the Khalil accounts. The calculations made on this basis are set out in Appendices 4 to 6 of the Liquidators' Accounting Report. Mr Preece and Mr Dyson, the authors of that report, say that they have approached Mr Akbar's schedules with some caution, but other BCCI records have largely corroborated their contents. They consider the Akbar Schedules to be broadly accurate. BOI's expert accounting witness, Mr Kabraji, in his own report, criticises the liquidators' reliance on the Akbar Schedules and says that he is not satisfied about the verification process which Mr Preece and Mr Dyson say they have undertaken. He was not critical of the sources used, but he complained in evidence that Mr Dyson and the liquidators had not provided him with sufficient information to verify that the way in which they had calculated the losses was correct. This led to an examination of the history of the Accounting Report which I do not propose to go into. The fact is that Mr Kabraji was supplied with the limited amount of documentation which he wished to see and could have inspected a much wider range of documents, had he chosen to do so. On the material before me there is nothing to suggest that Mr Preece and Mr Dyson have not analysed the Akbar Schedules and the supporting material in a balanced way, and I reject Mr Kabraji's criticisms of what they have done. It seems to me that the Akbar Schedules, prepared as they were to facilitate the fraud, are likely to be accurate records. That leaves the question of calculation. The liquidators have calculated the losses for which BOI should be held responsible, according to the A/B x C formula, as US $109.674m, made up of $44,171,638 for the year ending 31st December 1983, $37,927,233 for the year ending 31st December 1984 and $25,575,072 for the year ending 31st December 1985. In percentage terms, BOI is said to be responsible for 24.3%, 13.9% and 11.3% of the losses in 1983, 1984 and 1985 respectively. Mr Kabraji does not challenge the liquidators' arithmetic, but contends for a number of changes in the components of the formula, assuming (which he does not) that it represents the correct methodology. His view remains that BOI should not be made liable for anything more than the lost interest, unless it can be shown that it actively conspired with Mr Khalil and the other banks who are said to have had knowledge of the fraud. On the basis, however, that the formula is the correct approach, he says that the denominator B should be expanded to include other funds which were used by Mr Akbar to inflate the balances on the Khalil accounts. These were monies from various Islamic corporations and individuals which I shall refer to for convenience as the Islamic deposits. He has also added in the funds made available from the ICIC portfolio account no. 20071 referred to in the Akbar Schedule of 31st October 1983. Some $100m of funds were from this account and were used to credit the Khalil accounts. By recalculating denominator B in this way, Mr Kabraji has produced denominators of $618.470m, £907.814m and $958.395m for the three years in question, as opposed to the liquidators' denominators of $175.470m, $430.814m and $411.395m for the same years. In relation to the figure for losses (C), Mr Kabraji makes a 50% reduction in the liquidators' figure of $243.43m for 1985, because (as the liquidators say in their report) the Akbar Schedules do not exist at 31st December 1985 and they have therefore used the line item "Adjustments" as the basis of their calculation. Mr Dyson says that the liquidators have ignored all other line items and that their calculation almost certainly understates the total losses from treasury frauds for that year. When Mr Kabraji was asked to explain the basis for his further reduction of 50%, he accepted that it was an arbitrary figure, designed to reflect what he regards as the unreliable nature of the material used as the basis for calculation. Given the conservative nature of the liquidators' approach to the calculation of losses for 1985, I can see no justification for making this 50% deduction. Mr Kabraji has not carried out any detailed work of his own to substantiate such a reduction and it is little more than guesswork. Mr Kabraji also contended for a reduction in the amount of the losses attributable to the treasury frauds by removing losses incurred outside the periods during which the BOI funding was available to Mr Akbar. A particular example of this, relied upon by Mr Kabraji, are the losses incurred in metal trading which were subsequently hidden by fictitious trades with Euro Commodities Limited, a company controlled by Mr Akbar. In the second half of 1983 trading on the LME resulted in BCCI holding a number of loss-making positions which were concealed by trades with Euro Commodities. The bulk of the metal trading losses were incurred between July and October, when BOI funding was not in place, and Mr Kabraji suggests that they ought not to be treated as attributable to the BOI back-to-back loans. It seems to me that this is too narrow an approach. The liquidators' calculation of losses in the years 1983 to 1985 is based upon the premise that, but for the BOI funding, BCCI's insolvency would have been exposed and it would not have been able to continue trading at all. Logically, as I have already indicated, this would lead to a claim based on all trading losses in subsequent years, but the restriction of the claim to the three years from 1983 to 1985 is intended to recognise that a multiplier based on all subsequent losses would be excessive. There is, however, in my judgment, no reason to limit the losses within the three selected years to those which are precisely contemporaneous with the availability of the BOI loans. That seems to me to be unrealistic and wrong in principle. I do not intend to make any further deductions in the loss figures on that basis. On the basis of the revisions made to the liquidators' calculations which I have referred to, Mr Kabraji assesses BOI's proportionate share of the relevant losses at US $32.678m. To this he applies a time apportionment calculation which reduces the claim by a further 63%, but Mr Hirst did not seek to support this in his closing submissions and I need say no more about it. For the reasons already given I am not persuaded that it would be correct to reduce the liquidators' calculation of the losses for 1985 or to make any allowance for the periods within the three years when the BOI loans were not in existence. I also accept the two basic factual premises on which these calculations are based: i.e. that BOI was insolvent by 1983 and that, but for the back-to-back arrangements with BOI and others, it would have been forced to cease to trade. The fact that Mr Akbar conducted the treasury frauds over this period is the clearest evidence of what the consequences were likely to have been, had the true position been disclosed. I therefore accept the figures for losses calculated by the liquidators as the appropriate multiplier in the formula. I am also not persuaded by Mr Kabraji's argument that the A/B x C formula should only be applied if it can be shown that BOI and the other lenders were in some way in collusion with each other. A contribution based simply on the lost interest would come nowhere close to reflecting the true damage which their conduct has caused. The more difficult question is whether some adjustment is called for in the denominator. This comes down to considering whether the Islamic deposits and the ICIC portfolio monies should be included. The reasoning behind the inclusion in the denominator of the bank loans and the Khalil deposits is that they are treated by the liquidators as payments by persons who had knowledge of the fraud. Following my judgment in the case against SBI the loans by that bank fall to be excluded on this basis unless the liquidators' alternative method of calculating the denominator is used, in which case BOI's share of the losses will remain the same. The Islamic deposits and the ICIC payments have not been included, simply because there is no evidence that those deposits were made by persons who had knowledge of the fraud. That is obviously right, but the issue of principle is whether BOI's contribution to the continued existence of BCCI should be measured by reference only to the other knowing contributors or to all other relevant sources of funds. I prefer the latter approach. It seems to me that to disregard any source of funds other than those from entities with knowledge of the fraud would be to impose a disproportionate burden on BOI in this case. My own calculation, using the liquidators' figures for A and C in the formula, but Mr Kabraji's figures for the denominator B, produces figures for 1983, 1984 and 1985 of $12.532m, $17.999m and $12.700m respectively: a total of $43.231m. Interest The liquidators also seek interest. Three possible bases for an award of interest are put forward: (i) as part of an order for a contribution under s.213(2); (ii) in equity; and (iii) pursuant to s.35A of the Supreme Court Act 1981. It seems to me that I have jurisdiction to include an element of interest in the contribution which I order under s.213. Although the statute does not refer to any power to award interest in terms, it must be open to the Court to ensure that any award under s.213 adequately compensates the creditors of the company for the passage of time which has elapsed. This seems to have been the view of Knox J in relation to an order under s.214 of the 1986 Act (see Re Produce Marketing Consortium (No. 2) [1989] BCLC 520) and I can see no reason not to apply the same principles under s.213. That leaves the question of the appropriate rate and the period for which interest should run. I think that the appropriate rate is base rate plus 1%. This is the usual rate applied in commercial cases unless it would be unfair to one or other of the parties. I can see no basis on which BOI could object to this rate. That leaves the date from which interest should run. I consider that it should run from the date of liquidation in 1991 and that it should be simple interest. However, as I have heard no detailed submissions on interest, the parties should regard my conclusions on this matter as open to further argument, if they wish, once this judgment has been handed down. In the absence of further dispute, I will award a payment in favour of the liquidators in the sum of US $43.231m with interest from the date of liquidation at the rate I have specified. I am grateful to Counsel and to their solicitors for the assistance I have received.

Mr Justice Tomlinson : This is an application by the claimants, Louis Dreyfus Commodities Kenya Limited, to whom I shall refer hereafter as "LDCK", for a final anti-suit injunction. Although the application is cast in somewhat wider form, essentially LDCK seek to restrain the Defendants from taking any steps to join them as a party to proceedings before the Mexico City Federal District Court, "the Mexican proceedings". There has been no application for an interim injunction because until recently the relief sought was not thought to be urgently required. I heard the application on 14 and 17 June 2010. On 5 July 2010 I was informed that papers relating to the joinder of LDCK to the Mexican proceedings had been served on them in Kenya and that they have only a short time within which to respond to service. LDCK contend that the Defendants' application to join them as a party to the Mexican proceedings amounts to a breach of an arbitration clause contained in a bill of lading, B/L No.2 dated 10 March 2007 to which LDCK and the Defendants are both party. LDCK were named therein as the shippers of 5,000 tonnes of what the shippers described as "South African No. Two (2) or better white corn fit for human consumption". The bill of lading was signed at Mombasa by agents on behalf of the Master of the "Giorgis Carras", herein- after "the vessel". The Defendants, Bolster Shipping Company Limited, are the registered owners of the vessel and it is common ground that they were the carriers identified in the bill of lading. I shall refer to the Defendants hereafter as "the Owners". The consignee was identified in the bill of lading as Suministros de Maiz del Mayab S.A. de CV, a Mexican company to which I will refer hereafter as "Suministros". The cargo thus loaded was part of a larger consignment amounting to 19,079 tonnes in all. There were two further bills of lading, Nos. 1 and 3, representing two parcels consigned to another Mexican company, Productores de Semillas del Sureste S.A. de CV, to which I shall refer hereafter as "Productores", but I am not concerned with these two parcels. LDCK is, as its name implies, part of the Louis Dreyfus group of companies. On 12 February 2007 LDCK sold to Louis Dreyfus Corporation of Wilton Connecticut, to whom I shall refer hereafter as "LDC", fob Mombasa 20,500 tonnes, 10% more or less at seller's option, South African White Maize No.1 with up to 40% No.2. It was stipulated in the contract that the foreign matter contained therein should be maximum 0.3% in the No.1 and maximum 0.5% in the No.2. The sale was on the terms of GAFTA (The Grain and Feed Trade Association) Form 59 and also contained a GAFTA arbitration clause. On the same day, 12 February 2007, Sangamon Transportation Group, that being the trading name for LDC, chartered the vessel from the Owners on an Amended New York Produce Exchange form of charter for a time-charter trip via East Coast Africa to East Coast Mexico for the carriage of grain. The time charter contained the following arbitration provisions:- "17. That should any dispute arise between the Owners and the Charterers, the matter in dispute shall be referred to Arbitration in London in accordance with Arbitration Act 1994 (sic) and any subsequent alterations (See Clause No.64). Clause 64 With reference to Clause 17, it is agreed that all disputes or differences arising out of this contract which cannot be amicably resolved shall be referred to Arbitration in London. . . . . This contract is governed by English law and there shall apply to all proceedings under this Clause the terms of the "London Maritime Arbitrators Association" current at the time when the Arbitration Proceedings were commenced." On 22 February 2007 LDC sold to CHS Inc of Minnesota (hereinafter "CHS") cif Coatzacoalcos 19,000 tonnes 10% more/less White Corn of South African origin "all specs as per South African White Corn 2" fit for human consumption. The contract was on GAFTA Form 59 Incl. GAFTA 125. In due course CHS concluded sales to Productores and Suministros. The terms of those contracts are not in evidence before me. Loading commenced at Mombasa on 18 February 2007. It was completed on 10 March 2007 and the three bills of lading to which I have already referred were issued. It is common ground that B/L No.2, indeed all of the bills of lading, incorporated the charter party arbitration clauses which I have set out above. The vessel arrived at Coatzacoalcos Vera Cruz on 27 April 2007. At 08.30 the cargo receivers drew samples from Holds Nos. 1 and 5 for analysis. At 09.00 discharge commenced. At 15.15 on the same day the Master was presented by Suministros with a Claim Letter. Suministros asserted that they were the receiver of 5,000 tonnes South African No.2 or better white corn and that there was "a quality cargo damage". They asserted that a comparison of an SGS Certificate of Quality at loadport, describing the goods as South African No. Two (2) or better white corn fit for human consumption and the samples drawn from Holds Nos. 1 and 5 showed a difference in quality. There is no evidence that Productores made a similar claim. Of course, I do not know how the product was described in the sale to them. Owners have placed before the court a report from Dr Nicholas Crouch of Messrs Brookes Bell. He concluded that there was a relatively high level of brown germ-damaged kernels present in the cargo shipped, caused by mould invasion of the germ tissue during storage prior to shipment. He concludes that what is, in reality, at issue is a quality dispute between "the Shippers and the Receivers", by which he means of course, in legal terms, between sellers and buyers. He also considers that there was a faulty grading operation at the time of loading. He concludes that the damage to the grain, observable on discharge, did not occur during carriage. His conclusions are of course untested but they are not implausible. In argument before me Owners also stressed that the description of the cargo in the bill of lading as South African No.2 or better white corn fit for human consumption is said to be the Shipper's description. They point out that whereas LDCK sold the cargo as having up to 0.5% foreign matter, in fact maximum 0.5% only in the permitted 40% No.2, maximum 0.3% in the No.1, on 19 March 2002 LDCK instructed the load port inspectors, SGS, that the specification of the test parameters had been revised and that so far as concerned foreign matter the maximum permitted was 1.3%. The Certificate issued by SGS shows an actual result of 1.25%. I cannot properly make out the date of the Certificate, although I suspect it to be 20 March. The maximum permitted foreign matter for South African No.2 corn would indeed appear to be 0.5%. However, the question of the nature of any revision to the sale agreement concluded between LDCK and LDC was not explored in the evidence filed for the purpose of this application. I have already pointed out that there is no evidence before the court as to the terms upon which Suministros (or indeed Productores) bought from CHS save insofar as the Letter of Claim to which I have referred above suggests that Suministros had bought South African No.2 grade or better white corn, an assertion repeated by them in their "Initial Written Complaint" issued in the Mexico City Federal District Court to which I now turn. That Complaint gave rise to the Mexican proceedings, to which I have referred at paragraph 1 above. By that Complaint Suministros commenced proceedings against:- i) CHS Inc, as seller of the goods subject matter of these proceedings by means of its agent Gradesa S.A. de C.V; ii) FORTIS CORPORATE INSURANCE N.V., as INSURER and GROUPE EYSSAUTIER PARIS, as INSURANCE AGENT of such insurance company, of the goods subject matter of these proceedings by means of its agent MARINE SURVEYORS AND ADJUSTERS S.C.; iii) BOLSTER SHIPPING COMPANY LIMITED, as owner of motor vessel GIORGIS CARRAS which transported the cargo giving rise to these proceedings; and iv) MARMARAS NAVIGATION LIMITED, as OWNER and OPERATOR of motor vessel GIORGIS CARRAS. Marmaras Navigation Limited were, as I understand it, the Managers of the vessel. The Complaint alleges that the cargo was damaged by a "brown germ" and that the Claimant therein cannot determine where the damage occurred or who is responsible therefor. Damages assessed at US$815,573.36 are claimed in consequence of the cargo having been unfit for human consumption. On 28 February 2007 the Owners made an application to the Mexican Court. In the first instance they challenged jurisdiction. They also however, as I understand by Mexican procedure they were obliged to do, set out their defence on the merits. They asserted that they were not liable under the bill of lading contract for pre-shipment damage. They point to the role allegedly played by LDCK in relation to the storage of the goods before shipment. The Owners did not I think, contrary to the submission of Miss Masters on behalf of LDCK, assert that in consequence LDCK are liable to Suministros, or indeed to any other party, for the damage. It is difficult to see on what basis LDCK could be sought to be held liable by Suministros. Finally the Owners in their document of 28 February 2007 sought the joinder to the action of LDCK, LDC and Sangamon. It is this application and its pursuit thereafter that is said by LDCK to amount, insofar as it concerns them, to a breach of the arbitration clause incorporated into the bill of lading. Before turning to the substance of LDCK's application to this court and the necessary analysis of the nature of the Owners' application to the Mexican Court, I should first briefly describe the multiplicity of proceedings to which this relatively mundane dispute has given rise. On 24 April 2008 Suministros commenced arbitration in London against Owners, presumably relying upon the arbitration clause incorporated into the bill of lading, there being no other obvious source of jurisdiction. On 7 May 2008 Owners notified the Mexican Court of this development, no doubt in purported vindication of their own reliance upon the bill of lading arbitration clause as depriving the Mexican Court of jurisdiction. This notwithstanding, Owners' challenge to the jurisdiction of the Mexican Court has been rejected at first instance and that decision has been affirmed on appeal. I have not been shown the reasons for these decisions. On 7 July 2008 the Owners issued what are described as Letters Rogatory, addressed to LDCK, LDC and Sangamon. As I understand it this was done at the direction of the Mexican Court as an integral part of the service upon those parties of the proceedings to which their joinder was sought. Service upon LDC and Sangamon was effected on 25 September 2009, but service upon LDCK was delayed in consequence of without prejudice discussions. As I have recorded above, service has now very recently been effected upon LDCK in Kenya. In the London arbitration commenced by Suministros against Owners, Suministros unaccountably contended that the arbitrators, whose appointment they had initiated, had no jurisdiction, the time charter arbitration clause not having been, as they said, incorporated into the bill of lading. On 13 March 2009 the arbitrators ruled that they did have jurisdiction. Suministros challenged this ruling, but this court dismissed that application on account of the failure of Suministros to comply with a direction to provide security for costs. Thereafter Suministros took no further part in the arbitration. On 8 April 2010 the tribunal issued an award to the effect that the Owners have no liability to Suministros. Other relevant proceedings include:- i) An arbitration commenced by the Owners against Sangamon under the time charter arbitration clause in which the Owners seek an indemnity from Sangamon as time charterers in respect of any liability which the Owners may have attracted; and ii) A GAFTA arbitration commenced by CHS against LDC. The Owners' application to the Mexican Court in which they seek the joinder of LDCK is of course in Spanish. There is some debate about the proper translation. However, in the Owners' certified translation provided to the Mexican Court, the relevant section has the sub-title "SUMMON TO PROCEEDINGS". I set out the certified translation of this section below. "Due to the fact that the company Sangamon transportation group is the one chartering vessel Giorgis Carras, and accordingly is the one in charge of the commercial exploitation of the vessel, it is bound to third parties in its own name, as it assigns areas in the vessel, gives orders to the captain, who is subordinated thereto, represents it and binds it to third parties, issuing bills of lading on its behalf, therefore, the party contracted by the goods transportation shipper was such company and any damage attributable to the goods must be claimed to the Charterer by, or accordingly, the party to be sued is such legal entity and not my principal, therefore, I heretofore request to service that party in order for judgment therefrom be rendered on that company whose domicile to be served is that located at: . . . Likewise and due to the fact that Sangamon Transportation Group is a division of Louis Dreyfus Corporation as proven with guarantee letter dated February 12, 2007, as it is the owner of the former, it ordered and directed the captain regarding transportation of the goods covered by bills of lading shown by plaintiff, who acted under its orders and on behalf thereof, I request to serve that company on this action, and that the judgment to be rendered against it with the domicile to be served being located at : . . . Due to the fact that Louis Dreyfus Commodities Kenya LTD is the shipper of the corn covered by bills of lading presently shown by the plaintiff and it was the one requesting SGS Kenya LTD to issue the Quality and Condition Certificates, the Lack of Aflotoxin Certificate, the cleaning Certificate of halls and hatches cover and requested fumigation of halls and the white corn, it was the one selling the corn, I heretofore request to serve it on this case of action and that the judgment to be rendered against it with its domicile to be served being that located at: . . ." The words in Spanish, the translation of which have given rise to discussion, are "le cause perjuicio", which have been rendered in their context so as to produce the expression "that the judgment to be rendered against it". The exactly similar expression in Spanish is used so far as concerns the request to join Sangamon and LDC. As can be seen above, it has been translated in exactly the same way in the context of LDC, although slightly differently in the case of Sangamon. It is the evidence of an English-speaking Mexican lawyer from whom LDCK has sought assistance, Mr Escamilla, that the Owners' certified translation of the phrase "le cause perjuicio" is "reasonably correct", although perhaps a more accurate translation would be "bound by the judgment". The evidence of the Owners' English-speaking Mexican lawyer, Mr Moctezuma, is that the translation of the critical phrase contained in their own certified translation is inaccurate and that the more accurate translation of the joinder application is that it was seeking a resolution "causing involvement" of LDCK but not holding it liable for the amounts claimed. Miss Sara Masters for LDCK submits that their position that the Owners have asked the Mexican Court to render judgment against LDCK, or at least that any such judgment should bind LDCK, is obviously right because:- i) it is supported by the Owners' own original certified translation; ii) it is supported by Article 1094 of the Mexican Commercial Code, which also uses the word "perjuicio" and which is translated in the same way as "rendered against";- iii) it is also supported by a further certified translation which has been obtained by LDCK and placed before the court, which translates the relevant phrase as "I request that [LDCK] be given notice of the present law suit so that the ruling rendered therein is to its detriment". Miss Clare Ambrose for the Owners in her skeleton argument observes "the correct translation of the formal wording is of little relevance, it is accepted that the literal translation is calling for judgment to be rendered against [LDCK]". In view of this very realistic approach I need not dwell on the linguistic arguments. The question remains, however, what is to be the nature of LDCK's involvement in the Mexican proceedings and in whose, if anyone's, favour a judgment might be. Would it be to the effect that arising out of the circumstances surrounding the sale and shipment of this cargo LDCK attracts liability and if so to whom and for what? I have already recorded that the Owners, in their formal document setting out their defence and seeking the joinder of LDCK, have not asserted that LDCK has any such liability. It is the evidence of Mr Escamilla that Mexican law distinguishes between two types of third parties, "mere" third parties and "interested" third parties. He says this:- "Mere third parties will not suffer any consequences derived from the final judgment. Their purpose is to assist the court in finding the truth. Court aids, experts, witnesses and supervisors are considered mere third parties. Interested third parties will participate in the proceedings if they, the court or one of the parties considers that the final outcome of the procedure could affect their rights or duties. The interested third party pursues its own interest in a pre-existing procedural relation between claimant and defendant. The main distinction between a mere third party and an interested third party is that the final judgment in the proceedings could either benefit or prejudice the latter (because it may be bound by it) but not the former. Article 1094 section VI of the Commercial Code provides that the joinder against whom the judgment will be rendered will have the status of party, being able to offer evidence, file arguments and defenses as well as recourses (appeals). A Mexican court precedent (jurisprudencia) explains contents of section VI of article 1094 of the Commercial Code as follows: "From the understanding of section VI of article 1094 of the Commercial Code it follows that in the mercantile procedure the third party called to the proceedings has a party status when the calling to the procedure is with the objective that judgment which would resolve the merits of the dispute is rendered against it, therefore such third party is able to respond to the complaint, submit evidence and make allegations to defend its position as well as to appeal those decisions in its prejudice, such as the final judgment that would be issued in the proceedings. In this context, when the third interested party is linked to the judicial dispute the burden of appearing in its own defense is imposed because the judgment to be issued may produce consequences in its juridical sphere, which makes it to be hold to the proceedings, which would not have occurred if he had not been called to the proceedings, and it is for that reason that in the mercantile proceedings the third party adopts the party status (in procedural rules language), with the authority and holding of his condition, i.e., in defense, provided by article 1094 section VI of the Commercial code . . ." The interested third party could even be condemned to pay attorneys fees as explained by a court precedent (jurisprudencia)." Mr Moctezuma for the Owners contends that a joinder application does not "necessarily mean" that the third party will be bound by the judgment. That much is common ground. He accepts however that LDCK could be considered as an interested third party. Mr Moctezuma says that whether or not LDCK will be bound by the judgment depends upon whether a formal claim is made against it and whether LDCK assumes an active role in the case. He considers that the Mexican Court judgment will not in fact be binding as between LDCK and the Owners regarding the cause of the damage because this issue has not been raised between those parties. On this point Mr Escamilla says this:- ". . . The main issue that will be decided in the Mexican proceedings is as to whether Suministros can establish liability against the named defendants; however, in my opinion, based on scholar dissertations, Article 1094 paragraph VI of the Commercial Code and court precedents, the judgment could, legally speaking, contain a reference as to the involvement of LDC Kenya and such reference could be either in their benefit or prejudice and would bind LDC Kenya for the reasons already given. It is impossible to anticipate what the extent of the reference to LDC Kenya will be, if any, but I have no doubt that the possibility exist that LDC Kenya is somehow and to some extent included in the judgement." Mr Moctezuma for his part accepts that there is an "entirely remote" possibility that LDCK will be held liable to Suministros and that "in particular this would arise only if LDCK chose to assume an active role as Defendants". Mr Escamilla says that it is not only possible but advisable for LDCK to play an active role in the proceedings in order to avoid a judgment that may prejudice their interests, and I do not understand Mr Moctezuma to controvert this proposition, which must usually although not of course always be self-evidently correct. Finally it is, as I understand it, common ground between Mr Escamilla and Mr Moctezuma that the more active a role is played by LDCK, the more likely they are to be held bound by the judgment, whatever that may mean in practical terms. It is clear that the Owners' basic purpose in seeking to involve LDCK in the Mexican proceedings is to ensure that there are made available to the Mexican Court the information and in particular the documents which will enable Owners to make good their case as to the condition of the cargo on shipment. Ironically they have in part already achieved that purpose because in responding to the attempted joinder, by making this application to this court, LDCK have made available documents and information concerning the cargo and its condition which the Owners did not previously have. Owners point out however that they have made no claim against LDCK and that the effect of the judgment, either as between LDCK and themselves, or as between LDCK and third parties, will obviously depend upon the issues that are subsequently raised in the proceedings and upon the terms of the judgment when rendered. Whilst they accept that they are, as LDCK put it, seeking to deflect liability away from themselves, they deny that they are seeking to deflect responsibility for the damage onto others. They do not accept that they are effectively inviting Suministros to bring a claim against LDCK in the Mexican proceedings and they point out that there is no obvious cause of action upon which Suministros could rely against LDCK. Owners suggest that it is entirely legitimate, and in no way in breach of their obligations under the bill of lading arbitration clause, to join a party to proceedings in circumstances such as these for the purpose of obtaining information and evidence. Indeed, they cautioned me against interfering with the foreign court's method of obtaining evidence. Moreover, they point out that it is not ordinarily a breach of an arbitration clause to seek security, for example by the arrest of a ship or by an injunction restraining disposal of a cargo, and they suggest that the procedure here adopted is far more "benign" and incapable of constituting a breach of the bill of lading arbitration clause. LDCK for their part point out that in Owners' application to the Mexican Court there is no mention of the purpose of the joinder being merely to obtain the provision of documents and information. They also point out, as is common ground, that the Mexican Court has a procedure pursuant to which an officer of LDCK could have been required to give evidence and to produce documents. This last point is, I think, of little practical weight. It is common ground that, assuming that the relevant officer or officers lived outside Mexico, the assistance of the foreign court local to his or her place of residence would be required in order to obtain a deposition. This is usually a long and costly process with uncertain results. I accept that on sheer grounds of practicality a joinder application with a view to the provision of evidence and information is far more likely to be effective than seeking to compel the giving of information and the production of documents through the medium of a witness. Mr Moctezuma also points out that the Mexican procedure of joinder of LDCK has the advantage that they may be required by their attorneys to answer questions. The Owners say that it has been necessary to involve LDCK as a third party in order to ensure that they provide evidence as to the quality of the goods on shipment and that there was no alternative means to ensure their participation. Although it may be questionable whether this either is or might become a relevant consideration, the Owners also say that LDCK have been unwilling, voluntarily, to make available the evidence which would demonstrate that the Owners are under no liability to Suministros. The question which is determinative of this application is whether the Owners' conduct amounts to a breach of the bill of lading arbitration clause. That clause requires that all disputes or differences between LDCK and Owners arising out of the contract contained in or evidenced by the bill of lading shall be referred to arbitration. Miss Masters had difficulties in formulating the breach which has occurred or which is threatened. At one stage she submitted that the Owners should not be permitted to put it into the head of Suministros that they should claim against LDCK. Even if it could be accepted that this is an appropriate characterisation of what the Owners are attempting to do, I do not consider that such conduct can possibly of itself amount to a breach of the arbitration clause. A party to an arbitration clause does not undertake to his contractual partner that he will not, if sued by a third party, suggest that it is to the contractual partner that the third party should rather look for recompense. Miss Masters submits that on its proper construction the wording of the joinder application indicates that the Owners are asking the Mexican Court to render judgment against LDCK or, at least, to ensure that they are bound by the terms of that judgment. That, she submits, is a clear breach of the bill of lading arbitration clause. I agree that this is a proper description of what the Owners are asking the Mexican Court to do, but I do not agree that that is without more a clear breach of the bill of lading arbitration clause. The Owners are not inviting the Mexican Court to resolve a dispute between themselves and LDCK – they do not assert a claim against LDCK, and they do not identify any dispute between themselves and LDCK arising out of the contract. The Owners have not identified any issue arising between themselves and LDCK as to which the judgment of the Mexican Court could in any real sense be binding as between them. Miss Masters at first submitted that the attempt by the Owners to use the Mexican proceedings as an instrument to obtain evidence and information from LDCK is a breach of the arbitration clause. However, as Miss Ambrose pointed out, that is too broad a submission. It requires the implication of a term that a party to an arbitration clause cannot obtain evidence by resort to a tribunal other than the contractual arbitration. On that footing, simply seeking to compel a witness to give evidence or to produce documents would amount to a breach of contract, which is an extravagant proposition. In reply Miss Masters accepted that attempting to compel the giving of evidence by an officer of the opponent party, in proceedings other than a contractual arbitration, would not amount to a breach of the arbitration clause. She submitted however that the Owners are effectively asserting a contractual right to the provision of documentation by LDCK, and that since LDCK deny any such obligation, that is a dispute or difference arising out of the contract which Owners are expressly or impliedly asking the Mexican Court to resolve. Miss Ambrose for her part accepts that LDCK are under no contractual obligation to render co-operation and she submits that the Owners are not in the Mexican proceedings asserting a contractual right to co-operation. I agree that there is in the Owners' application to the Mexican Court no trace of the assertion of any such right. LDCK's application to this court is brought under section 37(1) of the Senior Court Act 1981 and the touchstone of the jurisdiction is the interests of justice. It is common ground that a prerequisite here to the grant of the injunction sought is the demonstration by LDCK of a clear breach of the arbitration clause by the Owners. The procedure which the Owners have adopted in Mexico is unfamiliar to English eyes but it is permitted in Mexico and is evidently an established part of the repertoire of the Mexican Court. It is not, in my judgment, demonstrated that the Owners' resort to that procedure constitutes a breach of the bill of lading arbitration clause. This application must accordingly be dismissed.

Mr Justice Nicol : This has been the trial of claims for slander and libel brought by the comedian and entertainer, Freddie Starr, against Karin Ward. They arise out of an interview which Ms Ward gave to the BBC in November 2011 and to ITV in October 2012 and the subsequent broadcasts of parts of those interviews and also out of online publications made by Ms Ward. 1974: the background Ms Ward was born on 25th March 1958. She had a troubled family background including, she says, sexual assault by her step father. She also shoplifted on a number of occasions. When she was about 14 she was sent to Duncroft Approved School ('Duncroft') in Surrey. There were about 25 girls at the school. The Headmistress was Margaret Jones. While Ms Ward was at Duncroft she met Jimmy Savile ('Savile'). She says that she and other girls at Duncroft were sexually abused by Savile. In return they were given cigarettes and also the opportunity to attend Savile's TV shows. Savile was particularly known for a show called 'Jim'll Fix It'. But another show was a programme called 'Clunk Click' on which guests appeared with Savile in front of a studio audience. 'Clunk Click' was not broadcast live, but recorded in advance of transmission. One episode of 'Clunk Click' was filmed on 7th March 1974. Ms Ward and about 4 other girls from Duncroft attended as part of the studio audience. On that date Ms Ward was 15. One of the guests on that episode of 'Clunk Click' was Freddie Starr. He was 32 at the time and was well known as a comedian and entertainer. After the show, Ms Ward says that she and the other girls from Duncroft were able to meet with Savile and others connected with the show including Mr Starr. Precisely what took place then is hotly disputed between the parties and I will need to return to it but, in very brief terms, Ms Ward's case is that Mr Starr felt her bottom. She protested vigorously. She says that he then made a crude remark referring to the flatness of her chest. She found this deeply humiliating. Mr Starr denies touching or attempting to touch Ms Ward. He denies saying anything humiliating. The publications complained of Ms Ward wrote an account of some of the incidents in her life on a website called 'FanStory'. She says that she started this exercise in 2008. For that reason it is convenient to take it first. However, the Particulars of Claim pleaded that the words were only defamatory of the Claimant after 8th October 2012, by which time the Defendant says she had taken this part of her account down from the website. In the course of his closing submissions, Mr Dunham, on the Claimant's behalf, accepted that he had no evidence to contradict what the Defendant said about the date when the story was taken down. He accepted that this part of the Claimant's case could not succeed. Nonetheless, what the Defendant said in 'FanStory' is relevant to other parts of the evidence and so it is still useful to set it out. What are conveniently called 'the FanStory words' were as follows: "The first time we were taken to London there were eight of us. All the rest of the girls had gone home for the weekend. We were escorted into Television Centre and taken to see Sir Jimmy in his 'dressing room'. The air hung thick with his foul cigar smoke. He laughed and joked with Miss Jones, Theo and every girl close enough to speak to. We were to be introduced to some of his guests on the show before it began. Now my recollections of meeting with these guests are very vivid, not least because at least one of them has since been prosecuted for sexual misconduct with minors. Don't get me wrong. Not every celebrity we met was a closet paedophile. Over several weeks, I met a great many male and female celebrities, some of whom I remember fondly for their intelligence, wit and general pleasant demeanour. However, of those who had similar tastes to Jimmy Savile – a liking of under-age girls, I can only recall vague disgust and horror. One particular celebrity, a very popular comedian of the time, whom I shall simply refer to as 'F', absolutely stank of booze and sweat. His hands wandered incessantly; he had absolutely no qualms whatever about any one of the girls seeing what he was doing to any of the others. The fact that we sat in his dressing room with him, drinking vodka or Bacardi rum whilst he blatantly selected which girl to humiliate amazes me. I cannot recall where Miss Jones and Theo were. Surely, they must have known what was going on? … Even so there were no acts of violence or threats. No-one was hit or taken against their will. I refused 'F' because getting anywhere near him made me heave. He smelled far too much like my step-father for my liking. 'F' made some rather cruel remarks about my lack of breasts by way of getting back at me for refusing him. Everyone laughed whilst I burned with humiliation." On 14th November 2011 the Defendant was interviewed by Liz MacKean of the BBC. In the course of the interview, the Defendant spoke these words: "That's when the other guests on the show would come in, generally after the show had finished they would come in and they clearly saw girls and, well, kids, male and female, as being there to be used. I had a famous person who would try, he smelled awful, he smelled of sweat and alcohol and it made me heave just to be near him, so I certainly didn't want him to do anything to me." For this publication the Claimant relies on words spoken by the Defendant. It is therefore a claim in slander[1]. He pleads that the words were defamatory of him in an innuendo meaning. An innuendo meaning is one which is dependent on certain facts being known to the person or people to whom they were published. In this case, the Claimant alleges that Ms Ward told Ms MacKean that the famous person in question was him. It is also alleged that Ms Ward told Ms MacKean that she had visited Savile's dressing room when she was a 14 year old schoolgirl and that the Defendant's words were in answer to the question 'What sort of things happened in Jimmy Savile's dressing room?' With the knowledge of those facts, it is alleged that these words were defamatory of the Claimant in that they meant that he saw children in Savile's dressing room as being there to be sexually abused and that he had tried to abuse the Defendant when she was a fourteen year old schoolgirl. I will refer to this publication as 'the BBC words'. Savile had died on 29th October 2011. Liz MacKean had interviewed the Defendant for the purpose of an item which she was helping to make for BBC 'Newsnight' on Savile's sexual offending. The BBC decided not to go ahead with the item before it was completed. The interview with the Defendant was not therefore broadcast on 'Newsnight' or anywhere else immediately after it was recorded. A part of it was broadcast later (see below). One of the people who had helped to work on the 'Newsnight' report was a consultant called Mark Williams-Thomas. In the autumn of 2012 he was preparing a programme on Jimmy Savile for ITV which was to be called 'Exposure: the Other Side of Jimmy Savile' ('Exposure'). The Defendant and Mr Williams-Thomas were in contact and she agreed to give him an interview which took place on 2nd October 2012. Ms Ward said in her interview, the following: "I was horribly, horribly humiliated by Freddie Starr who had a very bad attack of wandering hands and had groped me and I didn't like him because he smelled like my step-father and it frightened me and freaked me out and I rebuffed him and he humiliated me in front of everyone in the dressing room." I will refer to these as 'the ITV words'. Since they were spoken by the Defendant to Mr Williams-Thomas, the Claimant's claim in respect of them is again in slander[2]. Again the Claimant relies on an innuendo meaning. He alleges that Ms Ward told Mr Williams-Thomas that she was a fourteen year old schoolgirl at the relevant time and, with the knowledge of that, the ITV words meant to Mr Williams-Thomas that the Claimant was a paedophile who had groped and thereby sexually assaulted the Defendant when she was a fourteen year old schoolgirl and that he had humiliated and frightened her. 'Exposure' was broadcast on 3rd October 2012. Mr Williams-Thomas explained that its focus was Jimmy Savile. The programme did not include the ITV words. In order to explain how, nonetheless, the ITV words and BBC words came to be broadcast, it is necessary to interpose an account of further developments. Others within ITV had access to the material which Mr Williams-Thomas had accumulated, including his interview with the Defendant. On 3rd October 2012, a senior news editor at ITN emailed the Claimant's solicitor (Mr Dunham) and asked him to respond to the allegation that the Claimant had groped and humiliated a 14 year old girl in Jimmy Savile's changing room in the 1970s. Shortly afterwards, Mr Dunham responded by saying that the allegation was false and defamatory and he asked ITN to confirm that they would not report it, failing which the Claimant would seek an injunction. ITN responded by saying that it did not intend to identify the Claimant and it was carrying out journalistic inquiries. If circumstances changed, Mr Dunham would be notified. That evening (3rd October 2012) the Claimant applied without notice for a temporary injunction. This was granted by Cox J. A hearing on notice took place the following day (4th October 2012) before Tugendhat J. who discharged the injunction and ordered the Claimant to pay costs on an indemnity basis. Tugendhat J. was careful in his judgment not to set out the allegation as to what the Claimant was said to have done. Nevertheless, his judgment was public and the Claimant's unsuccessful attempt to obtain an injunction was widely reported. The Claimant then gave media interviews in which he denied meeting the Defendant, let alone groping her. He also denied being with Jimmy Savile on BBC premises. He said that he had only met Savile twice and those were quite different occasions. His remarks were widely reported. On 8th October 2012 Channel 4 News obtained footage of the episode of 'Clunk Click' which had been filmed on 7th March 1974. The Claimant could be seen as one of the guests on the show. The Defendant could be seen in the audience on the set. That same day, 8th October 2012, Channel 4 News broadcast part of the interview which Mr Williams-Thomas had conducted with the Defendant on 2nd October and which included the ITV words. It did so as part of its coverage of developments following 'Exposure'. It included the apology of the Director-General of the BBC to victims of Jimmy Savile's abuse. It also included a report of the Claimant's attempts to obtain an injunction (initially successful, but then unsuccessful), his denial that he had ever met the Defendant or appeared on a Savile show, and the 'Clunk Click' footage showing the presence of both the Claimant and the Defendant. It also included a statement by Mr Dunham that the Claimant accepted he had been mistaken about appearing on the Savile show, but that he maintained his denial of the Defendant's allegation. On 10th October 2012 the Claimant was interviewed on an ITV show, 'This Morning' together with his fiancé Sophie Lea. An extract of the Defendant's interview with Mr Williams-Thomas (which included the ITV words) was played. The 'Clunk Click' footage was also played. The Claimant was allowed to give his response to both. He denied the Defendant's allegation. On 1st November 2012 the Claimant was arrested on suspicion of sex abuse. An extract from the Defendant's interview with Mr Williams-Thomas (again including the ITV words) was broadcast on ITV News. The broadcast also included the Claimant's full denial. It is helpful to refer to these three broadcasts as 'the ITV broadcasts'. The Claimant has not sued ITV. He alleges that the Defendant is responsible in law for the harm which they caused him by two alternative routes. First, he submits it is a consequential loss flowing from the original slander in the ITV words and that the Defendant is liable for this further loss since she knew or should have known that there was at least a significant risk that the ITV words would be broadcast to a wide audience. Secondly, he submits, the Defendant is liable for them as a co-publisher since, he alleges, she intended or authorised the ITV words to be broadcast. He argues as well that, even if the Defendant did not intend or authorise these further broadcasts, the reasonable foreseeability that they might occur would be sufficient to make her liable as a co-publisher of them. The 8th October broadcast was preceded by the words 'Karin Ward was a schoolgirl when she claims she was assaulted.' The natural and ordinary meaning which the Claimant attributes to the ITV broadcasts is that the Claimant was a paedophile who had groped and thereby sexually assaulted the Defendant when she was a schoolgirl and that he had humiliated and frightened her. A defamatory publication by TV broadcast is a form of libel and, so far as the Claimant relies on the ITV broadcasts as giving rise to an independent cause of action, it is therefore in libel. On 22nd October 2012 BBC broadcast a 'Panorama' programme. It included footage of the Claimant. A narrator then said, 'Among the guests on Clunk Click were young people from hospitals and other institutions, including girls from Duncroft. Karin Ward, aged just 14, was one of them. After the show, she was invited with other young people to join more famous guests in the dressing rooms. She told Newsnight about this 11 months ago in the interview that was dropped'. Liz MacKean was then heard to say, 'What sort of things happened in Jimmy Savile's dressing room?' The BBC words were then broadcast. They were followed by footage of the notorious paedophile, Gary Glitter and these words, 'Gary Glitter also appeared on Clunk Click. He, too, would join Jimmy Savile and his young guests in the dressing room after the show.' I shall refer to this as 'the BBC broadcast'. The Claimant says the BBC broadcast had the natural and ordinary meaning that he saw children in Jimmy Savile's dressing room as being there to be sexually abused, and that he had tried to abuse the Defendant when she was a fourteen year old schoolgirl. The Claimant has not sued the BBC. As with the ITV broadcasts, the Claimant alleges that the Defendant is liable for the harm which flowed from the BBC broadcast either because it was reasonably foreseeable that there was a significant risk that the BBC words would be broadcast and she is liable for the harm which flowed from the broadcast as consequential loss from her slanderous BBC words, and/or because she is a co-publisher of the broadcasts since she intended or authorised them, or, because the broadcast was a reasonably foreseeable consequence of her interview with Liz MacKean. On 13th October 2012 the Defendant published an eBook for the Kindle device. It was entitled, 'Keri Karin: the shocking true story of a child abused, continued' and included the following words: "The first time we were taken to London there were eight of us. All the rest of the girls had gone home for the weekend. We were escorted into Television Centre and taken to see JS in his 'dressing room'. The room was large and well appointed. The air hung thick with his foul cigar smoke but most of us were smoking cigarettes as well so it all combined into a kind of hazy fog at ceiling height. JS laughed and joked with Miss Jones, Theo and every girl close enough to speak to. We were to be introduced to some of his guests on the show before it began. Now some of my recollection of meeting with these guests are very vivid, not least because at least one of them has since been prosecuted for sexual misconduct with minors. Don't get me wrong. Not every celebrity we met was a closet paedophile. Over several weeks, I met a great many male and female celebrities, some of whom I remember fondly for their intelligence, wit and general pleasant demeanour. However, of those who had similar tastes to JS – a liking for under-age girls, I can only recall vague disgust and horror. One particular celebrity, a very popular comedian of the time, whom I shall simply refer to as 'F', absolutely stank of old sweat and the same cologne my step-father used to use. His hands wandered incessantly; he had absolutely no qualms whatever about any one of the girls seeing what he was doing to any of the others. The fact that we sat in JS's dressing room with both of them, being encouraged to drink vodka, gin or Bacardi rum whilst they blatantly selected which girl to humiliate amazes me. I cannot recall where Miss Jones and Theo were. Surely, they must have known what was going on? … Even so, there were no episodes of violence or threats. No-one was hit or taken against their will. I refused 'F' because getting anywhere close to him made me heave. He smelled far too much like my step-father for my liking. 'F' was furious that I dared refuse him; he made an exceptionally cruel remark about my lack of breasts by way of getting back at me for refusing him. So that everyone could hear, he said loudly, 'I wouldn't touch you anyway, you're a titless wonder!' Everyone laughed while I burned with humiliation. I carried that humiliation for the rest of my adult life because I was always stick thin and never, ever had any breasts; I could barely fill a double A cup bra." I shall refer to these as 'the eBook words'. The Claimant alleges that, although he is not named in the eBook words, he could be identified as the popular comedian (which is what he was) whose name began with 'F' (which his did) and because of the ITV broadcasts and (after 22nd October 2012) the BBC broadcast. The Claimant alleges that the eBook words meant that he was a paedophile with a sexual liking for underage girls; that he groped and thereby sexually assaulted underage girls; that he, with Jimmy Savile, encouraged a group of underage girls to drink alcohol while blatantly choosing which of them to humiliate; and that he humiliated the Defendant in front of other girls. The Claimant has claimed general damages for harm to his personal and professional reputation and because of the distress, upset and embarrassment which the Defendant's publications have caused him. He has also alleged that he suffered special damages in the form of lost earnings when a number of venues cancelled his previously booked appearance with them. The Defendant's defences in outline The Defendant takes issue with the meanings attributed to each of the different publications and the facts relied on to support the innuendo meanings of the BBC words and ITV words. She accepts that she spoke the ITV words and the BBC words. She argues that to be actionable slander the Claimant would have either to prove special damage or he would have to show that the publications came within one of the specific categories of case where proof of special damage is unnecessary. Although the Claimant pleaded that he had suffered special damage in the form of lost bookings, she had provided evidence which disputed each of them and the Claimant had not challenged any of that evidence. Accordingly, the Claimant could not show special damage. His Particulars of Claim did not allege that any of exceptional cases where slander was actionable per se (i.e. by itself and without proof of special loss) applied to either the ITV words or the BBC words. She does not accept that she is liable for the ITV broadcasts or the BBC broadcasts, whether as consequential loss or as co-publisher. She denies that the eBook words identified the Claimant. For each of the publications, the Defendant pleads in the alternative that the words were true in the meanings which she sets out. In the further alternative, the Defendant says that she is entitled to rely on the same privilege as was established in Reynolds v Times Newspapers Ltd [2001] 2 AC 127 ('Reynolds'), or that each of the publications was on an occasion of qualified privilege since there was a duty and interest relationship between herself and those to whom each publication was made. She says also that the claims (except the ones based on the BBC and ITV broadcasts) are an abuse of process. She argues that the claim in relation to the BBC words is time barred because the claim was issued on 23rd September 2013, which was more than 1 year after her interview with the BBC on 14th November 2011. The Claimant denies that Reynolds privilege is available to a person such as the Defendant who is not a journalist, but the source of the allegations in question. In any case, he denies that the necessary foundation for a Reynolds privilege has been established. The Claimant does not accept that any of the publications were on an occasion of qualified privilege since she had no duty to publish and the journalists had no interest in receiving her communications. He disputes that any of the Defendant's allegations are true. The oral evidence The Claimant gave evidence. He also called Susan Bunce who had also been at Duncroft. She was 15 when she, too, went with the Defendant and other girls from the school to the recording of 'Clunk Click' on 7th March 1974. She recalled meeting Freddie Starr after the show. I will return to other parts of her evidence. The Defendant gave evidence. She also called Meirion Jones. He was the nephew of Margaret Jones, the headmistress of Duncroft at the time the Defendant was there. He worked as an Investigations Producer for the BBC on 'Newsnight' in 2011 and the proposed item on Jimmy Savile in particular. He made contact with the Defendant and encouraged her to give an interview on camera (primarily about Savile). Liz MacKean conducted the interview with the Defendant for the 'Newsnight' item. She, too, gave evidence. Mark Williams-Thomas was a consultant for 'Newsnight' and then worked on the 'Exposure' programme for ITV. He, also, was called by the Defendant. Another of the girls who had been at Duncroft had also been in contact with Ms MacKean. She was unwilling to give evidence voluntarily but she was witness summonsed by the Defendant. Before she was called, I heard an application made on her behalf that she should be able to conceal her name from the public and press in court. I agreed for reasons which I gave orally in a judgment on Monday 22nd June 2015. Accordingly, I will refer to her as 'Witness C' in this judgment. Applications by the Claimant In the course of his closing submissions on behalf of the Claimant, Mr Dunham made two applications: (a) to amend the Particulars of Claim and (b) to disapply the ordinary period of limitation in respect of the claim in slander for the BBC Words. Both applications were opposed by Mr Price QC for the Defendant and I said that I would give my decision on them in my Judgment. Since they raise discrete issues, it is convenient to deal with them now. Extension of time to bring the claim in slander for the BBC Words As I have noted, the BBC Words were spoken by the Defendant in her interview with Liz MacKean on 14th November 2011. The Claim Form was issued on 23rd September 2013. That is more than the 1 year which is the ordinary limitation period for defamation claims – see Limitation Act 1980 s.4A. Mr Dunham's application was for the limitation period to be extended pursuant to the Court's power in s.32A. This says, "(1) If it appears to the court that it would be equitable to allow an action to proceed having regard to the degree to which – (a) the operation of section 4A of this Act prejudices the plaintiff or any person whom he represents, and (b) any decision of the court under this subsection would prejudice the defendant or any person whom he represents, the court may direct that that section shall not apply to the action or shall not apply to any specified cause of action to which the action relates. (2) In acting under this section the court shall have regard to all the circumstances of the case and in particular to – (a) the length of, and the reasons for the delay on the part of the plaintiff; (b) where the reason or one of the reasons for the delay was that all or any of the facts relevant to the cause of action did not become known to the plaintiff until after the end of the period mentioned in section 4A – (i) the date on which any such facts did become known to him, and (ii) the extent to which he acted promptly and reasonably once he knew whether or not the facts in question might be capable of giving rise to an action; (c) the extent to which, having regard to the delay, relevant evidence is likely - (i) to be unavailable, or (ii) to be less cogent than if the action had been brought within the period mentioned in section 4A. …." The Claimant was arrested by the police on 1st November 2012 on suspicion of having sexually assaulted the Defendant. The Amended Defence pleads (and the Re-Amended Reply admits) that some 14 additional complainants made similar allegations to the police. The Claimant was on police bail until May 2014 when the CPS announced that he was not to be charged with any offence. The letter before claim was written by the Claimant's solicitors on 2nd September 2013. The letter began by saying, 'Please note that this letter has nothing to do with the current police investigation in relation to your allegations and therefore that it relates to a civil matter, not criminal.' The letter concluded, 'Please note that this letter is in no way meant to interfere with the current police investigation relating to you and our Client. In this respect we can confirm that we have fully informed the police of the action that our Client is taking against you and provided them with a copy of this letter.' Mr Dunham submitted that section 32A conferred a broad discretion on the Court. The Claimant could not have known about the interview with the BBC until the broadcast took place and he had issued proceedings less than a year after that. The limitation defence was only applicable to one of the Claimant's causes of action. In consequence, the Defendant would anyway have had to face a trial in respect of the other causes of action and these covered broadly the same territory. It was obvious that the Claimant was inhibited from taking action by the police investigation. The final paragraph of the letter before claim showed that he had, properly, liaised with the police before proceeding. Mr Price accepted that the Claimant could not have known about the Defendant's interview with the BBC until 'Panorama' was broadcast on 22nd October 2012. However, it was obvious from 'Panorama' that the Defendant had been interviewed. The words she had spoken - the BBC words – in the course of that interview were included in the programme. In addition, the commentator in the programme had said precisely when the Defendant had been interviewed – 14th November 2011. Consequently, the Claimant had all the information he needed for his claim in slander for the speaking of the BBC words as from 22nd October 2012. Section 32A(2)(b) directed the court to have specific regard to the date when the Claimant became aware of the necessary facts and the extent to which he acted promptly when he had that knowledge. But, this paragraph began with the words, 'where the reason or one of the reasons for the delay was that all or any of the facts relevant to the cause of action did not become known to the plaintiff until after the end of the period mentioned in section 4A.' Mr Price emphasised the words I have italicised because the Claimant could not satisfy this opening condition. He knew about the BBC words on 22nd October 2012, which was less than a year after the interview on 14th November 2011. The Re-Amended Reply pleaded that the Claimant had acted promptly after he did become aware of the interview but, Mr Price submitted, that was not so. He would have been aware of the interview from the 'Panorama' broadcast on 22nd October 2012. His solicitors did not write their letter before claim until 2nd September 2013, some 9 months later and the Claim Form was issued on 23rd September, over 10 months after 'Panorama' was broadcast. This was not the prompt action which s.32A(2)(b)(ii) expected. The letter before claim did refer to the Claimant's liaison with the police, but it did not say when this took place or why it could not have occurred earlier. The police investigations had, of course, been ongoing, but they were still continuing when the Claimant's solicitors did write on 2nd September 2013 and they were still continuing when the Claim Form was issued on 23rd September 2013. Nor was there any evidence at all from the Claimant to explain or expand on the reasons for the delay. I turn to the specific matters to which I must have regard in accordance with s.32A(2): i) The length of the delay is a little over 10 months beyond the 1 year ordinary limitation period. ii) I accept that until 22nd October 2012 the Claimant was unaware of the BBC interview, but, as Mr Price submitted, the ordinary limitation period had not by then expired. If 'delay', as I believe, refers to the time which elapsed after the expiry of the ordinary limitation period and before proceedings commenced, then there is no explanation at all. When a claimant is seeking to have an ordinary limitation period disapplied, the absence of an explanation for the delay can be of great importance – see for instance Steedman v BBC [2002] EMLR 318 (CA) per Brooke LJ at [45]. iii) Because all the facts relevant to the cause of action arising out of the BBC words were known before the ordinary limitation period expired, s.32A(2)(b) is not applicable. I accept that I must take account of all the circumstances, but particular regard must be had to the matters referred to in sub-paragraphs (i) and (ii) and they do not assist the Claimant. The date on which the facts were known to the Claimant was 22nd October 2012. Waiting 9 months thereafter to write a letter before action and almost another month before issuing the Claim Form was not in my judgment an example of acting promptly or reasonably. When the Claim Form was issued the sensible course was taken of staying proceedings until the police investigation was concluded. There is no evidence before me as to why a similar procedure could not have been adopted if the Claim Form had been issued earlier. iv) The Defendant has not suggested that evidence is unavailable or less cogent because of the delay. Those are the specific matters to which I must have regard, but the essential test is in s.32A(1), namely whether it would equitable to allow the action to proceed having regard (I paraphrase) to the degree to which the Claimant would be prejudiced if this claim is time barred and the degree to which disapplying the time bar would prejudice the Defendant. In my view, the prejudice on either side would not be very great. The Claimant will lose the opportunity of obtaining redress (assuming, as I must, that the claim in slander for the BBC words would otherwise be a good one) for the BBC words. The immediate audience for the BBC words were few – probably only Liz MacKean and the camera operator. I appreciate that the Claimant alleges that the Defendant is liable as well for the onward broadcast by 'Panorama' on 22nd October 2012. As I have already said, he does so on two bases. If he is right in his contention that the Defendant is liable as a co-publisher of her words on 'Panorama' then he will still recover because that cause of action is not time-barred. If he is right only in his contention that the Defendant's liability is for consequential loss caused by the broadcast then, I recognise, he will lose compensation for that loss as well if the action for slander in the BBC words is barred by limitation. This is not a situation where allowing the ordinary time bar to operate will preclude the Claimant from seeking vindication of his reputation. He has his other causes of action which will be a vehicle by which he can seek to achieve that end. Conversely, this is not a case where if the time bar operates the Defendant will be free of litigation worry. I recognise, of course, that the features of each of the causes of action differ somewhat, as do the defences advanced by the Defendant. I have considered all of these matters, but what seems to me to be of particular importance is the absence of any evidence as to why the Claimant delayed. 'Time is always "of the essence" in defamation claims' – see the Defamation Pre-Action Protocol paragraph 1.4. It is for the Claimant to persuade the Court that the equitable jurisdiction which he invokes under s.32A ought to be exercised. In my judgment he has failed to do that. I will not disapply the ordinary time limit. This has the consequence that his claim in slander for the BBC words is time barred. That in turn means that the Defendant is not liable for any consequential loss caused by the 'Panorama' broadcast. I will consider below his case that the Defendant is liable as a co-publisher of the BBC words in the 'Panorama' broadcast. Amendment of the Particulars of Claim to plead that the ITV words and BBC words were actionable without proof of special loss There is no dispute that, ordinarily, slander is only actionable on proof of special damage which means, in essence, some financial loss. The Particulars of Claim did allege that the Claimant had suffered such loss because bookings for his appearance were later withdrawn. The Defendant served a witness statement from Helen Morris of David Price Solicitors and Advocates, the Defendant's solicitors, which explained why, in each case, it was not accepted that the bookings had been withdrawn as a result of the publications on which the Claimant was suing the Defendant. Mr Dunham in his closing submissions accepted that the Claimant had put in no evidence in response. He accepted that the claim for special damage must fail. There are, though, four categories of case where slander is actionable without proof of special damage. In those cases, as with all libels, the slander is said to be actionable per se (by itself). In their current form, the Particulars of Claim do not allege that the slanders on which the Claimant sues (i.e. the ITV words and the BBC words) were actionable per se. Mr Dunham accepted in his closing submissions that, in order for the Claimant to make a case out that the slanders were in one of these exceptional categories, the Claimant would need to plead the necessary facts. This concession prompted Mr Dunham to apply to amend the Particulars of Claim so as to rely on two of the exceptional cases where slander is actionable per se. I will concentrate on the ITV words since my decision above means that the claim in relation to BBC words is anyway time barred. The Defamation Act 1952 s.2 provides, 'In an action for slander in respect of words, calculated to disparage the plaintiff in any office, profession, calling, trade or business held or carried on by him at the time of publication, it shall not be necessary to allege or prove special damage, whether or not the words are spoken of the plaintiff in the way of his office, profession, calling, trade or business.' Mr Dunham wishes to add to the pleading of the ITV words that '[they were] calculated to disparage him in his profession as an entertainer and comedian'. A second category of case where slander is actionable per se is where the words impute a criminal offence that is punishable by imprisonment. In the paragraph of the Particulars of Claim which allege the meaning of the ITV words, Mr Dunham wishes to add that the words complained of 'impute a criminal offence namely s.14 of the Sexual Offences Act 1956 for which the Claimant could have been punished by imprisonment.' By Section 14 of Sexual Offences Act 1956 it is an offence for a person to make an indecent assault on a woman. Section 14(2) provides that a girl under 16 cannot in law give any consent which would prevent an act being an assault for the purposes of this section. Where the victim was over 13 and the offence was committed prior to 1985, the maximum sentence was 2 years imprisonment. Section 14 of the 1956 Act was repealed by the Sexual Offences Act 2003. There was no specific transitional provision preserving the 1956 Act for historic offences in either the 2003 Act itself or the commencement order bringing it into force. However, the Interpretation Act 1978 s.16 is regarded as having that effect – see Archbold 2015 paragraph 20-1. Mr Dunham argued that the ITV words alleged that the Claimant had 'groped' the Defendant and that would amount to an indecent assault which was punishable with imprisonment. For this reason as well, he submitted, the ITV words were actionable per se. Mr Price opposed the application to amend. He accepted that an accusation of groping would be an allegation of sexual assault under the present law (Sexual Offences Act s.3). He submitted that it was rather more ambiguous as to whether the ITV words alleged an 'indecent' assault which was necessary for the words to impute an offence under s.14 of the 1956 Act. He submitted that the alternative relied upon by Mr Dunham was not arguable. The pleaded audience for the ITV words was the journalist, but the journalist in question, Mr Williams-Thomas was already aware of the Defendant's account of what Freddie Starr had done to her through having read her online account on FanStory and because he had learned from the Defendant that 'F' referred to the Claimant. So far as he was concerned, therefore, the allegation could make no difference to the Claimant's reputation, whether in connection with his business or otherwise. Mr Price refers me to Andre v Price [2010] EWHC 2572 (QB) in which Tugendhat J. considered a case of slander before a studio audience (in relation to words which were not subsequently broadcast). Tugendhat J commented that 'calculated' in Defamation Act 1952 s.2 meant 'likely' and this meant something less than 'more likely than not'. 'Disparage' could cover a wide range. It should be interpreted flexibly, but it meant something more than minimal. There had to be a degree of seriousness to justify imposing liability consistent with Article 10 of the European Convention on Human Rights - see [98] and [103]. Tugendhat J. also said that the effect of s.2 had to be considered, not just by reference to the words themselves. Their context was also important - see [99]. Mr Price argued as well that it would not be fair to allow the amendments to be made. He had prepared for the case on the basis that there was an obvious answer to the claims in slander: there had been no special loss proved and slander per se was not pleaded. In a case where the Claimant relied on multiple causes of action, the Defendant was entitled to adopt a proportionate approach to preparation for trial. It was notable as well that the Claimant had provided no evidence as to why this application was made so late in the day. That was a significant obstacle in the Claimant's path –see Swain-Mason v Mills and Reeve [2011] 1 WLR 2735 (CA) at [82], [104] – [106]. At this stage, I am only considering whether the Claimant should be permitted to amend his Particulars of Claim rather than ruling on whether the pleaded case can succeed. If it was hopeless, there would be no point in allowing the amendment, but I do not consider that to be so. The imputation of a criminal offence punishable by imprisonment is plainly arguable. I also consider that the Claimant can arguably allege that the words were likely to disparage him in his profession. Mr Price's argument based on the limited audience for the ITV words is in my view flawed. If the Claimant in a slander claim cannot come within one of the special cases and has to prove special damage, the damage in question can arise from the repetition of the words by others, if that is the natural and probable consequence of the original publication – see Gatley 12th edition paragraph 5.9. That is the common law. However, I see no reason why the test of 'calculated' (for which read 'likely to') in Defamation Act 1952 s.2 should not be viewed in a similar way. If it was likely that the interview with the Defendant would be broadcast and so seen by a much wider audience and that was in turn likely to disparage the Defendant in his profession, I find it difficult to see why the test in s.2 would not then be satisfied. This issue did not arise in Andre v Price either because the words in question were not in fact broadcast or because the point was not argued. While I understand that a legal representative in Mr Price's position has to make choices as to how to prepare for a trial, an argument based on prejudice has to be rather more clearly particularised. I could not discern in Mr Price's submissions any particular questions which he would have wished to put to any of the witnesses if the Particulars of Claim had stood as Mr Dunham wishes to amend them. In the course of the argument on the application to amend, Mr Price has taken the opportunity to make his submissions as to why amendments do not assist the Claimant. I accept that there is no evidence to explain why the application is made so late in the day, but I accept as well the point made by Mr Dunham, that this amendment is very different from what was being considered in Swain-Mason. The present amendment is clear and straightforward (which was plainly not the case in Swain-Mason - see [107]). It was also a position anticipated by the Defendant since her Amended Defence in terms denied that the ITV words were actionable per se (see paragraph 5 of the Amended Defence). I shall give permission to the Claimant to amend the Particulars of Claim in the way sought in paragraphs 3 and 5 (which are the ones relating to the ITV words). I will refuse permission in relation to paragraphs 9 and 10 (which are the ones relating to the BBC words) since the claim in slander arising out of the BBC words is anyway time barred. The 'Panorama' broadcast I have found that the slander for the BBC words is time barred. That means that the Claimant cannot recover for the 'Panorama' broadcast as consequential loss. He does, though, rely as an alternative on his claim that the Defendant is responsible for the repetition of the BBC words in 'Panorama' as a co-publisher of that part of the broadcast. I turn to that claim now. A publication is only actionable in defamation if it is 'of the claimant'. Another way of putting this requirement is that it must be apparent to the readers or audience of the words in question that it is the claimant who is identified as the subject of those words. In her BBC interview the Defendant spoke only of what 'a famous person' had done. That would not be enough to identify the Claimant. Identification does not have to be by name. The makers of 'Panorama' showed footage of the Claimant immediately before they broadcast the extract from the Defendant's interview with the BBC words. In combination the resulting broadcast was, I accept, 'of the Claimant'. But the question is whether the Defendant is liable as a co-publisher of what I will call that composite broadcast. Mr Price accepts that she would be so liable if she intended or authorised the BBC to put out the composite broadcast. But, he submits, she neither intended it to do so, nor authorised it to do so. Her evidence was that she did not intend Freddie Starr to be identified in what the BBC put out. That was why she referred to him as a 'famous person' rather than naming him. That approach was consistent with the fact that she had not named him in the FanStory words. She said the BBC promised her that Freddie Starr would not be identified. This evidence is corroborated by Liz MacKean and Meirion Jones. I accept their evidence. Of course, at the time of the Defendant's interview with the BBC, Mr Jones, Ms MacKean and their team were preparing an item for 'Newsnight'. The focus of the item was the behaviour of Jimmy Savile. Ms Ward had a great deal to say about the sexual abuse which she had suffered from Savile. What she had to say about Freddie Starr was of some relevance (because it had taken place on the occasion of a Savile TV show), but it was by no means certain that it would be included in an item which anyway was expected to last only about 10 minutes. It may be that no great thought was given by anyone to what use might be made of the interview if, as happened, the item was not included in 'Newsnight'. Nonetheless, given the content of the BBC words (deliberately not naming the Claimant) and the promises which the Defendant received (that the Claimant would not be identified) it seems to me impossible to infer or imply an intention on the part of the Defendant that a composite broadcast should take place which did identify the Claimant. For the same reason, it cannot be said that she impliedly or inferentially authorised the BBC to put out such a composite broadcast. Mr Dunham argued that the Defendant would also be liable as a co-publisher if it was reasonably foreseeable that her words would be subsequently broadcast. There are, though, several reasons why this argument is not open to the Claimant. First it is not how the claim is pleaded. Paragraph 11 of the Particulars of Claim pleaded liability for the 'Panorama' programme. The Defendant served a Part 18 request which asked the Claimant to, 'Confirm that the broadcast referred to in paragraph 11 is merely being relied on as consequential damage arising from [the BBC words].' The Claimant responded, 'The publications referred to in paragraph 11 were intended and/or authorised by the Defendant and are therefore sued upon as an independent torts for which the Defendant is liable; further or alternatively they were a sufficiently foreseeable consequence of the publication of [the BBC words] such that the Defendant is liable for the enormous damage that the publications caused to the Claimant…' The emphasis is mine and shows that the claim that the Defendant was a co-publisher was premised on intention or authorisation. Reasonable foreseeability was put forward as the basis for liability for consequential loss, consequent on the original slander. Second, the law does not support this alternative. It is sufficient to say in the circumstances that I share the views of Laws LJ in Berezovsky v Terluk [2011] EWCA Civ 1534 at [27] – [28]. He expressed his views tentatively because it was not necessary to reach a conclusion on the facts of that case. I also follow his views tentatively because in this case, as well, it is not necessary to reach a firm conclusion on the law. The third obstacle in Mr Dunham's way is that his argument fails on the evidence. Once again, it is necessary to emphasise that it is only if one has regard to the composite broadcast that the Claimant is able to say the 'Panorama' broadcast was 'of him'. The Claimant therefore has to prove that the composite broadcast was a reasonably foreseeable consequence of the interview which the Defendant gave to the BBC. He cannot do that. Far from it being reasonably foreseeable that the BBC would broadcast the Defendant's interview in such a way as to identify the Claimant, the exact opposite was the case. The Defendant, Ms MacKean and Mr Jones expected that, if the BBC words were broadcast, the Claimant would not be identified. For all of these reasons, I conclude that the Defendant is not liable as a co-publisher of 'Panorama'. Accordingly, the Claimant's claim for libel against the Defendant for that BBC broadcast fails. The ITV words I remind myself of what the Defendant said in her interview with Mark Williams-Thomas on 2nd October 2012. It was, "I was horribly, horribly humiliated by Freddie Starr who had a very bad attack of wandering hands and had groped me and I didn't like him because he smelled like my step-father and it frightened and freaked me out and I rebuffed him and he humiliated me in front of everyone in the dressing room." Unlike with the BBC words, the Defendant did name Freddie Starr in this interview. There is, therefore, no dispute that these words were spoken by her 'of the Claimant'. The pleaded natural and ordinary meaning of the words is not really disputed. In any event, I accept that they meant that the Claimant groped the Defendant. This would be taken to mean that he had touched her in a sexual way and, in this sense, had sexually assaulted her. I also accept that the words meant that he had humiliated and frightened the Defendant. The Claimant also argues that the words had an innuendo meaning. He has pleaded that the ITN journalist was told by the Defendant that at the relevant time she was a fourteen year old schoolgirl. With that knowledge, the words which the Defendant spoke meant to him that the Claimant had groped and thereby sexually assaulted a fourteen year old schoolgirl whom he had also humiliated and frightened and, for this reason, he was a paedophile. The ITN journalist was Mark Williams-Thomas. He says that he cannot recall the Defendant telling him that she was 14 at the time. He does remember knowing that she was still at school at the time and was under 16. He was not cross examined about this evidence. While this means that the Claimant has not proved precisely the facts on which the innuendo meaning is based, in my judgment he has established sufficient for an innuendo meaning which is more serious than the natural and ordinary meaning. Frightening and humiliating a girl who is under 16 is more serious than doing the same to an adult. Groping and thereby sexually assaulting a girl who is under the age of consent is also more serious than doing the same to an adult woman. The allegation that the words also meant that the Claimant was a paedophile adds nothing to the meaning that he had sexually assaulted a girl who was under 16. So far as they do, that is not an additional meaning which I consider the words bore with the limited additional facts known to Mr Williams-Thomas that the Claimant was able to prove. The Claimant has sued in slander for the ITV words. Mr Dunham has accepted that he cannot prove financial loss. By his amendments to the Particulars of Claim he relies on two categories of slander which are actionable without proof of special loss. He need only establish one. In my judgment he can rely on both. i) I accept that the words were calculated (for which read 'likely') to disparage him in his profession as an entertainer and comedian. I have, in considering the application for permission to amend, referred to Mr Price's argument that Mr Williams-Thomas was already aware of the Defendant's account of what Freddie Starr had done (from his work on the 'Newsnight' item) and her repetition of that account in the ITV words could have had no impact on the Claimant's reputation so far as he was concerned. In my view, though, in deciding whether words are likely to have the relevant effect, it is permissible to take into account any repetition which is reasonably foreseeable. Whether or not the Defendant authorised or intended the ITV words to be broadcast (and I return to this below in the context of the ITV broadcasts), it was in my judgment reasonably foreseeable that they would be. The Claimant was about 69 when the Defendant was interviewed, but he was still performing and still active as a comedian and entertainer. The ITV words did not allege the most serious form of sexual assault, but I accept that they were likely to disparage the Claimant in his profession. ii) In considering the application to amend, I explained that even in 2012 and long after the repeal of the Sexual Offences Act 1956, a person was still amenable to prosecution for something which was an offence under that Act at the time it was done. Section 14 of the Act prohibited an indecent assault on a woman. The prosecution would have to establish that the assault was 'indecent', but I am not concerned with whether the prosecution would necessarily succeed, but whether the words imputed that the Claimant had committed that offence. In my judgment, they did. To be relevant for these purposes, the imputed offence has to be punishable with imprisonment. An offence under s.14, committed in 1974, would have been punishable with a maximum of 2 years imprisonment. It is not necessary, as I understand it, for the Claimant to show that he was actually likely to be sent to prison if convicted of the particular act which was imputed. It follows that the ITV words are actionable even without proof of special damage. Mr Price argued that the claim in slander for speaking the ITV words was an abuse of process. Since that publication was only to Mark Williams-Thomas and he already knew of the allegation, it could have had no adverse impact on the Claimant's reputation. As I have said above, it seems to me plain that it was at least reasonably foreseeable that the ITV words would be broadcast. If that is so, it is wrong to confine attention to the immediate audience of the ITV words at the time the interview was filmed. They had a potential for a much wider audience which was reasonably foreseeable. I would not dismiss the claim based on the ITV words as an abuse of process. The remaining defences on which the Defendant relies for this claim (justification, Reynolds privilege, qualified privilege) are more conveniently dealt with when I consider the claim based on the ITV broadcasts. The ITV broadcasts These were the Channel 4 News on 8th October 2012, 'This Morning' on 10th October 2012 and ITV News on 1st November 2012. On each occasion, ITV played a clip from the interview which the Defendant had given to Mark Williams-Thomas. On each occasion the clip included the ITV words and a statement to the effect that she had been a schoolgirl when she claims she was assaulted. The Claimant alleges that the Defendant intended or authorised the ITV words to be broadcast. In her witness statement the Defendant said that she agreed to be interviewed by Mr Williams-Thomas for the 'Exposure' programme. This was essentially about Jimmy Savile and his sexual abuse. As I have already noted, the Defendant had a good deal to say about how she had been sexually abused by Jimmy Savile. She claimed that, while she had been a pupil at Duncroft, he had visited and encouraged her to perform oral sex on him on several occasions. She accepted that, in the course of the interview, she was also asked about the Claimant. She spoke the words complained of, but said, in her witness statement that she did not know or intend that they would be broadcast. In her evidence she said that she had understood from Mr Williams-Thomas that he was building up a dossier on Freddie Starr and her comments on him were for that purpose. She agreed that she did not know what particular part of her interview was going to be included in the broadcast. She agreed that anything which she said to him in the course of the interview was 'broadcastable'. In his evidence Mr Williams-Thomas confirmed that the focus of 'Exposure' was Jimmy Savile. The programme had been largely completed when he had interviewed the Defendant on 2nd October 2012 and she was told that this was so. However, they still wanted to gather supporting information regarding Savile. He was asked what authorisation the Defendant gave for the interview to be broadcast. He said that there would either have been a written authorisation or (which was more likely since this was an interview for a news, rather than a current affairs, programme) she would have signified her agreement on camera. In one way or another the Defendant had indicated that she was happy for him to use the material in any way he saw fit. I accept Mr Williams-Thomas's evidence which is consistent with the Defendant's. It is also consistent with her evidence that there were several takes of the interview and that at various times he asked her to express herself more clearly (including in what she was saying about the Claimant). All of this is compatible with Mr Williams-Thomas wanting (and obtaining the Defendant's authorisation for) film which could potentially be broadcast. The Defendant will not have known the precise circumstances in which her interview would be broadcast, but I accept that she was prepared to leave that to the discretion of ITV. She had made no secret of the fact that she was a school girl at the time of the incident with Freddie Starr and I accept that she impliedly authorised her interview to be accompanied by a statement to this effect. It follows that I agree she was a co-publisher of the ITV broadcasts. The meaning of the ITV broadcasts was that the Claimant had groped the Defendant when she was a schoolgirl and that he had thereby sexually assaulted her. It also meant that he had frightened and humiliated her. Justification and the ITV words and ITV Broadcasts In essence the meanings which I have said the ITV words and the ITV broadcasts bear are meanings which the Defendant has said are true. Thus she is relying on the common law defence to a claim in defamation (whether libel or slander) of 'justification'. This defence is abolished and replaced with a statutory defence of 'truth' by Defamation Act 2013 s.2, but that provision only came into force on 1st January 2014 and is not relevant to the claims which I am considering. It is for the Defendant to establish that the meaning of the words she published was true. The parties were agreed that I must apply the ordinary civil burden of proof. Thus I must consider whether it is more likely than not that they are true. I bear in mind that the words, as I have found, imputed a criminal offence. That does not change the standard of proof. It does mean that I must look rather harder at the evidence to see whether that standard is satisfied since 'the more improbable an allegation the stronger must be the evidence that it did occur before, on the balance of probabilities, its occurrence will be established.' Chase v News Group Newspapers Ltd [2002] EWCA Civ 1772 at [35] per Brooke LJ. That said, the sexual assault which was imputed was not, as I have said, of the most serious kind. The Defendant's evidence was that her allegations were true. She had been a pupil at Duncroft since she was 14. On 7th March 1974 she was 15. She was among a group of about 5 girls from the school that went to a recording of an episode of 'Clunk Click' which was a programme hosted by Jimmy Savile. She can be seen among a group of young people on the stage in footage of the programme. One of the guests on the show was Freddie Starr. He, too, can be seen in the footage. The Defendant says that, after the show, she with the other Duncroft girls and some other people met with Savile. Freddie Starr joined them. She says that there came a point where he grabbed or squeezed her bottom. She says that this was something she commonly experienced at the time from men, despite her age. In her evidence she said that she recognised it as the first stage in what was called a 'goose'. The next stage of a goose was that the man would grab or touch the woman or girl's breasts. That, too, had often happened to her. On this occasion, though, she was repelled by Freddie Starr's smell. It was a male smell, a mixture of stale sweat, halitosis and stale cologne. The smell strongly reminded her of her step-father who had sexually assaulted her since the age of 4. She recoiled and made a fuss. Freddie Starr then said 'I wouldn't touch you anyway. You're a titless wonder.' She says she was frightened. She was also humiliated. Her breasts were small. She was self-conscious of them. To have attention drawn to them in this manner was deeply hurtful. The Claimant said that nothing of this kind took place. He had not touched the Defendant. He had said nothing of the kind which she attributes to him. As I have mentioned previously, when first asked about the occasion in 2012, he denied that he had ever appeared on television with Jimmy Savile. He agreed that that was a mistake. He had been in business for 55 years and had done about 3,000 – 4,000 television shows in the course of his career. In the interview which he gave on camera for 'This Morning' on 10th October 2012, he said that he had shot straight off with his manager after the show. He added, 'We never stayed behind'. In his evidence he said that he and his manager, stayed behind for 10 minutes in the Green Room. When he was asked about what he had said on 'This Morning' he responded, 'That night we did go straight off, after we finished a coffee or something.' A little later in his evidence he said that his wife had also been with him (this was his second wife, Sandy). His witness statement had made no mention of his wife being present. He explained, that this was because he had been trying to get her to come to court but her present husband would not let her come. After hearing Mr Starr give evidence, my conclusion is that he has very little, if any, recollection of that night at all. The Claimant's case is that the Defendant is mistaken. Either these things never occurred or they were done by someone completely different. In a Part 18 Request of his Particulars of Claim he was asked whether it was alleged that the Defendant knew her allegations were false. He replied, 'The Claimant does not need to and does not make any allegation about whether the Defendant knew that her allegations were false.' In her Amended Defence the Defendant has relied on qualified privilege. In his Re-Amended Reply, the Claimant has not pleaded that the Defendant was malicious. While malice may be demonstrated in a number of ways, a classic form is where the Defendant knew that what was said was untrue. That, as I say, was not pleaded by the Claimant. There is little scope for a plea of malice in response to a defence based on Reynolds privilege. The Amended Defence does rely on Reynolds, but it does also plead qualified privilege of the duty/interest kind. To this malice would be an answer since the privilege is only qualified. Because of this state of the pleadings, I agreed with Mr Price that it was not now open to the Mr Dunham to cross examine the Defendant on the basis that she had made her allegations about the Claimant knowing them to be untrue or that she had deliberately manufactured a false account. He did not do so. He did put to the Defendant that she was mistaken. She accepted that these events had taken place over 40 years ago, but she said that the insult about her breasts and what led up to it had been particularly hurtful and had stayed with her. She agreed that she had been prescribed Lithium at the time and her memory of some of the surrounding circumstances was hazy, but she said, of the core elements – the grabbing of her bottom, the expression 'titless wonder' and the fact that it was Freddie Starr who had done these things she was certain. She agreed that she could not be certain if the smell which came from the Claimant included alcohol (the Claimant does not and did not drink alcohol), but she was sure that the odour had reminded her of her step-father. She denied that she had changed her story from saying that the Claimant had attempted to molest her to saying that he had succeeded in grabbing her bottom. She said he had succeeded in touching her bottom. He had attempted to go further with the 'goose' but he had not been able to do so because of her protests. Susan Bunce gave evidence for the Claimant. As I have said, she was another of the Duncroft girls who attended the recording of 'Clunk Click' on 7th March 1974. She, too, was 15 at the time. She recalls that, after the show, they were taken to a room behind the theatre. There were 15-20 people present. She remembers that the Defendant was wearing rather old-fashioned clothes which led to her being teased by the other girls. At one point, while the Claimant was in the room, one of them said aloud to him, 'she [i.e. the Defendant] wants to know if she is attractive and if you would fancy her.' The Claimant went towards her in a playful manner and inspected her as if he was an army parade sergeant. Ms Bunce says the Claimant did not touch the Defendant and was not even within touching distance, but suddenly the Defendant jumped back as if a wasp had flown in her face and waved her hands in front of her. There was no obvious cause for this behaviour. The Claimant did not insult the Defendant. I will need to return to this and other aspects of Ms Bunce's evidence later. Witness C gave evidence that when she was 15 and also a pupil at Duncroft she went to the BBC. There was only one occasion when she made such a trip. A Jimmy Savile programme was filmed. Afterwards they went to a room and Freddie Starr came in. She asked him for something to remind them of the trip. He said that she could have a lock of his hair. He then put his hand down the front of his trousers and said, 'you can have a lock of my pubic hair.' Jimmy Savile was there and he laughed. In his evidence the Claimant denied doing any such thing as Witness C described. He said that he had been wearing tight trousers and a wide belt, as can be seen in the footage of the 'Clunk Click' recording, and it would have been physically impossible for him to do what Witness C alleged. However in her evidence, Ms Bunce had said that after the show when Freddie Starr came into the room, she asked him for a cigarette. He said she could help herself from a packet in his pocket. She recalls reaching into his trousers' pocket and the trousers were loose. I agree with Mr Price that the likely explanation is that the Claimant had changed after his appearance on the show. The Claimant said that it would be standard for him to be allocated a dressing room when he appeared on TV. Ms Bunce had no recollection of an incident of the kind which Witness C described and thought that Witness C had attended a different episode of 'Clunk Click', yet Freddie Starr appeared on only one BBC show with Jimmy Savile. The Defendant's evidence makes no mention of this incident either. Witness C accepted that her memory of this visit was incomplete. She could not recall the name of the show or the celebrities who appeared on it or the month in which it had taken place. She was not sure if Freddie Starr had been on the show itself. However, she was sure that it had been Freddie Starr who offered her some of his pubic hair as a memento of the occasion. Witness C had first been contacted by Liz MacKean on 16th November 2011 (and so two days after Ms MacKean interviewed the Defendant). As part of her investigation on Jimmy Savile, Ms MacKean tried to make contact with as many of the girls who had been at Duncroft as she could. She had succeeded in contacting 45-60 of them, mostly through the Friends Reunited website. When Witness C spoke to Ms MacKean she remembered Jimmy Savile coming to the school. She recalled as well that a number of girls had said that he had encouraged them to perform oral sex on him. She did not say this had happened to her. But she did mention the incident with pubic hair which had taken place in Jimmy Savile's presence and Savile had laughed. She did not name Freddie Starr but she said he was 'A certain person who is now in the celebrity Jungle.' Ms MacKean said that made it obvious that she was referring to the Claimant since he was on that show at the time that she was in contact with Witness C. I said I would return to another aspect of Ms Bunce's evidence. Before the recording of the show, she said she bumped into Freddie Starr in the corridor and recognised him. He came and joined a group that was waiting for the show to start. There was a jocular atmosphere. Ms Bunce who says that she was particularly small was picked up by the Claimant and held in the air. One of the Duncroft girls then said 'why don't you kiss him?' Ms Bunce did. In her interview with the police subsequently on 9th May 2013, she said, '"Well I'm up for it" he said … So I kissed him. Still, he's still holding me, and, but instead of just like, erm, just a kiss, and he did actually, looking back, it could wrong, it did actually linger on rather, it was a bit of, er, you know, the tongues tangled up there, and it was an extended long kiss.' Later in her interview she described it as, 'one of the more passionate kind of kisses that people would do in private.' She said that the Claimant offered to give her a lift home after the show, but she declined. The Claimant has no recollection of kissing Ms Bunce. He said the entire thing was fiction and lies. He says he did not offer her a lift because, after the show, he had to go elsewhere urgently. Ms Bunce also recalled a conversation with the Claimant about her age. She had asked him to guess. He suggested 18. She said he was good at guessing and left him with the impression that she was older than her true age at the time of 15. In her police interview, she said that this conversation took place after her kiss with the Claimant. In her evidence she said it was before. In the end I have to decide whether the Defendant's account is true on the balance of probabilities. I must do so, taking account of the oral evidence of these witnesses (which, necessarily, I have only summarised above), the documentary evidence that has been put before me and the submissions of Mr Price and Mr Dunham. In my judgment the Defendant's account is true. i) It is, of course, a matter which took place a long time ago. But I find that the Claimant's remark to the Defendant, 'you're a titless wonder' was a striking one. It lodged in her memory. She was sensitive about her appearance (as are many teenage girls) and this remark in a crowded room which included some of the other girls at her school was understandably humiliating. I reject the submission by Mr Dunham that the Defendant had confused the Claimant with some other celebrity. ii) I find as well that the Defendant's account of what led up to this remark by the Claimant is also more likely to be true than not, that is the Claimant touched or grabbed her bottom and she recoiled. The recoil, at least, was seen by Susan Bunce. Ms Bunce did not see what caused the Defendant to behave in this fashion. I have considered Mr Dunham's submission that it may have been the Claimant's smell which the Defendant associated with her step-father, but I have decided that it was more likely than not the smell, plus the sexual advance which grabbing of the Defendant's bottom was. iii) The Defendant was being given Lithium at Duncroft at this time. She has accepted that this affected her memory. On peripheral matters her account has varied. Thus she said at some points that the Claimant's smell included a component of alcohol. She has accepted that she may have been wrong about that. In her BBC interview she said she was 14 at the time. We know that she was in fact 15. But in its core elements, her account has been consistent. iv) In her BBC interview the Defendant had said 'I had a famous person who would try, he smelled awful, he smelled of sweat and alcohol and it made me heave just to be near him, so I certainly didn't want him to do anything to me'. Mr Dunham emphasised the word 'try' and suggested that the Defendant had later in her ITV interview sexed up what was previously described as an attempt to an actual grope. I reject this argument. In the first place, in the BBC interview she did not go on to explain what was 'tried'. In her evidence she said that the Claimant had tried to complete the 'goose', but got no further than grabbing her bottom. Secondly, the account which the Defendant gave in her FanStory words (and which was written in about 2008 so well before the BBC interview) was that the Claimant's hands 'wandered incessantly' and the meaning attributed to this in the Particulars of Claim was that the Claimant had groped and sexually assaulted her. Next, I do not accept that Mr Williams-Thomas encouraged the Defendant to elevate an 'attempt' to a 'grope' for the purpose of the ITV interview. I agree with his response that that would have been unprofessional. Mr Williams-Thomas, like Ms MacKean and Mr Jones, impressed me as a professional reporter and broadcaster. It would also be a curious thing to do in relation to a person who was not the focus of the programme he was making and where the difference between an attempted grope and an actual grope was not of the highest magnitude. I do not attach significance to the Defendant's omission to use the word 'goose' until she gave evidence. It is not a common idiom now and she would be right to consider that her audience (whether readers of FanStory, watchers of 'Newsnight' or viewers of the ITV interview) would be mystified if she used it. v) As I have said, I find that in truth the Claimant has no recollection of what actually happened on this evening. He originally said that he could not remember being on a show with Jimmy Savile at all. I accept that the Claimant has appeared on several thousand TV shows and he could not be expected to remember each one, but his response when initially approached was to deny his appearance categorically – not to say he could not remember. He then said that he had left immediately after the show. In his evidence he said he may have stayed for a short time with him manager, Mr Cartwright. Later in his evidence he said that his wife remained as well with him and Mr Cartwright. There has been no evidence from either Mr Cartwright (whose absence in the USA would not have prevented him providing a witness statement) or the Claimant's wife at the time (who could have been witness summonsed if she was unwilling to attend voluntarily). vi) In his evidence, Mr Starr accepted that he had a voracious sexual appetite in 1974. Slapping a girl's bottom is what people did in the 1970's, he said. It did not mean anything and was acceptable. He revelled in the reputation of being a 'cheeky bastard' as he put it in his autobiography. He agreed that he did make jokes about women's breasts. 'Every man does it, even my 15 year old son', he said in evidence. He was asked about a passage in his autobiography which recounted his first meeting with Sandy, whom he later married in the mid-1970s. The book recorded him as saying to this woman to whom he had not previously spoken and, when learning her name, 'Hello Sandy. Can I play with your fur purse?' He said in his evidence this was inaccurate. In fact he had asked if he could play with her fur clitoris. vii) In his witness statement, the Claimant said 'my humour was and remains the opposite of humiliation.' That is difficult to reconcile with an extract which Mr Price played from one of the Claimant's shows in which he takes two women from the audience on to the stage: one beautiful; the other, not so. The audience is repeatedly invited to laugh at the latter. Mr Starr emphasised that this was an adult show to which children were not admitted. That may be and it may explain why the jokes could be sexually frank. But it also showed that the Claimant felt free to raise a laugh at another person's embarrassment about her body. viii) The Claimant's response was to say that his behaviour towards young girls was different. He said he didn't like younger women. In his interview for 'This Morning' he had said 'I always kept away from girls because I knew it spelt trouble.' In his evidence he said the cut off point was 22 or 23. However, his behaviour on the very same occasion as the Defendant spoke about tells a different story. Susan Bunce was a small 15 year old. He picked her up, held her in the air and gave her a long passionate kiss. Later in the evening he offered to drive her home. There was, according to Ms Bunce, a conversation about her age in which she allowed the Claimant to believe that she was 18. In her evidence she said that this took place before the Claimant had kissed her. Even if this was the case, it would mean that the Claimant's cut off below which he avoided girls was lower than he was prepared to admit. However, I prefer the account which Ms Bunce gave in her more detailed interview with the police. In this she said the conversation about her age took place only after the incident in which she and the Claimant had kissed. I also accept the evidence of witness C. When she, also a 15 year old school girl, asked for a memento, he offered her a tuft of his pubic hair. I reject the claim that this was impossible because of the tightness of his trousers or the width of his belt. Ms Bunce had described him as wearing loose trousers when he invited her to look in his pocket for a packet of cigarettes. He had obviously changed from the trousers he had been wearing during the 'Clunk Click' show. ix) The accounts of the Defendant, Witness C and Ms Bunce appear to be independent of each other. There is no evidence to the contrary. Indeed, Ms Bunce was called in the Claimant's support. Ms Bunce did not see what the Claimant did and said to Witness C. Witness C and the Defendant gave no evidence about what took place between Ms Bunce and the Claimant. I do not find this surprising. There were lots of people in the room. Each of these three remembered most clearly what happened to her. The accounts of Ms Bunce and Witness C however, provide support as to the Claimant's behaviour towards 15 year old girls that night. They contradict the Claimant's evidence that below 22 or 23 was the cut off for his interest in women. They support the Defendant's account that it included girls of 15. The ITV words also meant that the Claimant had frightened the Defendant. She said in her evidence that it was his smell which frightened her because it resembled her step-father. In my judgment the ITV words made the same link. It may be that in this sense the words were not defamatory of the Claimant, but, to the extent that they were, I find they were true. Other defences for the ITV words and ITV broadcasts Justification is a complete defence to a claim for slander or libel. This means that it is not necessary for me to rule on the Defendant's alternative defence of Reynolds. A further reason not to do so is that the Reynolds defence has been abolished by Defamation Act 2013 s.4(6) and replaced with the statutory defence of publication on a matter of public interest. It is sufficient for me to record that Malik v Newspost Ltd [2007] EWHC 3063 (QB) would in my view have been a formidable obstacle to the Defendant succeeding in the Reynolds defence despite Mr Price's submissions to the contrary. It is a disputed issue as to whether a defendant who fails on Reynolds can succeed on qualified privilege – see Hays plc v Hartley [2010] EWHC 1068 (QB) at [69] and Seaga v Harper [2009] AC 1, 15. Since I am not reaching a concluded view on the applicability of Reynolds it would not be right for me to consider the hypothetical applicability of a residual qualified privilege defence. However, for the reasons which I have given the claims based on the ITV words and ITV broadcasts fail. The eBook In view of my conclusions in relation to justification above, I can be relatively brief in relation to this claim. The words are not identical to the ITV words but the sting of the libel in the eBook is the same. Assuming that the reader would recognise the Claimant as 'F' (as to which see below), the essential allegation is that the Defendant when an under-age girl refused a sexual advance from the Claimant who then humiliated her by making the same remark as was alleged in the ITV words. I have found that the Defendant has proved these allegations to be true. I do not accept that the words meant that the Claimant assaulted underage girls in the plural. However, as it happens, I have also found that he did engage in a passionate kiss with another underage girl and did offer yet another underage girl a tuft of his pubic hair. I accept that the eBook words also meant that the Claimant and Jimmy Savile had encouraged underage girls to drink alcohol. The Defendant has not shown this to be true. However, as Mr Dunham realistically accepted in the course of his closing submissions, this allegation was put in the shadows by the others. This is another way of saying that although the Defendant has not proved the truth of this particular matter, the Claimant's reputation was not materially affected because of the truth of the remaining charges. I find that the Defendant is thus able to rely on s.5 of the Defamation Act 1952. There are, though, two interconnected matters which Mr Price raises which mean that the Defendant does not need to rely on the defence of justification to the eBook publication. The first concerns identification of the Claimant. He is not named, but referred to as 'F', a popular comedian of time. The Claimant pleads that this refers to him because (a) he was a popular comedian in the time referred to, (b) his name begins with 'F', and (c) millions of people saw the ITV broadcasts and (after 22nd October 2012) BBC Panorama and, when they read the eBook, would make the link between the person to whom the Defendant referred. There are a number of difficulties in the way of the Claimant making good this case: i) The eBook does not say that the name of person concerned began with 'F', simply that was the code which the Defendant was going to use. But, even if I assume that some readers made the (correct) assumption that it did mean that the comedian's name began with F (a) and (b) alone give insufficient clue as to the identity of the person about whom she was speaking. The evidence of Ms MacKean, Mr Jones and Mr Williams-Thomas was that none of them knew who F was until the Defendant told them. Mr Dunham argued that a reader of the eBook could have consulted the internet and found that the Claimant was a popular comedian in the 1970's whose name began with F. However, there is no pleading or evidence to this effect. Nor do I know how many other comedians whose names began with F would have been thrown up. The size of that group would make a difference as to how realistic it would be for a reader to assume that 'F' was the Claimant. ii) The Claimant relies as well on (c), but a reader of the eBook who was able to identify the Claimant as F because of the broadcasts would have learned that he vigorously denied the Defendant's allegations. Furthermore, Channel 4 News broadcast the item because of the Claimant's actions in applying unsuccessfully for an injunction and because of his denials in the media of the Defendant's allegations (which had not at that stage been published by her). Mr Dunham acknowledged the force of these points which had been made by Mr Price. He responded by saying that there would be some readers of the eBook who had not seen the broadcasts. However, that brings him back to the difficulty which I mentioned in (i) above. iii) The numbers of those who read the eBook in this jurisdiction is uncertain. The Claimant pleaded that there was a significant number. This was not admitted and he called no evidence in support of the contention. In cross examination the Defendant said she had sold 100 copies of Part 1 of her book (an earlier part than the eBook which contained the words complained of). At least some of those were to the United States of America and there is no claim in respect of publications outside the jurisdiction. There was no cross examination and no other evidence in relation to sales of the eBook. The related point is that a claim in defamation will be an abuse of process if it did not seek redress for a real and substantial tort because the publication within the jurisdiction was minimal or the damage to the Claimant's reputation by the publication was insignificant - see Jameel v Dow Jones Inc [2005] QB 946 (CA). That seems to me to describe the position in relation to the eBook, given (at most) the very small number of copies sold in the jurisdiction and that readers of them would only have identified the Claimant if they had seen the broadcasts for which I have held the Defendant is not liable, but which anyway would have included the Claimant's denials of the Defendant's allegations. For all of these reasons the claim in relation to the eBook fails. Summary of conclusions The claim in slander based on the Defendant's interview to the BBC is time barred. I have refused to disapply the ordinary limitation period. Accordingly, the claim fails. The claim in libel based on the broadcast of a clip from the BBC interview in 'Panorama' was only recognisably about the Claimant because the BBC also included footage of the Claimant. The Defendant did not authorise or intend the BBC to broadcast a section of her interview in conjunction with material which identified the Claimant as the 'famous person' about whom she spoke. Accordingly, she is not liable for this composite broadcast and this claim fails. The interview which the Defendant gave to ITV did name the Claimant. He sues her for this in slander. He has accepted that he cannot establish any financial loss in consequence, but that in itself is not an obstacle to this claim since the Defendant's words imputed that he had committed a criminal offence (indecently assaulting a woman) and was likely to disparage him in his profession as a comedian and entertainer. However, she has proved that it was true that he groped her (an under-age school girl) and humiliated her by calling her a 'titless wonder'. His behaviour and smell also frightened her because it reminded her of her step-father who had sexually abused her as a child. Because her words were true, this claim fails. A clip from the ITV interview was broadcast three times. The Defendant authorised its broadcasting and she is therefore to be treated as a co-publisher of those broadcasts. However because her words were true, this claim also fails. The Claimant has sued the Defendant for publication of her memoir on FanStory only after 8th October 2012. He has not been able to prove that it was still available after this date. He accepts, therefore, that this claim fails. The Claimant has also sued the Defendant for the publication of her eBook. The essential allegations were the same as she had made in the ITV interview. They were true. Her eBook also alleged that the Defendant (along with Jimmy Savile) had encouraged her to drink alcohol, although she was underage. This was not true, but in view of my finding that she has proved the more serious allegations, this matter did not seriously injure the reputation of the Claimant. In consequence, she can successfully defend the claim against her in relation to the eBook. In any event, no evidence was called as to the readership of the eBook which, at most, was very small. The eBook did not name the Claimant but referred only to 'F', a popular comedian. On their own, there is not the evidence that these matters would have been sufficient to identify the Claimant as 'F' to a significant number of readers. Those who saw the ITV broadcasts might have been able to join the dots, but if they saw the broadcasts they would, inevitably, have also seen the Claimant's denials of the allegations. Putting all of this together, the claim in relation to publication of the eBook does not represent a real and substantial tort. For this reason as well, the claim in relation to the eBook fails. I have found that all of the Claimant's claims fail. It follows that judgment must be entered for the Defendant. Note 1   At one point in his closing submissions, Mr Dunham suggested that words spoken which were recorded on film could, alternatively, be treated as a libel, but on reflection he accepted that they were pleaded as slander and he did not apply to amend to plead them as libel in the alternative.    [Back] Note 2   As with the BBC words, Mr Dunham accepted that the claim for the ITV words was pleaded in slander and he did not apply to amend to plead libel in the alternative.    [Back]

Mr Justice Christopher Clarke: This is an application by eight of the defendants in the action for an order that service of the claim form be set aside and for a declaration that the Court has no jurisdiction to try the claim against them or that it should not exercise any jurisdiction that it may have. I set out the essential nature of the claim in my judgment of 24th August 2010, [2010] EWHC 2219 (QB), in the following terms: "1……The Bank is one of the largest in Kazakhstan. It was effectively nationalized on 2nd February 2009 in the wake of the worldwide financial crisis. Until that date the first defendant, Mr Ablyazov, was the beneficial owner of the majority of the Bank's shares and Chairman of its Board. The second defendant, Mr Zharimbetov, was a close associate of the first defendant and first Chairman of the management board. Both of them have now fled to this country. Various criminal prosecutions are pending against them and others in Kazakhstan. Several sets of civil proceedings are pending against them and those who are said to be their associates in this court. 2 The current proceedings concern what is said to be a scheme of misappropriation by which over a billion United States dollars was extracted from the Bank in late 2008. The scheme was effected through, so the Bank says, the use of the first to fourth respondents to this application who supposedly borrowed from the Bank, and the fifth to ninth respondents, who were the direct recipients of the Bank's advances - the monies being transferred to them at a bank in Latvia pursuant to letters of credit opened by the Bank on behalf of the borrowers in their favour on the basis that they were intermediaries for the purported supply of oil machinery and equipment. 3 The Bank's case is that the whole scheme was a sham carried out by and for the benefit of the first defendant, who used the second defendant as his assistant, and the respondent companies as his vehicles. A summary of the Bank's case is set out at para 20 of the Bank's skeleton argument and in the Points of Claim, to which I refer but which it is unnecessary to recount. 4. No defence has yet been filed. The first defendant claims that the loans were made to financial entities of substance, and that he had no connection with either the borrowers or the intermediaries. In the present proceedings the Bank makes proprietary claims in respect of the sums advanced and claims for compensation against the first and second defendants (the Bank's officers) for breach of duty, and for compensation against the borrowers and intermediaries for participation in that breach." The first four applicants are the four borrowing companies ("the Borrowers") and the fifth to eight applicants are four of the six intermediary companies ("the Intermediaries"), from whom equipment was supposedly to have been purchased by the Borrowers. The allegedly fraudulent scheme was very large. According to the Bank payments totalling $ 1,031,263,000 were made by the Bank in November and December 2008. In order to obtain permission to serve the applicants out of the jurisdiction it was and is necessary for the Bank to establish that they were necessary or proper parties to the Bank's claim against Mr Ablyazov and Mr Zharimbetov and that England is the natural and appropriate forum for the determination of the claim, distinctly more suitable in the interests of the parties and for the needs of justice than any competing jurisdiction. If that be established it is for the applicants to show that there are special circumstances by reason of which justice requires that service out should nevertheless be refused. On 9th June 2010 Mr Gavin Kealey, QC, sitting as a Deputy Judge of the High Court granted the Bank permission to serve the claim form and the Particulars of Claim on the applicants out of the jurisdiction. He did so because it seemed to him (a) that the applicants were necessary or proper parties to the claim against Mr Ablyazov and Mr Zharimbetov against whom there was a real issue to be tried; and (b) that this jurisdiction was clearly the most suitable for the hearing of all the claims against all the parties in the interests of all of them and in the interests of justice. This is, as Mr Simon Colton for the applicants, points out, an unusual case. The Bank is a Kazakh bank which claims to have been the victim of a fraud directed by two Kazakh nationals in Kazakhstan in breach of their Kazakh law duties as officers of the Bank. It brings claims governed by Kazakh law against those Kazakh nationals and the applicants who have no connection with this jurisdiction. The likely issues, he submits, will involve consideration of the actions of up to two dozen nationals of Kazakhstan; the application of Kazakh law which expressly incorporates the ethical norms of Kazakh society; and many documents most of which are in Russian. Most of the witnesses will be residents of Kazakhstan speaking Russian or Kazakh and not English. In his helpful skeleton argument Mr Colton has set out in considerable detail the connections to Kazakhstan displayed by almost every paragraph of the Particulars of Claim. The Bank is incorporated in Kazakhstan and licensed by the National Bank of Kazakhstan. Its documented Lending Policy contains restrictions set out in Kazakh legislation and provides for the concept of persons "affiliated" with the Bank to be as defined in that legislation. Mr Ablyazov is a Kazakh national who was born and rose to prominence in Kazakh public life. Mr Zharimbetov is also a Kazakh national born in Kazakhstan, who has held a range of appointments there. At the material time both of them worked at the Bank's Headquarters in Kazakhstan. Both of them speak Russian and little or no English. None of the applicants have any connection (other than by reason of these proceedings) with England. Mr Timichev who is said to be their beneficial owner, controller and sole director is resident in Belarus and speaks Russian but no English. The documentation which is said to mask the essentially fraudulent purpose of the scheme was usually prepared in Kazakhstan, written in Russian and considered in Kazakhstan, e.g. the credit applications of the Borrowers; the business plans filed in support; the questionnaires completed by the Borrowers and their balance sheets (although these may have been compiled outside Kazakhstan). The sales contracts between the Borrowers and the Intermediaries provided for delivery of the equipment in Kazakhstan and for payment to be by a letter of credit issued by the bank in Kazakhstan. They were executed in both English and Russian. The Bank relied, in support of its application for permission, on various legal opinions all originally written in Russian, and on general credit agreements made in Kazakhstan subject to Kazakh law and subject to dispute resolution in the Kazakh arbitrazh courts. The approval of the Bank's Credit Committee was given in Kazakhstan in accordance with Regulations in Russian which required the Committee to operate in accordance with the legislation of the Republic of Kazakhstan and other Kazakh regulations. Its minutes are in Russian. 8 members of the Committee (a majority) approved the relevant loans together with additional bank employees. (On the Bank's case that approval was given because of the control which Mr Ablyazov and Mr Zharimetov exercised – in Kazakhstan). Reference is made in the Particulars of Claim to a number of Economic Security and Compliance Reports, all in Russian. The Borrowers completed applications for letters of credit in Russian; the agreements between the Bank and the Borrowers under which letters of credit would be issued were in Russian (as were variations to those agreements) and contained numerous references to Kazakh law and provided for all disputes to be resolved in the Kazakh courts under Kazakh law. All the letters of credit provided for payment to be available at Almaty, Kazakhstan. Claims under the letters of credit were addressed to the Bank in Kazakhstan and payments were made by SWIFT message sent from the Bank in Kazakhstan to Trasta Komercbanka in Latvia. Valuations for the equipment were produced to the Bank in Almaty, allegedly in accordance with Kazakh standards. Pledge Agreements were made containing numerous references to Kazakh law and providing for disputes to be settled in Kazakhstan. In paras 79 ff of the Particulars of Claim the Bank pleads the breaches of Kazakh law upon which it relies as follows: a. The Bank alleges that in breach of Article 8 of the Kazakh Civil Code ('the Civil Code') each of the Borrowers and Intermediaries "did not exercise their rights in good faith, reasonably and fairly and did not observe legal rules and ethical norms of society and did not observe rules of business ethics": PoC, para 82. b. The Bank then alleges that the credit agreements, letter of credit agreement and letters of credit can be invalidated pursuant to article 74 of the Kazakh Joint Stock Company Law, further to which the corporate defendants can (the Bank pleads) be made liable to pay 'damages': PoC, para 83. c. Finally, the Bank claims restitution or compensation under various provisions of the Civil Code: PoC, para 84. No defence has been filed but a summary of what appears to be the applicants' defence is set out in para 9 of the first witness statement of Mr Culbert of iLaw, the applicants' solicitors: "(1) I am instructed that the loans were arranged by the Bank as part of a scheme, in which the Bank asked the Applicants' beneficial owner and controller (Mr Timichev) to participate, to permit the Bank to make loans to clients who could not otherwise receive loans under the Bank's regulations. Mr Timichev was asked by the Bank, for its own business purposes, to forward the payments received by the Applicants as 'loans' to certain identified companies, "the Ultimate Borrowers", in circumstances where it was commonly understood that the 'loans' would not in fact be repayable. Mr Timichev was led to understand that these funds would be paid (directly or indirectly) by these Ultimate Borrowers back into the Bank's control. Mr Timichev was assured by the Bank that, in return for his (and his companies') participation in this scheme, the Bank would provide Mr Timichev's companies with the funds required for the purchase of the equipment on preferential terms and at lower interest rates at a later stage. (2) In the circumstances, the Applicants acted at the request and with the full knowledge of the Bank of all relevant circumstances, for the benefit of the Bank. Assuming that the onward payments by the Ultimate Borrowers were made, which is outside the control of the Applicants, the Bank suffered no loss. (3) In any event, the allegations of wrongdoing made against the Applicants would, under Kazakh law, not give rise to any civil claim against them. Rather, the Applicants would be subject to Kazakh criminal processes, ancillary to which there would be the possibility of a claim for reparation by any victim. Accordingly, this claim is an attempt to enforce Kazakh penal law. (4) Finally, even if the alleged wrongdoing were proven, they would not give rise to any claim under Kazakh civil law. The Articles of the Kazakh Civil Code cited in the Particulars of Claim would not apply to this situation." But for the presence of Mr Ablyazov and Mr Zharimbetov in this jurisdiction, England would not be the appropriate forum for any trial. However, as I have said, in February 2009 both of them fled from Kazakhstan, moved to England and have become presumptively domiciled here. Criminal investigations have been launched against them in Kazakhstan relating, inter alia, to the loans to the Borrowers. Mr Ablyazov contends that the claims against him are politically motivated and has sought asylum here. Both he and Mr Zharimbetov have in other proceedings alleged the absence of the rule of law in Kazakhstan and contend that they would face political persecution if they returned there. That circumstance fundamentally alters the position. Mr Ablyazov and Mr Zharimbetov are the alleged architects of the fraud. In view of their domicile within this jurisdiction there is no possibility of their applying to stay the proceedings against them and they have no intention of doing so. On 3rd September 2010 they issued an application for an order that the claim in these proceedings against them should be struck out or permanently stayed on the grounds that it is an abuse of process of the English court and/or that to allow it to proceed would be contrary to English public policy. What is said is that the nationalisation of the Bank was part of a scheme to expropriate Mr Ablyazov's assets and to eliminate him as a political force and that the present claim is a continuation of that scheme. Subject to the outcome of that application (currently due to be heard in January 2011) the claim against them will continue. In those circumstances it seems to me plain, as it did to Mr Kealey, QC, that the applicants are necessary and proper parties and that England is distinctly the most suitable of the competing forums. As to the former, the applicant companies are all alleged to be controlled by Mr Ablyazov and to be the vehicles by which he fraudulently enriched himself. It makes little sense to decide whether that is so in proceedings which do not have both Mr Ablyazov and Mr Zharimbetov, on the one hand, and the Borrowers and Intermediaries on the other. The same essential issues lie at the heart of the claim against all of them, namely whether there was a massive fraud orchestrated by those two persons using the applicants as the means of carrying it into effect. Proceedings without those two or without the Borrowers and Intermediaries as parties would be incomplete. As to the latter, England is the forum in which the whole dispute can be tried in circumstances where the court is more likely than any other to have before it the evidence of all the relevant participants. It is fanciful to suppose that Mr Ablyazov and Mr Zharimbetov would voluntarily take part in any claim against them in Kazakhstan[1]. If a judgment was obtained against them in Kazakhstan, I can foresee great scope for dispute as to its enforceability in the light of the allegations which they make about persecution by the Kazakh authorities. It is in the interests of justice in this case that the claim against the applicants should be brought in a court to whose jurisdiction the first two defendants are unquestionably subject and before which there can be no good grounds (assuming good health) for non appearance. So far as the applicants are concerned, I have considerable doubts as to their real willingness to take part in any trial in Kazakhstan. None of them are domiciled or resident in Kazakhstan. They are incorporated either in the BVI or the Seychelles. Their alleged beneficial owner and current sole director, Mr Timichev, lives in Belarus. His representative in Kazakhstan has apparently destroyed all documents relating to the Borrowers' assets through fear: see para 33 below. I do not, however, propose to take any account of those doubts because Mr Colton had proffered an undertaking on their part to submit to the jurisdiction of the Kazakh courts. If the proceedings against Mr Ablyazov and Mr Zharimbetov go ahead as, subject to the strike out/ stay application, they will, and the proceedings against the applicants are heard in Kazakhstan (or elsewhere) there is an obvious risk of inconsistent judgments and of waste and duplication of costs. That is a powerful factor in favour of having the applicants as parties to this litigation: see 889457 Alberta Inc v Katanga Mining Ltd [2008] EWHC 2679 (Comm), para 25; Citi-March Ltd v Neptune Orient Lines Ltd [1996] 1 WLR 1367, 1375-6. I do not ignore the size of the connection of the case with Kazakhstan, the swathes of documentation which are in Russian, and the fact that the claim is governed by Kazakh law. I do not, however regard those matters as outweighing the considerations to which I have referred or rendering the English court an inappropriate, or less appropriate, forum. In this respect it is material to take account of the nature of the case which the Bank seeks to make. The Bank's case, according to its skeleton argument, is broadly as follows: a. There is no evidence that any of the Borrowers were or had been involved in the business of acquiring or supplying oil drilling and other equipment or had any experience of it. Such financial information as was available on the Borrowers showed them to operate on a significantly different scale to that being proposed, and wholly unable to meet repayments out of their own resources. b. The purpose of the facilities was said to be for the acquisition of oil drilling and other equipment from the Intermediaries. But there is no evidence that the supply of such equipment was a business in which any of the Intermediaries had been involved or had any experience. Nor is there any evidence as to why it was necessary for four Borrowers to acquire the machinery and equipment from the Intermediaries, rather than from manufacturers or established suppliers. c. There were a total of 16 contracts of supply. Notwithstanding that they were between four different Borrowers and six different Intermediaries, and were in respect of different machinery and equipment (albeit related generally to the oil industry), both the form and content of every agreement are almost identical. d. The contracts were, at least in the case of the vessels and oil rigs, both unusual and lacking the normal terms expected in market practice. e. The contracts have several peculiar features. Most notable are the payment provisions. In particular, there is no or no obviously rational reason why (a) payments should be by letter of credit; or (b) the majority of the payments (70% in all but one case) should be paid up front and on the presentation of manifestly inadequate documentation, without any evidence that the Intermediary had acquired the equipment or that the equipment even existed. f. The circumstances in which, following the up front payments, all of the contracts were almost immediately amended so as to reduce the purchase price to exactly the amount of the up front payment, bear no obviously honest explanation. g. Simple mistakes on the documentation, including certain letters carrying the incorrect letterhead and others being addressed to the wrong addressee, point to a central hub of activity and a lack of care inconsistent with legitimate commercial transactions of this magnitude. h. The facts that (a) no guarantees have been provided; (b) no pledges of existing equipment have been provided; (c) no repayments have been made; and (d) the Bank's efforts even to locate equipment with the specifications in the contracts have drawn a blank, support the conclusion that the contracts were shams, the equipment did not exist and this was a crudely executed scheme to extract money from the Bank for no legitimate purpose. It is also apparent from the affidavits recently filed by Mr Denis Silyutin, a Russian lawyer with powers of attorney on behalf of the Borrowers and certain Intermediaries, that none of the Borrowers received any equipment and that the money loaned was, almost immediately it was received, advanced on to other off-shore companies without security in circumstances in which "it was commonly understood that the "loans" would not in fact be repayable" such that the value of these further loans as receivables is nil. So far as the conduct of Messrs Ablyazov and Zharimbetov is concerned, the Bank's position (as set out in its skeleton argument) is as follows. The facilities were approved by Mr Zharimbetov, as Chairman of the Credit Committee. The Bank contends that such approval could not have been given in good faith and for proper commercial purposes and relies in particular on : (a) the paucity of information provided to the Bank and the prima facie fraudulent circumstances of the transaction, as identified above; (b) the circumstances in which the approval was apparently pushed through the Credit Committee, without a meeting; (c) the speed with which the documents were put together and the advances made; (d) the fact that the facilities were approved and the advances were made without security; (e) the Bank's apparent failure even to question the uniform reductions in the purchase price but instead simply to amend the documentation to reflect them; (f) the Bank's apparent reliance on obviously inadequate valuations; and (g) the Bank's apparent failure to address, or even consider, its inability to determine the related party issues which could arise on the transactions. Whilst the contentions summarised in the previous paragraphs will no doubt be the subject of considerable evidence, the scope of the inquiry cannot be regarded as particularly complicated, technical or esoteric; and does not require prolonged consideration of documents. Further, if the Bank's case be well founded, it seems difficult to suppose that the conduct in question gives rise to no rights under Kazakh law. Further, from the point of view of the applicants, if their defence is as foreshadowed in Mr Culbert's witness statement, it involves nothing particularly complicated or esoteric either. On their account the applicants were the vehicles whereby the Bank might make loans in a way which would circumvent its own regulations. On their case, too, the arrangements made with the Bank were not what the documents show. They, and, in particular the agreements for the purchase of equipment and general credit agreements, are, in truth, shams, not intended to take effect in accordance with their terms. The real transaction was a loan by the Bank to unspecified "Ultimate Borrowers", made in a roundabout manner in order to evade the Bank's regulations. In those circumstances the fact that most of the documents are in Russian loses much of its significance. They do not reveal the true nature of the transaction anyway. Mr Colton submitted that it used to be the position that where (a) an anchor defendant was properly sued in this jurisdiction, and (b) some other defendants were 'necessary or proper parties' to the claims against him, then the factors which made those other defendants 'necessary or proper parties' would weigh heavily towards jurisdiction being exercised over them too, as a matter of discretion. But there was never a fetter on the Court's discretion, nor any presumption that leave to serve out should be given in respect of any necessary or proper party: The Eras Eil Actions [1992] 1 Lloyd's Rep 570, at 591. Before the decision in Owusu v Jackson [2005] QB 801 the court was in a position to consider whether the anchor defendant was properly sued in the jurisdiction, before or in conjunction with giving permission to serve another defendant out of the jurisdiction. Where the issues raised in a claim against multiple defendants had a clear connection with a foreign jurisdiction, and no connection with England, forum-shopping by suing one defendant who was domiciled within the jurisdiction, and then joining all the other defendants, would not succeed: the court could and would stay proceedings against the first defendant on the grounds of forum non conveniens. The decision in Owusu has taken away the court's ability to prevent proceedings being brought within the jurisdiction against a defendant who is domiciled here. This power to prevent forum-shopping by a claimant has thus been lost in relation to domiciled defendants. Owusu does not, however, decide that proceedings against other defendants, albeit necessary or proper parties to the claim against the domiciled defendant, may not be stayed on the grounds of forum non conveniens[2]. Further, after Owusu, the court should be cautious about attaching the same weight to the desirability of avoiding multiplicity of proceedings because of the danger that, if it is not, foreign defendants with no connection to England & Wales will find themselves forced into proceedings simply because another defendant is domiciled here. Mr Colton referred me to the following passage in Dicey, Morris & Collins in respect of attempts to assert jurisdiction on the basis that the defendant is a necessary or proper party: "Because the cause of action may have no connection with England, especial care is required before permission to serve out of the jurisdiction will be allowed. In particular, the court should not grant permission under this clause as a matter of course merely because not to do so would mean that more than one set of proceedings would be required." In the light of Owusu, the appropriate course for the court to take in a case such as this is, he submits, to consider which is the natural and appropriate forum for the case without regard to Owusu. The court should consider whether, but for Owusu, the entire proceedings would be permitted to proceed in England, or whether the proceedings would more conveniently be heard elsewhere. a. If, even without the dictates of the Judgments Regulation (Council Regulation (EC) No44/2001), England would in any event be the forum conveniens, then the court can conclude that England is the forum conveniens in respect of proceedings against all defendants. b. But if England would not be the forum conveniens for the entirety of the proceedings were it not for the Judgments Regulation, then the fact that the English court is unable to stay the claim against the domiciled defendants on forum non conveniens grounds does not justify permitting the claim to be expanded to bring in all of the non-domiciled defendants. c. As Blackburne J put it, in Pacific International Sports Clubs Ltd v Surkis [2009] EWHC 1839 (Ch) at [111]; upheld on appeal [2010] EWCA Civ 753, the interests of justice will not be served by allowing the tail to wag the dog. He also referred me to my judgment in OJSC Oil Company Yugraneft v Abramovich [2008] EWHC 2613 (Comm) at [488] to [490]; and Briggs and Rees: Civil Jurisdiction & Judgments (5th Ed) at ¶4.57. I do not accept that the second proposition can be taken as a rule. It fails to distinguish the case in which the anchor defendant is the chief protagonist from the case where he is a minor player. A decision that permission should be granted to serve the protagonist out of the jurisdiction because the minor player is domiciled within the jurisdiction would indeed allow the tail to wag the dog. But if the anchor defendant is the protagonist a decision to allow a minor player to be served outside the jurisdiction may be entirely appropriate. That would be, to continue the metaphor, to allow the dog to wag the tail. Just as it may make little sense to have the venue determined by where the claim against the most insignificant player will be heard, so it may make little sense to have the venue where the most significant will be sued passed over in favour of another jurisdiction to whose jurisdiction a lesser player is subject. I do not mean thereby to suggest that whether or not jurisdiction should be exercised against a foreign defendant is necessarily determined by whether the anchor defendant, or the defendant sought to be joined, fits into some particular descriptive category ("major/minor"; "principal/secondary"); only that a decision as to appropriate forum must necessarily take account of the relative importance in the case of different defendants and particularly those against whom proceedings in England are practically bound to continue. Mr Colton submitted that it would be wrong, in circumstances where the claim is for around US $ 1 billion against all the defendants, to characterise the applicants as minor, secondary or subsidiary parties and Mr Ablyazov and Mr Zharimbetov as major ones. I do not agree. It is plain that Mr Ablyazov and Mr Zharimbetov are the most significant parties on the defence side. It is they who appear to have brought about the disposition of the Bank's funds with which the claim is concerned, either to enrich themselves or their associates, as the Bank claims, or in order that the Bank might lend to other persons unknown, as appears to be the gist of the applicants' case. They and, in particular, Mr Ablyazov, are the persons from whom the Bank has the best likelihood of substantial recovery. Mr Ablyazov is said by the Bank to be worth over $ 1 billion. The Intermediaries say that they have no assets. The Borrowers are said to have (indirectly) interests in oil and gas exploration contracts but their value is wholly uncertain, and in the case of Granton a decision of the Almaty Court dated 15th January 2010 has set aside the transactions by which it acquired those interests. Mr Colton further submitted that the Court cannot assume that the applicants are beneficially owned, or controlled, by Mr Ablyazov. The applicants do not accept that that is so and there is no documentary evidence to that effect. I do not make any such assumption. What, however, I do take into account is that (i) that is the case which the Bank is making; (ii) the Bank has well arguable grounds for doing so; and (iii), in consequence the principal, albeit not the exclusive focus of the case will be on what exactly those two were doing. The most important evidence on the defence side may be expected to come from them. Mr Colton submits that such an approach ignores the fact that many people were involved in the decision to make the transfers in question; Mr Zharimbetov was not the sole person who approved the arrangements. On this see para 31-33 below. Mr Colton set out in an Appendix to his skeleton argument a list of 23 potential witnesses who are based in Kazakhstan, whose names appear on apparently relevant documents, and who appear to have played some part in the impugned transactions (e.g. as members of the Credit Committee or signatories to its decision). He relied on this as a pointer to the unsuitability of a trial in this country. As to that a number of points arise. Firstly, subject to the outcome of the strike out/ stay application, the proceedings are going to continue against Mr Ablyasov and Mr Zharimbetov, and the Bank will have to adduce the evidence of the witnesses on whom it relies in these proceedings. Secondly, I am sceptical as to whether the evidence of many of the individuals on the list will be important or, in some cases, even relevant. The documentation is, according to both parties, in substantial measure a sham e.g. the agreements for the purchase of equipment and the general credit agreements. In those circumstances the critical question may well be - which sham was it? - and the important witnesses will be those who set it up, in particular Mr Ablyazov and Mr Zharimbetov; together with Ms Tleukulova, a managing director, whose evidence is said to be that the approval of the Credit Committee was in each case a formality, that the minutes were sent, already signed by Mr Zharimbetov, and with no attached documentation, to the members for signing without a meeting. There is reason, therefore, to believe that many of the persons whose names appear on the documents had no, or very little, real role in relation to the transaction. I note also that the applicants, whilst ascribing various intentions to the Bank have not indicated who are the natural persons who had the relevant intentions. Lastly it is material to note that many (but by no means all) of the documents are already in this country (although not necessarily translated); that, according to the applicants, the documentation relating to the Borrowers' assets held by Mr Timichev's representative in Kazakhstan was destroyed because of a "perception in Kazakhstan that those with connections to the former management of the Bank are liable to prosecution by their former affiliates" which might endanger their "life and freedom". If the proceedings against the applicants continue in this country it will be necessary for there to be evidence of Kazakh law. Such evidence is obtainable. It will be necessary to have it anyway for the purpose of the claims against Mr Ablyazov and Mr Zharimbetov. Both the solicitors for the Bank and those representing those two (and, to some extent the court) are becoming increasingly familiar with the Kazakh legal issues. In those circumstances, subject to the question of the effect of the stay application, I have no doubt that England is distinctly the more appropriate forum for the trial of the action against the applicants. Mr Colton submits that, even if I am of that view, I should postpone giving effect to it, either by adjourning the hearing or making any order conditional or suspended, pending the determination of the strike out/stay application. If that application is successful it will have established, he submits, that those defendants should not have been joined and the whole basis for the case against the applicants will have been demolished. The defendants to the claim against whom they are necessary or proper parties will cease, effectively, to be defendants at all, not as a result of some event supervening after the commencement of the proceedings but because the proceedings against them ought never to have been brought. Mr Philip Marshall QC for the Bank submits that this approach is misplaced. In cases where there is a dispute as to whether the court has or should exercise jurisdiction over someone served or to be served outside the jurisdiction the court has to resolve any jurisdictional challenge at an early stage and on limited material. If jurisdiction is established, it may well be that, later, the case against an anchor defendant fails. The contract with him containing (say) an exclusive jurisdiction clause may turn out not to exist or to be voidable. He may have a limitation defence or one that goes to the substantive merits; or the claim may fail for other reasons. That will not, however, deprive the court of jurisdiction over those who have been added at an earlier stage as necessary or proper parties. In the present case it is necessary, he submits, for the Court to decide whether, as at the date of the issue of the proceedings, the Bank had a good arguable case that the applicants were necessary or proper parties. That involves deciding whether there is a good arguable case that the stay application will fail so that the applicants will remain parties. I accept these submissions. They are in my judgment in accordance with the decisions of the Court of Appeal and House of Lords in Canada Trust Co. v Stolzenberg [1998] 1 WLR 547; [2002] 1 AC 1 where Lord Steyn observed that a balance of probabilities test would sometimes require the trial of an issue or at least cross-examination of deponents on their affidavit which would be inappropriate in relation to challenges to the jurisdiction which ought to be decided expeditiously. Similarly in The Spiliada [1987] AC 460 Lord Templeman contemplated that arguments regarding forum conveniens should be determined swiftly and with minimum expense (something devoutly to be wished but in practice not often achieved). Neither Lord Steyn nor Lord Templeman envisaged that the determination of a jurisdiction challenge would await the determination of a hearing at which the court would make findings of fact (as is potentially the case here). Mr Colton submitted that the court's approach should differ according to whether the ground of opposition to the continuance of proceedings against the anchor defendant was that there was no arguable case on the merits or that the commencement and continuation of the claim was an abuse of process. I am not persuaded that it is right, at any rate in this case, to make any such distinction, particularly where the claim is that the allegations of fraudulent behaviour are both politically motivated and false. The substantive defence and the claim of abuse of process are effectively opposite sides of the same coin. I am satisfied that the Bank has a good arguable case for resisting the application to strike out or stay. There are, as it seems to me, considerable difficulties in the way of Mr Ablyazov and Mr Zharimbetov establishing that it is an abuse of process for the Bank to seek a resolution of the case in this court. It is debatable whether the allegations about persecution are justiciable. If they are, it is difficult to see how the court could strike out or stay the proceedings unless satisfied that the Bank's claim to have been defrauded was unsustainable on the facts or why it should be an abuse of process for this Court, which these two defendants recognise as a proper court and whose powers they invoke, to rule on the validity of the Bank's claims. Further, if the application were to succeed on the ground put forward, namely that there is no effective rule of law in Kazakhstan, even in the courts, Mr Ablyazov would, paradoxically, have established that Kazakhstan was not a place where justice could be obtained, let alone the forum where the case could most appropriately be heard in the interests of the parties and for the ends of justice; in which case England would be left as the appropriate forum, if there is to be a trial at all. For these reasons I shall dismiss the application. Note 1   Mr Colton submitted that I could make no finding that either of them face political persecution in Kazakhstan (or have a well founded fear thereof), or that the quality of justice there is, in any way, deficient so that it is an unavailable forum, in the absence of any contention by the parties to the present application, or cogent evidence, to that effect. That seems to me somewhat to miss the essential point, which is that neither of them will voluntarily litigate in Kazakhstan but will do so here.     [Back] Note 2   At first instance in Owusu the judge had decided that, but for the fact that he was precluded by the Brussels Convention from staying the action against D1, he would have regarded Jamaica as the more appropriate forum. What order (if any) was made about the joinder of D3, 4 and 6 after the decision of the European Court of Justice is unknown. The Court of Appeal had deferred consideration of that issue until after the decision of the ECJ.    [Back]

Opinion of Mr Advocate General Saggio delivered on 4 May 1999. - Caisse de pension des employés privés v Dieter Kordel, Rainer Kordel and Frankfurter Allianz Versicherungs AG. - Reference for a preliminary ruling: Landgericht Trier - Germany. - Social security - Institution responsible for benefits - Right of action against liable third party - Subrogation. - Case C-397/96. European Court reports 1999 Page I-05959 Opinion of the Advocate-General 1 By order of 29 November 1996, the Ladgericht Trier (Germany) referred to the Court of Justice for a preliminary ruling a question on the interpretation of Council Regulation (EEC) No 1408/71 on the application of social security schemes to employed persons and their families moving within the Community, (1) as amended by Council Regulation (EEC) No 2001/83 (2) (hereinafter `the Regulation'). That question, supplemented by further order of 24 October 1997, concerns the extent of the rights of action accorded to institutions responsible for social security benefits under Article 93(1)(a) of the Regulation. The relevant Community and national legislation 2 The Regulation co-ordinates the social security schemes which apply in the Member States to employed persons and to members of their families moving within the Community, in order to promote freedom of movement for workers and to contribute towards the improvement of their standard of living and conditions of employment. As stated in the fifth recital in the preamble to the Regulation, to that end, the Regulation guarantees `within the Community firstly equality of treatment for all nationals of Member States under the various national legislations and secondly social security benefits for workers and their dependents regardless of their place of employment or of residence'. 3 Within Title II of the Regulation, which lays down rules for determining which legislation is applicable, Article 13 provides that `persons to whom this Regulation applies shall be subject to the legislation of a single Member State only', which is to be determined in accordance with the provisions of that Title. 4 Article 93, entitled `Rights of institutions responsible for benefits against liable third parties', is the provision which is the subject of the question referred by the German court. Article 93(1)(a), the relevant part of that provision, provides that `[i]f a person receives benefits under the legislation of one Member State in respect of an injury resulting from an occurrence in the territory of another State, any rights of the institution responsible for benefits against a third party bound to compensate for the injury shall be governed by the following rules: (a) where the institution responsible for benefits is, by virtue of the legislation which it administers, subrogated to the rights which the recipient has against the third party, such subrogation shall be recognised by each Member State'. 5 Article 232 of the Luxembourg Social Insurance Code provides that if a person entitled to a pension has a legal right, exercisable against a third party, to compensation for loss or damage caused to him by reason of a death or invalidity, the rights of the victim or his heirs pass to the institution paying the pension up to the amount of the benefits payable. If the pension is a permanent pension, the institution's right of recourse applies to the amount of the cover capital less accrued rights. According to Article 4 of the Grand-Ducal regulation giving effect to the Code, however, where a person already entitled to a pension dies, the institution has no right of recourse against a liable third party. The facts and the question referred 6 The proceedings before the national court concern the establishment of responsibility for the death of a German national as a result of a road accident that happened on 27 December 1991 near Trier. Alfons Ginsbach died after being run over by a motor vehicle driven by Dieter Kordel and owned by Rainer Kordel, both of whom are also German nationals. Mr Ginsbach was insured with the Caisse de Pension des Employés Privés (the Luxembourg institution responsible for pension schemes for employees in the private sector, hereinafter `the Pension Fund'). Consequent upon Mr Ginsbach's death, the Pension Fund paid to his widow and daughter a reversionary pension with cover capital of LUF 4 003 236. In the main proceedings, the Pension Fund claims damages in the sum of half of the cover capital against the driver of the vehicle, its owner and the insurance company on the basis that they are jointly and several liable. The Pension Fund maintains that, in accordance with Article 232 of the Luxembourg Social Insurance Code, it is subrogated to the rights of Mr Ginsbach's survivors in this regard and that, pursuant to Article 93(1)(a) of the Regulation, its right of subrogation must also be recognised in Member States other than that in which the Pension Fund operates. 7 Taking the view that interpretation of Article 93(1)(a) of the Regulation is necessary in order for it to give judgment, the German court referred the following question to the Court of Justice for a preliminary ruling: `How is Article 93(1)(a) of Regulation (EEC) No 1408/71 to be interpreted? Does recognition by the Member States extend to the content of the subrogated right, as defined in another Member State (in this case, by the second sentence of Article 232 of the Luxembourg Social Insurance Code which, in conjunction with the relevant Grand-Ducal regulation, provides that the claim to which the Pension Fund is subrogated is to amount to the cover capital less accrued statutory rights), or merely to the subrogation as such?' 8 By letter of 24 July 1997, the Court sent the Landgericht Trier a copy of its judgment in DAK v Lærerstanders Brandforsikring, (3) at the same time asking whether or not, in the light of that judgment, the Landgericht wished to reformulate its question. By further order of 24 October 1997 the Landgericht Trier supplemented its question as follows: `Do provisions which prevent an institution of a Member State responsible for benefits, within the meaning of Article 93(1)(a) of Regulation (EEC) No 1408/71, from being subrogated to the right of a person in receipt of benefits to claim damages against a person liable for causing injury in another Member State, or prevent such an institution from asserting such a right, not also exclude the institution's right of recourse against the third party where the provisions in question are those of the Member State to which the institution belongs (the provision in this case being Article 4 of the regulation implementing Article 232 of the Social Insurance Code, under which, on the death of a person entitled to a pension, no right of recourse is to be exercised against liable third parties)?' Substance 9 The question originally referred by the national court essentially concerns the extent of the rights of action accorded to social security institutions by Article 93(1) of the Regulation which, I would repeat, provides that where an institution responsible for benefits is, by virtue of the legislation which it administers, subrogated to the rights which a recipient has against a third party, such subrogation is to be recognised by every Member State. The German court, faced with two conflicting sets of rules under German and Luxembourg law respectively, only the latter of which allows the social security institution rights of action, asks the Court whether the reference in Article 93 of the Regulation to the legislation administered by the social security institution (in this case, Luxembourg law) is to be understood as applying exclusively to the subrogation as such, or to the content of the subrogated right also. 10 It must be observed at the outset that the answer to that question is quite evident from the settled case-law of the Court and that there seems to me to be no reason to depart from that case-law in the instant case. It is sufficient to refer to the judgment in DAK, cited above, in which the Court had occasion to clarify the scope of Article 93(1) of the Regulation. That case involved a dispute between a German social security institution and a Danish insurance company concerning the reimbursement of expenses incurred by the former in connection with the transport and hospital treatment of one of its insured who was involved in a road accident in Denmark. Asked by a Danish court for a preliminary ruling, the Court of Justice ruled that `Article 93(1) of the regulation is to be interpreted as meaning that the conditions and extent of the right of recoupment which a social security institution within the meaning of the regulation has against the party who has caused an injury in the territory of another Member State, which has entailed the payment of social security benefits, are determined in accordance with the law of the Member State to which that institution is subject' (paragraph 23). Thus, legal provisions of the Member State where the harmful event giving rise to the right of recoupment occurred cannot impose conditions upon or limit any right of action belonging to a social security institution in another Member State. 11 In its reasoning leading to that conclusion, the Court referred to the underlying purpose of the provision of the Regulation which is the subject of the present request for a preliminary ruling: Article 93, like Article 52 of the earlier Regulation No 3 of 25 September 1958, whose wording it largely reproduces, `has the object of allowing a social security institution, which has paid social security benefits following an injury sustained in the territory of another Member State, to exercise against the third party liable for the injury the rights of action provided for by the legislation which it administers, either by means of subrogation or by any other legal method' (paragraph 16). (4) The rights thus conferred on national social security institutions constitute, according to the Court, `a logical and fair counterpart to the extension of the obligations of those institutions throughout the entire Community as a result of the provisions of the regulation'. (5) To that end, Article 93(1) of the Regulation provides that every Member State is to recognise the subrogation of the institution responsible for benefits to the rights which the recipient of the benefits has against the third party bound to compensate for the injury, where that institution has such rights under the legislation of the Member State in which it operates (paragraph 17). 12 In the Court's view, Article 93(1) `must thus be seen as conflict-of-laws rule, which requires the national court hearing an action for compensation brought against the party liable for the injury to apply the law of the Member State to which the institution responsible is subject, not only to determine whether that institution is subrogated by law to the rights of the injured party or has direct rights against the third party liable, but also to determine the nature and extent of the claims to which the institution responsible for benefits is subrogated or which it can bring directly against the third parties' (paragraph 18). The conflict-of-laws rule in Article 93 thus precludes national courts from applying the law of the place where the harmful event occurred in order to establish the extent of the right of action of which the institution responsible for benefits may avail itself. That right must be recognised in the other Member States on the same conditions and to the same extent as is laid down by the legislation to which the social security institution is subject in the Member State in which it operates. That rule accords with the general principle, mentioned earlier, that the social security treatment of workers within the Community must be governed by the legislation of a single Member State only (Article 13 of the Regulation), and also takes account of the fact that the institution in question is also responsible for providing benefits in cases of loss or injury sustained in another Member State. (6) As the Commission has observed, the aim is to ensure that the institution's rights of action against a third party liable for a harmful event which led to its intervention match the benefits which it is required to provide. 13 Lastly, the Court held in DAK that the fact that jurisdiction is determined by reference to Article 93 not does imply any alteration of the rules applicable for determining whether and to what extent there is non-contractual liability on the part of the third party who has caused the injury. That liability remains subject to the substantive rules which are normally to be applied by the national court before which proceedings are brought, in other words, in principle the legislation of the Member State in whose territory the injury has occurred (paragraph 21). (7) 14 The pointers that can be derived from that case-law are highly relevant to the solution of the present case. The victim of the accident in Germany was insured by a Luxembourg social security institution. Any right to compensation which those deriving title from the victim of the accident might have against the liable party arises under the law which, in accordance with German private international law, applies in matters of non-contractual liability. Subrogation of the social security institution, on the other hand, is governed by the law which that institution administers - in this case, Luxembourg law - and that is also the law which determines the extent of the subrogated rights of action in another Member State. That right of action, governed by Luxembourg law, must be recognised in the other Member States, and in the present case in Germany, pursuant to Article 93 of the Regulation. 15 The answer to the question originally referred by the German court must therefore be consistent with the settled case-law of the Court, and thus Article 93 of the Regulation must be interpreted as requiring national courts to apply the law of the Member State to which the institution responsible for benefits belongs also in establishing the nature and extent of the rights to which such an institution is subrogated. In the grounds of its second order for reference, by which it expanded on its initial question, the German court appears to accept that solution. However, it justifies retaining its question, mentioning a factor which might distinguish the case now before it from that in DAK: whilst in DAK the Court held that the rights of the subrogated institution could not be restricted by provisions in the legislation of the State of the court having jurisdiction, in which the harmful event occurred, the obstacles to bringing an action arise in the present case from the legislation in force in the State where the institution operates, namely Luxembourg. As stated earlier, under Article 4 of the Grand-Ducal regulation giving effect to Article 232 of the Luxembourg Social Insurance Code, a subrogated institution cannot bring an action against a third party responsible for a harmful event in place of the heirs of the victim where the person entitled to a pension dies. Clearly, it is a matter for the national court, called upon to apply Luxembourg law, to ascertain whether in the present case the necessary conditions prevail for applying the Luxembourg provision just mentioned, in accordance with Article 93 of the Regulation. Nevertheless, if it should transpire that the legislation to which the institution is subject does pose an obstacle to the institution's exercising its own right of action, even if properly subrogated to the rights of those entitled under the victim, that restriction must be recognised in all the Member States. 16 The solution here proposed is derived without difficulty from the letter and spirit of Article 93. That provision, containing a conflict-of-laws rule, requires the Member States to recognise subrogated rights of action irrespective of the content of applicable legislation. Recognition must be on the same conditions as those under which the provision in question is applied in the Member State in which the subrogated institution operates. Restrictions on rights of action must be recognised and applied in the other Member States, and thus, in the present case, by the German court. Conclusion 17 In light of the foregoing, I suggest that the Court answer the question referred by the Landgericht Trier as follows: Article 93(1) of Council Regulation (EEC) No 1408/71 of 14 July 1971 on the application of social security schemes to employed persons and to members of their families moving within the Community, as amended by Council Regulation (EEC) No 2001/83 of 2 June 1983, is to be interpreted as meaning that the conditions applicable to and extent of the right of action which a social security institution, within the meaning of the regulation, has against a party liable for loss or injury which was sustained in the territory of another Member State and which has led to the payment of social security benefits are determined in accordance with the law of the Member State of the institution. Provisions of the laws of the Member State in which the institution responsible for benefits operates which restrict or preclude the right of action of the social security institution must therefore be recognised in the other Member States. (1) - OJ, English Special Edition 1971 (II), p. 416. (2) - OJ 1983 L 230, p. 6. (3) - Case C-428/92 DAK v Lærerstanders Brandforsikring [1994] ECR I-2259. (4) - See also the judgment in Case 27/69 Entr'aide Médicale v Assurances Générales [1969] ECR 405, paragraph 15. (5) - See, to the same effect, the judgments in Case 33/64 Betriebskrankenkasse Heseper Torfwerk v Koster [1965] ECR 97 and Case 44/65 Hessische Knappschaft v Singer [1965] ECR 965, which, of course, refer to the earlier version of the text of the Regulation. (6) - See the Opinion of Advocate General Lenz in DAK (ECR 1994 I-2261, paragraph 22). (7) - See, to that effect, Hessische Knappschaft, cited above, which refers to the earlier version of the Regulation.

J U D G M E N T SANTOSH HEGDE,J. The appellants and one Seti Lal were charged for offences punishable under Sections 302 and 307 read with Section 149 IPC before the II Additional Sessions Judge, Mainpuri, U.P. The trial companyrt having found them guilty of the said offence, they were sentenced to undergo life imprisonment for the offence under Section 302 read with Section 149 IPC. They were also found guilty of the offence punishable under Section 307 read with Section 149 and were sentenced to undergo RI for 7 years. They were further sentenced to undergo 2 years RI under Section 148 IPC. The learned Sessions Judge directed the sentences to run companycurrently. The said accused persons preferred Criminal Appeal No.993 of 1980 before the High Court of Judicature at Allahabad. During the pendency of the appeal, the fourth accused Seti Lal died and the appeal abated so far as he was companycerned. The High Court companycurring with the findings of the companyrts below dismissed the said criminal appeal, companysequent to which the appellants are before us in this appeal. Brief facts necessary for disposal of this appeal are as follows - Deceased Raghubir Singh was a witness in a murder case in which these appellants were accused persons. On 4.10.1977, when the deceased along with PW.1 and two others by name Deputy Singh and Onkar Singh were returning from the companyrt at about 5.30 p.m. to their village, near a Peepal tree at the distance of about one furlong from the village, the appellants along with some other persons all wearing police uniform came armed with guns and rifles and started shooting at Raghubir Singh and others, companysequent to which Raghubir Singh fell down dead while PW-1 Mahesh Babu sustained an injury on his hand. The other two were number injured. It is the prosecution case that PW-1 and the other two persons accompanying the deceased got scared and ran away and a companyplaint in regard to this incident was lodged at about 9.20 p.m. in the Police Station at Ekka. Based on the companyplaint given by Mahesh Babu PW-1 Ex.Ka-1 was registered by PW-8, the Investigating Officer, who then left for the place of occurrence but he did number find the dead body of the deceased. It is stated that on the next day, a headless body of Raghubir Singh was found near Arind river. PW-8 states that he on that day recorded the statement of witnesses and went to the place of incident and companyducted spot Mahazar and he recovered 6 empty cartridges of 30 carbine, 8 empty cartridges of 315 bore rifle and 5 empty cartridges of 12 bore. He also states that he companylected the blood stained and plain earth from the scene of occurrence. On companypletion of the investigation, a chargesheet Ex.Ka-15 was submitted against the four named accused and another Sajjan. However, since the said Sajjan companyld number be traced, his case was separated from the rest of the identified accused and the II Additional Sessions Judge Mainpuri after trial companyvicted the accused persons, as stated above. Learned companynsel appearing for the appellant stated that both the companyrts below have seriously erred in placing reliance on the evidence of PWs. 1 and 7 which is the only evidence in regard to the incident in question and also in regard to the identification of the dead body. He companytended that both these witnesses have turned hostile and have number supported the prosecution case inspite of the same the companyrts below relied upon their evidence to base a companyviction. The learned companynsel appearing for the State tried to justify the companyviction. We have carefully gone through the material on record and heard the argument. At the outset itself we must express our surprise how the two companyrts below companyld have based a companyviction on the material produced by the prosecution in this case. PW-1 who, according to the prosecution, is an eyewitness has number supported the case of the prosecution. He was permitted to be cross-examined by the prosecution. He in examination-in-chief has stated that at about 5.30 in the evening they reached near the peepal tree near their village along the Canal Bambaki Patri where they saw nine persons companying from village side and they were in police uniform. The witness says that he identified Nathu Ram, Tirth Prakash out of them. Thereafter the witness says that those persons told him and others that they will number spare the deceased on that day and so saying those persons who were in police uniform and armed with guns and rifles started firing, companysequent to which Raghubir Singh fell down dead. The witness also says that he sustained pellet injury on his left hand, witness thereafter says that Onkar Singh and Deputy Singh ran away and the witness went to his house. On reaching the house, he informed his elder uncles wife and his mother that same persons who killed his father, killed Raghubir Singh also. None of the persons named by him in this part of his evidence are appellants before us number were they the accused persons before the trial companyrt. In the cross-examination by the prosecution, this witness stated thus - I got true name of accused written in Ex.K-1. It is true when we came near the pipal tree 12-13 persons surrounded us, I know 9 persons out of them accused Jaipal Seti, Ghamdani and Suresh present in Court are out of 9 persons, Kunwar Pal, Nathu, Ramtirath, Ram Prakash and Sajjan were alongwith him, I have heard that Kunwarpal, Ramtirath, Ram Prakash, Nathu, have been killed in Police encounter. Though in this part of his examination, he has named the appellants herein he has number attributed any overt act to these persons. This part of his evidence was understood by the trial companyrt as this witness having said that these persons named by him had participated in the attack on the deceased which according to us is a clear misreading of the evidence. The trial companyrt in this regard held thus In his cross examination he has named all the four persons as having participated and further admitted that he had number named the accused earlier in companynter fear sic of the accused persons. From the part of evidence extracted by us herein above, it is clear that PW-1 has number stated that these accused had actually participated in the attack. This is an incorrect inference drawn by the trial companyrt. That apart admittedly though the incident in question has taken place on 4.10.1977 and this witness had personally given the companyplaint as per Ex.Ka-1, his statement was recorded only on 24.11.1977 nearly 50 days after the incident in question. The explanation given by PW-8 in regard to this inordinate delay is that this witness was number available for recording the statement, cannot be accepted on its face value. The companyrts below have number even adverted to this part of the lacunae in the prosecution case. The other witness on whom the trial companyrt placed reliance to base a companyviction is PW-7 who, according to the said companyrt, has companyroborated the evidence of PW-1. We have gone through the evidence of this witness also and are of the opinion that the companyrts below were once again wrong in inferring that this witness has companyroborated the evidence of PW-1. At the outset, we should record even this witnesss statement was recorded only on 24.11.1977 and there is numberacceptable explanation for this delay. This witness has also turned hostile and was cross-examined. In his examinationin-chief, he merely says that he saw 9 persons in police uniform companying from the opposite side and started firing. He stated that he companyld number identify any of them, hence, prosecution was permitted to cross examine. In the cross-examination, he like PW-1 stated I.O. Darogaji went to village in respect of this case. He interrogated me, I did number say to Sub-Inspector Darogaji that all the persons were seen in day light Sajjan, Kunwarpal Singh, Ramtirath, Ram Prakash and Nathu Jaipal Ghanandi Suresh are residents of our village. I companyld number tell that why did Sub Inspector recorded my statement. We fail to understand how this evidence even if companyrectly read companyld support the prosecution in identifying the accused persons. Still the trial companyrt found sufficient material to base a companyviction on the basis of the evidence of these two witnesses. As a matter of fact, there is hardly any evidence worth acceptance even in regard to identification of the body. The witness who was examined in this regard by the prosecution is PW-3 who has also turned hostile and who in his examination-in-chief has stated that I cannot say that the dead body was of Raghubir Singh. Nothing in support of the prosecution is elicited in the cross-examination. It is based on such evidence the trial companyrt companyvicted the accused persons and in appeal the High Court rather surprisingly accepted the finding of the companyrt below.

Ordonnance du Tribunal Case T-370/02 Alpenhain-Camembert-Werk and Others v Commission of the European Communities (Regulation (EC) No 1829/2002 – Registration of a designation of origin – ‘Feta’ – Application for annulment – Locus standi – Inadmissibility) Order of the Court of First Instance (Third Chamber), 6 July 2004 Summary of the Order 1. Actions for annulment – Natural or legal persons – Measures of direct and individual concern to them – Regulation on the registration of geographical indications and designations of origin – Action by undertakings producing ‘Feta’ cheese in a Member State other than that of the origin of that cheese – Inadmissibility (Art. 230, fourth para., EC; Council Regulation No 2081/92; Commission Regulation No 1829/2002) 2. Actions for annulment – Natural or legal persons – Measures of direct and individual concern to them – Interpretation, contrary to law, of the requirement of being individually concerned – Not permissible (Art. 230, fourth para., EC) 1. Regulation No 1829/2002 amending the Annex to Regulation No 1107/96 on the registration of geographical indications and designations of origin under the procedure laid down in Article 17 of Regulation No 2081/92, in so far as it covers the name ‘Feta’ as a protected designation, constitutes a measure of general application within the meaning of the second paragraph of Article 249 EC, since, by recognising that all undertakings whose products satisfy the prescribed geographical and qualitative requirements have the right to market them under the abovementioned designation and by refusing that right to all producers whose products do not fulfil those conditions, which are identical for all undertakings, it applies to situations determined objectively and produces its legal effects vis-à-vis categories of persons envisaged in the abstract. That regulation can therefore be of individual concern to natural or legal persons only if it affects them by reason of certain attributes peculiar to them or by reason of a factual situation which differentiates them from all other persons and thereby distinguishes them individually in the same way as an addressee. That is not the case of certain undertakings producing Feta cheese outside Greece, the Member State of origin of that cheese. The fact that those undertakings are among the main producers of Feta in the European Community, of which there are a limited number, and that they produce more than 90% of the Feta manufactured in the Member State in which they are established and that they market their products under the protected name is not sufficient in itself to distinguish them from all other economic operators concerned by Regulation No 1829/2002, since the general application and, therefore, the legislative nature of a measure are not called in question by the fact that it is possible to determine with a greater or lesser degree of precision the number or even the identity of the persons to which it applies at a given time. In addition, having recourse to the simplified procedure for registration of the protected name could not constitute a breach of those undertakings’ procedural rights since Regulation No 2081/92 did not establish, at Community level, specific procedural guarantees in favour of individuals. (see paras 54-56, 58-59, 67) 2. Whilst it is true that the condition of individual interest laid down by the fourth paragraph of Article 230 EC must be interpreted in the light of the principle of effective judicial protection, having regard to the various circumstances by which an applicant can be individually distinguished, such an interpretation cannot lead to disapplication of the condition in question, which is expressly laid down by the Treaty, without the jurisdiction conferred on the Community Courts by the Treaty thereby being exceeded. It follows that if that condition is not fulfilled, a natural or legal person does not, under any circumstances, have standing to bring an action for annulment of a regulation. (see para. 72) ORDER OF THE COURT OF FIRST INSTANCE (Third Chamber) 6 July 2004(1) (Regulation (EC) No 1829/2002 – Registration of a designation of origin – ‘Feta’ – Application for annulment – Locus standi – Inadmissibility) In Case T-370/02, Alpenhain-Camembert-Werk, established in Lehen/Pfaffing (Germany), Bergpracht Milchwerk GmbH & Co. KG, established in Tettnang (Germany),Käserei Champignon Hofmeister GmbH & Co. KG, established in Lauben (Germany),Bayerland eG, established in Nuremberg (Germany),Hochland AG, established in Heimenkirch (Germany),Milchwerk Crailsheim-Dinkelsbühl eG, established in Crailsheim (Germany),Rücker GmbH, established in Aurich (Germany), applicants, represented by J. Salzwedel and J. Werner, lawyers, with an address for service in Luxembourg, supported byUnited Kingdom of Great Britain and Northern Ireland, represented by P. Ormond, acting as Agent, intervener, v Commission of the European Communities, represented by J.L. Iglesias Buhigues, S. Grünheid and A.‑M. Rouchaud-Joët, acting as Agents, defendant, supported byHellenic Republic, represented by V. Kontolaimos, I. Chalkias and M. Tassopoulou, acting as Agents,and byAssociation of Greek Dairy Products Industries (Sevgap), represented by N. Korogiannakis, lawyer, APPLICATION for the annulment of Commission Regulation (EC) No 1829/2002 of 14 October 2002 amending the Annex to Regulation (EC) No 1107/96 with regard to the name ‘Feta’ (OJ 2002 L 277, p. 10) as a protected designation of origin, THE COURT OF FIRST INSTANCE OF THE EUROPEAN COMMUNITIES (Third Chamber), composed of: J. Azizi, President, M. Jaeger and F. Dehousse, Judges, Registrar: H. Jung, makes the following Order Legal background Council Regulation (EEC) No 2081/92 of 14 July 1992 on the protection of geographical indications and designations of origin for agricultural products and foodstuffs (OJ 1992 L 208, p. 1 – ‘the basic regulation’) lays down in Article 1 the rules on Community protection of designations of origin and geographical indications for certain agricultural products and foodstuffs. Under Article 2(2)(a) of the basic regulation, ‘designation of origin’ means ‘the name of a region, a specific place or, in exceptional cases, a country, used to describe an agricultural product or a foodstuff: – originating in that region, specific place or country, and – the quality or characteristics of which are essentially or exclusively due to a particular geographical environment with its inherent natural and human factors, and the production, processing and preparation of which take place in the defined geographical area’. Article 2(3) of the basic regulation provides: ‘Certain traditional geographical or non‑geographical names designating an agricultural product or a foodstuff originating in a region or a specific place, which fulfil the conditions referred to in the second indent of paragraph 2(a) shall also be considered as designations of origin.’ Under Article 3 of the basic regulation, names that have become generic may not be registered. For the purposes of that regulation, a ‘name that has become generic’ means the name of an agricultural product or a foodstuff which, although relating to the place or the region where that product or foodstuff was originally produced or marketed, has become the common name of an agricultural product or a foodstuff. To establish whether or not a name has become generic, account is taken of all factors, in particular: – the existing situation in the Member State in which the name originates and in areas of consumption, – the existing situation in other Member States, – the relevant national or Community laws. Registration of the name of an agricultural product or foodstuff as a protected designation of origin must, for that purpose, satisfy the conditions laid down by the basic regulation and, in particular, the product or foodstuff must comply with a specification defined in Article 4(1) of that regulation. Such registration confers Community protection on the designation in question. Articles 5 to 7 of the basic regulation lay down a procedure for registration of a designation, known as the ‘normal procedure’, which enables any group, defined as an association of producers and/or processors working with the same agricultural product or foodstuff or, under certain conditions, any natural or legal person, to apply for registration in the Member State in which the geographical area is located. The Member State checks that the application is justified and forwards it to the Commission. If it considers that the designation satisfies the conditions for registrability, the Commission publishes in the Official Journal of the European Communities the specific information detailed in Article 6(2) of the basic regulation. Article 7 of the basic regulation, as amended by Council Regulation (EC) No 535/97 of 17 March 1997 (OJ 1997 L 83, p. 3), provides: ‘1. Within six months of the date of publication in the Official Journal of the European Communities referred to in Article 6(2), any Member State may object to the registration. 2. The competent authorities of the Member States shall ensure that all persons who can demonstrate a legitimate economic interest are authorised to consult the application. In addition and in accordance with the existing situation in the Member States, the Member States may provide access to other parties with a legitimate interest. 3. Any legitimately concerned natural or legal person may object to the proposed registration by sending a duly substantiated statement to the competent authority of the Member State in which he resides or is established. The competent authority shall take the necessary measures to consider these comments or objection within the deadlines laid down. …’ If no Member State lodges a statement of objections to the proposed registration, the name is entered in a register kept by the Commission entitled ‘Register of protected designations of origin and protected geographical indications’. If the Member States concerned do not, in the event of an admissible objection, reach agreement among themselves in accordance with Article 7(5) of the basic regulation, the Commission adopts a decision under the procedure provided for in Article 15 thereof (the regulatory committee procedure). Article 7(5)(b) of the basic regulation provides that the Commission is to have regard, for the purposes of its decision, to ‘traditional fair practice and ... the actual likelihood of confusion’. Article 17 of the basic regulation establishes a registration procedure, known as the ‘simplified procedure’, which differs from the normal procedure. Under that procedure, the Member States notify the Commission which of their legally protected names or names established by usage they wish to register pursuant to the basic regulation. The procedure envisaged in Article 15 applies mutatis mutandis. The second sentence of Article 17(2) of that regulation states that the objection procedure under Article 7 is not applicable in the simplified procedure. The facts giving rise to the dispute By letter of 21 January 1994, the Greek Government asked the Commission to register the name ‘Feta’ as a protected designation of origin, in accordance with Article 17 of the basic regulation. On 19 January 1996, the Commission submitted to the regulatory committee set up by Article 15 of the basic regulation a proposal for a regulation containing a list of names that could be registered as geographical indications or protected designations of origin, in accordance with Article 17 of the basic regulation. That list included the term ‘Feta’. Since the regulatory committee did not give a decision on that proposal within the time-limit notified to it, the Commission forwarded it to the Council, in accordance with the fourth paragraph of Article 15 of the basic regulation, on 6 March 1996. The Council did not give a decision within the period of three months laid down in the fifth paragraph of Article 15 of the basic regulation. Consequently, in accordance with the fifth paragraph of Article 15 of the basic regulation, on 12 June 1996 the Commission adopted Regulation (EC) No 1107/96 of 12 June 1996 on the registration of geographical indications and designations of origin under the procedure laid down in Article 17 of [the basic regulation] (OJ 1996 L 148, p. 1). Under Article 1 of Regulation No 1107/96, the name ‘Feta’, appearing in Part A of the annex to that regulation, under the heading ‘Cheeses’ and under the country heading ‘Greece’, was registered as a protected designation of origin. By judgment of 16 March 1999 in Joined Cases C-289/96, C-293/96 and C-299/96 Denmark, Germany and France v Commission [1999] ECR I-1541, the Court of Justice annulled Regulation No 1107/96 to the extent to which it registered ‘Feta’ as a protected designation of origin. In its judgment, the Court stated that, when considering whether Feta constituted a generic name, the Commission had not taken due account of all the factors which Article 3(1) of the basic regulation required it to take into consideration. Following that judgment, on 25 May 1999 the Commission adopted Regulation (EC) No 1070/1999 of 25 May 1999, amending the Annex to Regulation No 1107/96, which removed the name ‘Feta’ from the Register of Protected Geographical Indications and Designations of Origin and from the Annex to Regulation No 1107/96 (OJ 1999 L 130, p. 18). The Commission then re-examined the Greek Government’s application for registration and submitted a proposal for a regulation to the regulatory committee under the second paragraph of Article 15 of the basic regulation, proposing to register the term ‘Feta’, on the basis of Article 17 of the basic regulation, as a protected designation of origin, in the register of protected designations of origin and protected geographical indications. Since the committee did not give a decision on that proposal within the time-limit notified to it, the Commission forwarded it to the Council pursuant to the fourth paragraph of Article 15 of the basic regulation. Since the Council did not give a decision on the proposal within the time-limit laid down in the fifth paragraph of Article 15 of the basic regulation, on 14 October 2002 the Commission adopted Regulation (EC) No 1829/2002 of 14 October 2002 amending the Annex to Regulation (EC) No 1107/96 with regard to the name ‘Feta’ (OJ 2002 L 277, p. 10 – ‘the contested regulation’). Pursuant to that regulation, the name ‘Feta’ was again registered as a protected designation of origin and it was added to Part A of the Annex to Regulation No 1107/96, under the heading ‘Cheeses’ and under the country heading ‘Greece’. By application lodged at the Registry of the Court of First Instance on 12 December 2002, the applicants brought the present action. By letter of 14 February 2003, the Commission requested that the proceedings be suspended until judgment had been delivered in Cases C-465/02 and C-466/02. By letter of 17 March 2003, the applicants gave notice that they opposed the request for suspension and requested that the Court of First Instance refer the present case to the Court of Justice to be joined to Cases C-465/02 and C-466/02. By decision of 19 March 2003, the Court of First Instance rejected the request for suspension and the request that the case be referred to the Court of Justice and ordered that the proceedings continue. By a separate document lodged at the Registry of the Court of First Instance on 12 June 2003, the Commission raised an objection of inadmissibility under Article 114 of the Rules of Procedure of the Court of First Instance. On 1 August 2003, the applicants submitted their written observations on that objection. By applications lodged at the Registry of the Court of First Instance on 16 April and 2 May 2003 respectively, the Hellenic Republic and the Association of Greek Dairy Product Industries (Sevgap) requested leave to intervene in support of the forms of order sought by the Commission. By application lodged at the Registry on 28 April 2003, the United Kingdom of Great Britain and Northern Ireland applied for leave to intervene in support of the forms of order sought by the applicants. By orders of 4 March 2004, the Hellenic Republic, the United Kingdom of Great Britain and Northern Ireland and Sevgap were granted leave to intervene. On 30 March 2004, the Hellenic Republic submitted its statement in intervention in support of the forms of order sought by the Commission. The United Kingdom of Great Britain and Northern Ireland did not submit a statement in intervention within the prescribed time-limit. Since Sevgap was granted leave to intervene under Article 116(6) of the Rules of Procedure, its intervention is limited to the presentation of oral argument at the hearing. Forms of order sought In their application, the applicants claim that the Court of First Instance should: – annul the contested regulation to the extent to which it registers the name ‘Feta’ as a protected designation of origin; – order the Commission to pay the costs. In its objection of inadmissibility, the Commission contends that the Court of First Instance should: – dismiss the action as inadmissible; – order the applicants to pay the costs. In their observations on the objection of inadmissibility, the applicants contend that the Court of First Instance should reject the objection of inadmissibility. In its statement in intervention, the Hellenic Republic submits that the Court of First Instance should dismiss the action as inadmissible. The admissibility of the action By the present action, the applicants, seven German companies which produce Feta cheese from cow’s milk, seek the annulment of the contested regulation. They allege in particular an infringement of Articles 3 and 17 of the basic regulation and, in the alternative, of Articles 2 and 4 of that regulation and of Article 30 EC and of the fundamental rights upheld within the Community legal order concerning protection of property and the right to exercise a profession. The Commission considers that the action is inadmissible on the ground that the applicants have no standing to bring proceedings under the fourth paragraph of Article 230 EC. Pursuant to Article 114(1) of the Rules of Procedure, if a party so requests the Court of First Instance may give a decision on inadmissibility without considering the substance. Under paragraph 3 of the same article, the remainder of the proceedings are oral, unless otherwise decided by the Court. In this case, the Court considers that it has sufficient information from an examination of the documents in the file to give a decision on the objection raised by the Commission without opening the oral procedure. Arguments of the parties The Commission contends that the action is concerned with a regulation of general application, within the meaning of the second paragraph of Article 249 EC, and that the contested regulation is not of individual concern to the applicants. The applicants argue that the action is admissible. The applicants claim, first, that, with the exception of the Greek producers, they, together with one Danish producer, are the largest producers of Feta in the Community and produce more than 90% of the Feta cheese produced in Germany. Having produced Feta for many years in large quantities, they have commercial relations and traditional outlets which are well established and stable, involving long‑term supply contracts. Accordingly, the contested regulation is of particular concern to them within the meaning of the case‑law of the Court of Justice (Joined Cases 106/63 and 107/63 Toepfer and Getreide-Import Gesellschaft v Commission [1965] ECR 405 and Case 11/82 Piraiki-Patraiki and Others v Commission [1985] ECR 207). The applicants claim, secondly, that the Commission’s recourse to the simplified procedure under Article 17 of the basic regulation deprived them of the procedural safeguards available under the normal procedure which, pursuant to Article 7 of the basic regulation, grants every person with a legitimate interest an opportunity to object to the proposed registration. In that context, they point out that, in its proposal for amendment of the basic regulation with a view to abolishing the simplified procedure under Article 17 of that regulation, the Commission expressly stated as a reason for its proposal that the right of objection provided for under the normal procedure was an ‘essential requirement for protecting acquired rights and preventing injury on registration’. Third, the applicants maintain that their action is admissible on the basis of the judgment of the Court of First Instance in Case T-177/01 Jégo-Quéré v Commission [2002] ECR II-2365, and in the Opinion of Advocate General Jacobs preceding the judgment of the Court of Justice in Case C-50/00 P Unión de Pequeños Agricultores v Council [2002] ECR I-6681, according to which a natural or legal person is to be regarded as individually concerned by a Community measure of general application that concerns him directly if the measure in question affects his legal position, in a manner which is both definite and immediate, by restricting his rights or by imposing obligations on him. The contested regulation harms their interests, since its effect is that they will no longer be able to use the designation ‘Feta’ after the end of the transitional period. In their observations on the objection of inadmissibility, the applicants, whilst conceding that the contested regulation is a measure of general application, observe that, although it extends its favourable effects to all Greek producers of Feta manufactured with goat’s or sheep’s milk, both present and future, who, from now on, will be the only producers still entitled legally to use that designation, the contested regulation only adversely affects, on the other hand, all the non‑Greek producers of Feta manufactured using cow’s milk existing at present, who will be prohibited from using that designation after the end of the transitional period. They emphasise that it is solely to the detriment of the latter that the contested measure produces its effects in the market. The applicants state that the designation ‘Feta’ has been a generic designation, worldwide, for a considerable time and that, accordingly, it could not be entered, pursuant to Article 3(1) of the basic regulation, on the register of protected designations of origin and geographical designations under the contested regulation. The Commission was wrong to adopt the contested regulation in the belief that the non-Greek markets for Feta produced using cow’s milk had come into being only through illegal exploitation of the prestige attaching to Greek Feta cheese made using sheep’s milk. As a result of the Commission’s retroactive intervention effecting a correction in the market, the contested regulation cannot be regarded as having ‘general and abstract’ effects since it is addressed only to a limited circle of economic operators who are in a particular situation in the market and whose particular rights are individually affected. In reality, the contested regulation will lead to destruction of the market for Feta made from cow’s milk which has developed in Germany and, more widely, in Europe, given that habitual consumers of Feta made from cow’s milk would not quickly recognise that product under any other designation. The applicants consider that it would be incompatible with the expectations which, in the European Union, derive from the legal protection offered by the Court of Justice for the operators concerned not to be able to secure judicial review of the legality of the contested regulation, which will lead to total destruction of their outlets. The Court of First Instance has not accepted that either proceedings before a national court, with an order for reference submitted to the Court of Justice under Article 234 EC, or proceedings to establish non‑contractual liability of the Community under Article 235 EC and the second paragraph of Article 288 EC constitute an effective remedy enabling interested parties to contest the legality of Community provisions of general application which directly restrict their legal position. Actions for damages, under Article 235 EC and the second paragraph of Article 288 EC, cannot moreover take the place of effective protection of fundamental rights at European level, since they do not enable a measure to be removed from the Community legal order when it is found to be illegal. Moreover, since the prohibition of further use of the generic designation ‘Feta’ for Feta made from cow’s milk after the date specified in the contested regulation has direct effect and does not require implementing measures in the Member States against which an action can be brought before the national courts, the applicants could not take action to establish that their fundamental rights had been infringed by the Community measure at issue unless they contravened the provisions of that measure and, in the context of legal proceedings brought against them, contended that those provisions were illegal. According to recent case‑law of the Court of First Instance, it is appropriate to take as a starting point the principle according to which effective legal protection for individuals is available only where undertakings which are directly and individually concerned by a Community measure of general application also have access to the Community courts. An undertaking is individually concerned where it is definitely and immediately affected by reason of the fact that the measure restricts its rights or imposes obligations on it. That is not seriously open to doubt in the applicants’ case, since their outlets are endangered and their market shares are liable to be destroyed, at least within a foreseeable period. According to the applicants, the Court of First Instance has emphasised that access to the Community judicature is one of the constituent elements of a Community governed by the rule of law and is based on constitutional traditions common to the Member States and on Articles 6 and 13 of the European Convention for the Protection of Human Rights and Fundamental Freedoms. They draw attention to the fact that Article 47 of the Charter of Fundamental Rights of the European Union reaffirms that right to access to effective remedies for any person whose rights or freedoms upheld by the law of the Union have been impaired. Findings of the Court The fourth paragraph of Article 230 EC provides that any natural or legal person may institute proceedings against a decision addressed to that person or against a decision which, although in the form of a regulation, is of direct and individual concern to that person. It is settled case‑law that the criterion for distinguishing between a regulation and a decision must be sought in the general application or otherwise of the act in question (orders of the Court of Justice of 23 November 1995 in Case C-10/95 P Asocarne v Council [1995] ECR I-4149, paragraph 28, and of 24 April 1996 in Case C-87/95 P Cassa nazionale di previdenza ed assistenza a favore degli avvocati e dei procuratori v Council [1996] ECR I-2003, paragraph 33). A measure is of general application if it applies to objectively determined situations and produces its legal effects with respect to categories of persons envisaged in the abstract (Case T-482/93 Weber v Commission [1996] ECR II-609, paragraph 55 and the case-law there cited). In this case, the contested regulation gives the designation ‘Feta’ the protection afforded to designations of origin by the basic regulation. A designation of origin is defined by Article 2(2)(a) thereof as being the name of a region, a specific place or, in exceptional cases, a country, used to describe an agricultural product or a foodstuff originating in that region, specific place or country, and the quality or characteristics of which are essentially or exclusively due to a particular geographical environment with its inherent natural and human factors, and the production, processing and preparation of which take place in the defined geographical area. That protection consists in reserving the use of the designation ‘Feta’ to the original producers in the defined geographical area whose products comply with the geographical and quality requirements laid down in the specification for the production of Feta. As the Commission has rightly emphasised, the contested regulation, far from being addressed to specified operators, such as the applicants, recognises that all undertakings whose products satisfy the prescribed geographical and qualitative requirements have the right to market them under the abovementioned designation and refuses that right to all producers whose products do not fulfil those conditions, which are identical for all undertakings. The contested regulation applies in the same way to all manufacturers – both present and future – of Feta who are legally authorised to employ that designation as it does to all those who will be prohibited from using it after the end of the transitional period. It is not aimed solely at producers in the Member States but also produces legal effects vis-à-vis an unknown number of producers in non‑member countries wishing to import Feta into the Community, either now or in the future. The contested regulation thus constitutes a measure of general application within the meaning of the second paragraph of Article 249 EC. It applies to situations determined objectively and produces its legal effects vis‑à‑vis categories of persons envisaged in the abstract (see, to that effect, the orders of the Court of First Instance of 15 September 1998 in Case T-109/97 Molkerei Großbraunshain and Bene Nahrungsmittel v Commission [1998] ECR II-3533; of 26 March 1999 in Case T-114/96 Biscuiterie-confiserie LOR and Confiserie du Tech v Commission [1999] ECR II-913, paragraphs 27 to 29; and of 9 November 1999 in Case T-114/99 CSR Pampryl v Commission [1999] ECR II-3331, paragraphs 42 and 43). That general application is apparent, moreover, from the purpose of the rules in question, which is to ensure protection, erga omnes and throughout the European Community, for validly registered geographical indications and designations of origin. However, the possibility cannot be ruled out that a provision which, by reason of its nature and scope, may be of a legislative character may be of individual concern to natural or legal persons. That is the case where the measure at issue affects them by reason of certain attributes peculiar to them or by reason of a factual situation which differentiates them from all other persons and thereby distinguishes them individually in the same way as an addressee (Case 25/62 Plaumann v Commission [1963] ECR 95, at 107; Case C-309/89 Codorniu v Council [1994] ECR I-1853, paragraphs 19 and 20; Unión de Pequeños Agricultores v Council paragraph 36; and Weber v Commission, paragraph 56). In this case, the factual allegations made by the applicants, if assumed to be correct, do not give the slightest indication of any attribute peculiar to them or of any factual circumstances distinguishing them and, accordingly, individually differentiating them from the other economic operators concerned. On the contrary, the applicants are concerned by the contested regulation only in their capacity as economic operators producing or marketing cheese that does not fulfil the conditions for use of the protected designation ‘Feta’. The applicants are affected in the same way as all other undertakings whose products likewise do not satisfy the requirements of the Community provisions at issue. As regards the applicants’ contention that, if the Greek producers and one Danish producer are disregarded, they are the main producers of Feta in the European Community and produce more than 90% of the Feta manufactured in Germany, it need merely be pointed out that the fact that an undertaking holds a large share of the relevant market is not sufficient in itself to distinguish that undertaking from all other economic operators concerned by the contested regulation (order in CSR Pampryl v Commission, paragraph 46). Similarly, the applicants’ assertion that the contested regulation affects, in essence, only eight producers is not only contradicted by their application, in which it is stated that Feta cheese is manufactured in substantial quantities in six Member States of the European Community and in a large number of non‑member countries but is also, in any event, irrelevant since, according to settled case‑law, the general application and, therefore, the legislative nature of a measure are not called in question by the fact that it is possible to determine with a greater or lesser degree of precision the number or even the identity of the persons to which it applies at a given time, as long as it is established that it is applied by virtue of an objective legal or factual situation defined by the measure in relation to its objective (Case 6/68 Zuckerfabrik Watenstedt v Council [1968] ECR 409, at 414 and 415, and order of the Court of First Instance of 29 June 1995 in Case T-183/94 Cantina cooperativa fra produttori vitivinicoli di Torre di Mosto and Others v Commission [1995] ECR II-1941, paragraph 48). That is the case here, since the contested regulation affects without distinction all present and future producers wishing to market cheese under the designation ‘Feta’ in the Community. The applicants also submit that they are distinguished by the fact that the measure is of economic concern to them. Referring to the judgments of the Court of Justice in Toepfer and Getreide-Import Gesellschaft v Commission and Piraiki-Patraiki and Others v Commission, they claim that the prohibition, which the contested regulation applies to undertakings producing Feta from cow’s milk, of using the designation ‘Feta’ makes it practically impossible for them to continue to market that cheese at all and that those undertakings can no longer comply with and keep in force their long‑term supply contracts. It must be observed in that connection, first, that the contested regulation does not affect any supply contracts concluded on a long‑term basis but simply prohibits, in connection with Article 13 of the basic regulation and after the end of a transitional period, any usurpation or imitation of or reliance upon the protected designation ‘Feta’. That prohibition applies in the same way to the applicants as to any other producer who is at present or potentially in the same situation. Next, it must be borne in mind that, in any event, the fact that a measure of general application may have effects which differ according to the various persons to whom it applies is not such as to distinguish them from all other operators concerned where, as in this case, the measure is applied on the basis of an objectively determined situation (Case T-138/98 ACAV and Others v Council [2000] ECR II-341, paragraph 66, and order of the Court of First Instance of 30 January 2001 in Case T-215/00 La Conqueste v Commission [2001] ECR II-181, paragraph 37). The Court of Justice has expressly confirmed that the fact that an applicant finds himself, when a regulation registering a designation of origin is adopted, in a situation requiring it to make changes to its production structure in order to fulfil the conditions laid down by the regulation is not sufficient for it to be individually concerned in a manner analogous to that in which the addressee of a measure would be concerned (order of the Court of Justice of 30 January 2002 in Case C-151/01 P La Conqueste v Commission [2002] ECR I-1179, paragraph 35). The applicants are wrong to maintain that they are in the same situation as the applicants in Toepfer and Getreide-Import Gesellschaft v Commission and Piraiki-Patraiki and Others v Commission. In Toepfer and Getreide-Import Gesellschaft v Commission, the contested measure affected only importers whose number and identity were known and who had applied, before the adoption of the contested decision, for import licences the issue of which had been made impossible by the decision at issue. Similarly, in Piraiki-Patraiki and Others v Commission, which concerned the legality of a Commission decision authorising France to make imports of cotton yarn from Greece subject to a system of quotas, the applicants were individually concerned by the contested decision as members of a limited circle of economic operators particularly affected by the contested decision by reason of the fact that they had previously concluded sales contracts in good faith, the performance of which fell within the period of application of the safeguard measure contained in the decision and had therefore been rendered wholly or partially impossible by reason of excedence of the authorised quota. Moreover, it likewise cannot be concluded that the applicants are individually concerned on the basis of the judgment given in Cordorniu, in which the applicant was prevented, by a provision of general application, from using a graphic mark which it had registered and used traditionally over a long period before the adoption of the regulation at issue in that case, so that it was distinguished from all the other economic operators. In this case, the applicants have neither demonstrated, nor even purported to demonstrate, that their use of the designation ‘Feta’ derives from a similar specific right which they acquired at national or Community level before the adoption of the contested regulation and which was adversely affected by that regulation. The fact, in particular, that the applicants may have marketed their products under the designation ‘Feta’ does not confer any specific right on them under the case-law cited above. The applicants’ situation is not thereby distinguished from that of the other operators who have also marketed their products under the designation ‘Feta’ and who are no longer authorised to use that name, which is henceforth protected by its registration as a designation of origin. The absence of a specific right conferred on any other economic operator is, moreover, confirmed by the fact that that situation is explicitly governed in an abstract and general manner by Article 13(2) of the basic regulation, which provides for a transitional period allowing all producers without distinction, subject to certain conditions, a sufficiently long period of adjustment to obviate any loss. As regards, finally, the applicants’ argument relating to procedural rights of which they were allegedly deprived through use of the simplified procedure for registration of the designation ‘Feta’, it must be borne in mind that the Court of First Instance has held on several occasions that the case‑law relied on by the applicants, which developed principally in the areas of anti‑dumping duties, competition law and State aid, cannot be transposed to the procedure for registration of protected designations under the basic regulation (order in Molkerei Großbraunshain and Bene Nahrungsmittel v Commission), in so far as that regulation does not provide for specific procedural safeguards, at Community level, in favour of individuals (order in CST Pampryl v Commission). The Court of Justice confirmed that case‑law in its order of 26 October 2000, in Case C-447/98 P Molkerei Großbraunshain and Bene Nahrungsmittel v Commission [2000] ECR I-9097, paragraphs 71 to 73 (see also, to that effect, the order in Case T-215/00 La Conqueste v Commission, paragraphs 43 and 44), by stating: ‘71 Even if recourse to the procedure under Article 17 of [the basic regulation] had been unlawful, and the existence of procedural rights expressly guaranteed to an individual by the relevant legislation or the mere fact that that individual has taken part in the procedure for the adoption of a legislative measure by a Community institution were capable of distinguishing him individually within the meaning of the fourth paragraph of Article [230] of the Treaty, the exercise of the possibility of objecting, as provided for in the ordinary registration procedure, would still not be such as to give the appellants the right to bring an action against the act adopted as a result of that procedure. On this point, it must be noted, first, that under Article 7(1) and (3) of [the basis regulation] a statement of objection to a proposed registration may be made to the Commission only by a Member State which has been applied to by a natural or legal person who can demonstrate a legitimate economic interest. Second, it appears from Article 7(5) of [the basis regulation] that, once an admissible objection has been made to the Commission, the objection procedure confronts the Member State or States which object to registration and the Member State which has applied for registration. Under that provision, it is for the Member States concerned to seek agreement among themselves and notify the Commission if agreement is reached.’ It follows that the argument concerning the existence of procedural rights is not capable of distinguishing the applicants individually. It follows from the foregoing that since the contested regulation constitutes a measure of general application and the applicants are not adversely affected by reason of circumstances peculiar to them or by a factual situation in which they are differentiated from all other persons and thereby distinguished individually, the application is inadmissible. That conclusion cannot be called in question by the applicants’ argument concerning the requirement of effective judicial protection. Besides the fact that it is incumbent on the Member States to provide a complete system of legal remedies and procedures which ensure respect for the right to effective judicial protection, a direct action for annulment could not be brought before the Community Court even if it could be shown, following an examination by that Court of the national procedural rules, that those rules do not allow an individual to bring proceedings to contest the validity of the Community measure at issue (order of the Court of Justice of 12 December 2003 in Case C-258/02 P Bactria v Commission [2003] ECR I-0000, paragraph 58). The Court has clearly established, in relation to the condition of individual interest laid down by the fourth paragraph of Article 230 EC, that, whilst it is true that the latter provision must be interpreted in the light of the principle of effective judicial protection, having regard to the various circumstances by which an applicant can be individually distinguished, such an interpretation cannot lead to disapplication of the condition in question, which is expressly laid down by the Treaty, without the jurisdiction conferred on the Community Courts by the Treaty thereby being exceeded. It follows that if that condition is not fulfilled, a natural or legal person does not, under any circumstances, have standing to bring an action for annulment of a regulation (Unión de Pequeños Agricultores v Council, paragraphs 36 and 37). It follows from the foregoing considerations that the contested regulation cannot be considered to be of individual concern to the applicants within the meaning of the fourth paragraph of Article 230 EC and that, therefore, the action must be dismissed as inadmissible. Costs Under Article 87(2) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party’s pleadings. Since the applicants have been unsuccessful, they must, in the light of the forms of order sought by the Commission, be ordered to bear their own costs and pay those incurred by the Commission. Under the first subparagraph of Article 87(4) of the Rules of Procedure, Member States which intervene must bear their own costs. In this case, the Hellenic Republic and the United Kingdom of Great Britain and Northern Ireland must be ordered to bear their own costs. Under the third subparagraph of Article 87(4) of the Rules of Procedure, interveners other than Member States and institutions may be ordered to bear their own costs. In this case, Sevgap should bear its own costs. On those grounds, THE COURT OF FIRST INSTANCE (Third Chamber), hereby orders: 1. The action is dismissed as inadmissible. 2. The applicants shall bear their own costs and those of the Commission. 3. The Hellenic Republic, the United Kingdom of Great Britain and Northern Ireland and the Association of Greek Dairy Product Industries (Sevgap) shall bear their own costs. Luxembourg, 6 July 2004. H. Jung J. Azizi Registrar President 1 – Language of the case: German.

This judgment is concerned with an appeal from an arbitrator's costs award brought with the consent of both parties pursuant to section 69 of the Arbitration Act 1996; as to whether the award should be remitted or revised by the court pursuant to section 69(7) of the Act and with the terms of the revision. Key words: Appeal from a costs award of an arbitrator where leave to appeal not required; consideration of the principles on which an arbitrator should determine costs, section 61 of the Arbitration Act 1996 and Rule 13 of Construction Industry Model Arbitration Rules ("CIMAR") ; whether court costs decisions or costs appeal decisions from arbitrators should be cited; whether an arbitrator is subject to a duty to "act judicially" when making a costs award; whether a finding of fact for which there was no evidence or other supporting material can give rise to an appealable question of law; whether the award should be remitted, varied or set aside by the court and section 69(7) of the Arbitration Act 1996; the process of varying the costs award and the principles to be adopted in that variation; the considerations to be applied in considering whether to allow a second appeal to be brought to the Court of Appeal pursuant to section 69(8) of the Arbitration Act 1996. 1. INTRODUCTION This is an appeal from an arbitrator's costs award made in a construction arbitration. The applicant is Fence Gate Limited ("FGL") who was the building employer and the respondent is NEL Construction Limited ("NEL") who was the building contractor. These parties entered into a contract in the JCT IFC 84 standard form of contract dated 2 February 1998 for the extension of, and alterations to, the dining and kitchen facilities at FGL's premises at the Fence Gate Inn, Wheatley Lane Road, Burnley, Lancashire. The resulting dispute was referred to arbitration pursuant to the arbitration agreement in the contract and, by the agreement of the parties, Mr Keith Rawson ARIBA, FCIArb, MAE was appointed as arbitrator. He accepted his appointment on 25 March 1999. A lengthy hearing was held in Burnley in March and April 2000. The arbitrator has published 5 awards. The principal award, which was award no. 2, dealt with FGL's counterclaim, save for a claim for loss of profit which had been held over for a subsequent hearing. Awards nos 1 and 4 were consent awards which incorporated agreements reached by the parties compromising, respectively, NEL's claim and FGL's loss of profit counterclaim. Award no. 3 dismissed an applicant by each party to correct award no. 2 and award no. 5, with which this appeal is concerned, dealt with the costs of both the claim and the counterclaim. Leave to appeal pursuant to section 69(2) (b) of the Arbitration Act 1996 ("the Act") was not required. This was because the parties, by their arbitration agreement contained in clause 9.5 of JCT IFC 84, had agreed and consented to either party being able to appeal any question of law arising out of any award resulting from that agreement. It has already been decided, by Clarke J, in Taylor Woodrow Civil Engineering Ltd v Hutchinson Development Ltd[1], in relation to the same arbitration agreement, that the effect of clause 9.5 is to constitute an agreement covered by section 69(2) (a) of the Act and is, therefore, one which allows the parties to appeal any question of law arising out of an award without the need to obtain leave to appeal from the High Court. It follows that the appeal is a rarity being one involving a consideration of the powers of an arbitrator to award costs. In most cases, a question of law arising out of a costs award can only be brought with leave which, given the statutory limitations usually applying to such appeals, is rarely forthcoming. The relevant award was published on 14 February 2001 and is unusually lengthy for a costs award given that it runs to 74 paragraphs and 13 pages. The reason for its length was because the arbitrator directed that there would be no oral costs hearing and the preceding written submissions were lengthy and diffuse and also because the costs award was unusual and had significant financial consequences to the parties. The award was concerned with the costs of both parties which, 4 months before the 13-day hearing, had been estimated to exceed £180,000 in an arbitration concerned with a relatively straightforward building dispute. NEL's claim had been settled prior to the hearing on terms that the costs would be determined by the arbitrator. In the costs award, the arbitrator awarded NEL its costs of the claim to be assessed of not agreed. The hearing had only been concerned with FGL's counterclaim and, despite there having been an award on the counterclaim in FGL's favour, the costs award provided that each side should pay its own costs of that counterclaim. The compromise of NEL's claim for the unpaid balance of the value of its work was for £22,000 inclusive of VAT and interest in relation to a claim totalling £32,411.82 inclusive of VAT but exclusive of interest. This agreed sum compromised not only the totality of NEL's claim but also 6 items of FGL's counterclaim which had been originally claimed by FGL in the total sum of £20,625. The combined effects of awards nos 2, 3 and 4 had been to award FGL £47,788.39 on its counterclaim inclusive of Vat and interest against a total sum claimed of about £290,000 inclusive of VAT but exclusive of interest over a period of 15 months. Thus, FGL recovered a relatively small part of its counterclaim whereas NEL recovered the greater part of its claim. 2. THE ARBITRATION It is accepted practice that a court considering an appeal arising out of an award should confine its consideration to the terms of the award and its accompanying reasons and to any document incorporated into the award. The costs award was worded in a way which effectively incorporated within it the parties' written submissions, the arbitrator's earlier awards and the pleadings since the costs award was only intelligible if read in conjunction with these documents. In addition, the parties' submissions and the costs award both referred to and relied on several settlement offers made during the reference. I was therefore provided with copies of all these documents from which I have extracted the relevant background facts. FGL runs the Fence Gate Inn, a listed public house in Burnley. In 1997, FGL's Managing Director, Mr Kevin Berkins, sought to implement a scheme to instal a new kitchen and brasserie to enable superior quality restaurant food and wine to be served at the Inn. Designs were prepared by Mr Andrew Little and, following a tender submitted in August 1997, NEL contracted to undertake the work. Although the date for completion was 26 April 1998, the work was programmed to be completed by 9 April 1998 and the kitchen was in fact occupied on 15 April 1998. The arbitrator found that practical completion of the kitchen occurred on 15 April 1998 and of the brasserie on 29 May 1998. Since the delay in completing the work in the brasserie was found to be the responsibility of FGL, the arbitrator also found that NEL had no liability for liquidated damages. Although Mr Berkins maintained throughout the arbitration that he had appointed Mr Little as Contract Administrator, the arbitrator found that Mr Berkins took on that role from Mr Little although subsequently he appointed James R Knowles Limited ("JRK"), a firm of quantity surveyors and claims consultants, to this role in early July 1998. This appointment followed the preparation by JRK of a schedule of allegedly outstanding defects in NEL's work which it completed in June 1998. NEL subsequently carried out certain remedial works to the roof structure. In addition, extensive negotiations took place between JRK and NEL as to the scope and extent of the remedial works required to the kitchen but these matters could not be agreed and NEL's contract was ultimately determined by JRK and other contractors undertook the remedial works. Completion was never certified. The arbitration was started by NEL with a notice of arbitration dated 30 September 1998. NEL was claiming the unpaid balance of the contract sum which included a sum for variations which NEL had valued at £20,958.47. NEL's claim was disputed in part by FGL but, essentially, was met with a set-off and counterclaim which greatly exceeded it. The principal claims included in the counterclaim related to the quality of the kitchen and brasserie floors, remedial work to these floors, the dates by which they had achieved practical completion and the loss of profit that FGL claimed it had incurred as a result of the alleged delays in completion and the defects left by NEL. The claim for the defects, as remedied by others, totalled £59,423 and the professional fees of JRK that were also claimed totalled £45,370, both sums being inclusive of VAT. The loss of profit claim was claimed in the round at an estimated sum of £100,000. No further particulars of this loss of profit counterclaim were provided when the counterclaim was first pleaded. In a comprehensive first order for direction made on 23 February 1999, the arbitrator provisionally fixed the week commencing 26 July 1999 for the hearing. The order also provided a detailed timetable for pleadings, discovery and the service of witness and expert evidence. The experts were directed to meet by 8 June 1999 and then exchange reports by 15 June 1999. Once the pleadings and FBL's scott schedule and NEL's replies had been served, it became clear that the parties would not be ready for the hearing and the arbitrator re-fixed it to start on 22 November 1999 for a period of one week. In September 1999, FGL obtained an accountant's report which, for the first time, quantified its loss of profit claim. This report was dated 10 September 1999. It was subsequently served on NEL along with FGL's witness statements and its other expert's report from a building surveyor. However, no applicant to amend the counterclaim to plead the details or figures contained in the accountant's report was made until a much later stage and NEL did nothing at that stage to obtain or serve on FGL its own accountancy evidence despite the arbitrator's original order that all expert evidence should be exchanged by 15 June 1999. In early November 1999, the parties engaged in an unsuccessful mediation. Following that, in the week before the intended hearing, both parties' respective counsel wrote a joint letter to the arbitrator seeking an adjustment of the hearing on the grounds that 5 days would be insufficient, given the large amount of documentation and evidence and the large number of disputed issues to be resolved. They estimated that three weeks of hearing time would be needed and both counsel stated that it was neither practicable nor desirable to split up the hearing or to hive off issues. The arbitrator wrote back suggesting that costs might be saved, if, initially, three of what he regarded as the principle liability issues were heard and resolved in the week set aside for the hearing. However, both counsel jointly replied stating that the parties agreed that to truncate or split the hearing would be contrary to their wishes and a potential injustice. In consequence, the arbitrator agreed to adjourn the hearing and refixed it for an estimated 13-day period starting on 29 March 2000. Significantly, soon afterwards, following a suggestion made by the arbitrator, the parties agreed to the loss of profit claim being hived off for hearing once the award on all other counterclaim issues had been issued. In consequence, a consent order was made on 22 December 1999 whereby the time for NEL's expert accountant to respond to FGL's accountant's report was extended until 3 July 2000 to be followed by a meeting and joint statement. A second hearing to deal with the loss of profit claim was provisionally fixed for a period in the hearing window August - September 2000. On 8 March 2000, in the period leading up to the hearing, the parties compromised the claim and 6 small items of the counterclaim and this was given effect to in award no. 1 published on 26 April 2000. On the second day of the hearing, on 30 March 2000, the arbitrator made a number of procedural directions including one giving FGL leave to amend its counterclaim to plead a new schedule of loss. These amendments included the quantification of two alternative loss of profit claims that had been put forward for the first time by FGL's accountant in the report served in October 1999. These claims were based on two different periods of alleged disruption and were for, respectively, £100,900 and £171,500. Previously, the pleadings had merely claimed a figure of £100,000 with no more particularisation than: "Loss of profit estimated at £100,000". The amendment to particularise the loss of profit claim did not affect the earlier decision that all preparations for the hearing of the counterclaim for loss of profit would await publication of the award on all other counterclaim issues. Following the conclusion of what turned out to be a 12-day hearing on 13 April 2000, the arbitrator published his award on 8 June 2000. The award determined 5 general issues of fact and a large number of further factual issues affecting liability set out in the detailed scott schedule and, in the light of these findings, a monetary award in favour of FGL was made which totalled £36,467.11 VAT. The award made it clear that it did not cover the outstanding claim for loss of profit (if any) and it reserved awards of interest and costs. Following that award, each party applied under section 57 of the Act to the arbitrator, in NEL's case for corrections to the award and, in FGL's case; for an additional award. NEL sought corrections to the quantification which, if made, would have changed the manner of quantification with a consequent significant decrease in the sum previously awarded. FGL sough an additional award relating to facts that it stated would permit the quantification of the loss of profit claim. In award no. 3, published on 8 September 2000, the arbitrator dismissed both applications with detailed supporting reasons. No hearing of the loss of profit claim took place in the proposed hearing window of August - September 2000. Subsequently, the parties compromised this claim in the sum of £5,000 inclusive of both VAT and interest and this agreement was embodied in a consent award, no. 4, published on 19 December 2000. By agreement, this award provided that the entitlement to costs in relation to the loss of profit claim should be determined at the same time as the determination of the costs of the counterclaim. The arbitrator directed that the costs hearing would be by way of a written procedure. The parties exchanged submissions and then reply submissions. These were extremely detailed and included copies of a large number of authorities and, in FGL's case, a lengthy extract concerned with costs from the report of Lord Woolf entitled: "Access to Justice - Interim Report" which had been the prelude to the introduction in 1999 of the Civil Procedure Rules used in the High Court and the county courts. This led to the arbitrator's costs award no. 5 published on 14 February 2001. FGL's arbitration application containing its appeal from this award was issued on 12 March 2001. The hearing of the appeal occupied 2 ½ hours following the service of detailed written submissions by both parties. Many of the arguments and authorities were the same as had been provided to the arbitrator. Following the handing down of my draft judgment allowing FGL's appeal, a second hearing took place which also lasted 2 ½ hours. This hearing considered the parties' further submissions on, in particular, the question of whether my conclusion that the arbitrator's finding that the exaggerated size of the counterclaim was unsupported by any evidence and should not have been relied on gave rise to an appealable question of law. The hearing also considered the difficult question of whether I should order that the costs question considered by the arbitrator should be remitted for a further hearing by him or whether, instead, I should consider what variation, if any, should be made to his costs award. Having determined that I should vary the costs order myself, a third short hearing was then held to consider the parties' submission on the question of what variation, if any, there should be and with all other procedural questions. Finally, a fourth hearing was held to consider NEL's application for leave to further appeal my decision on the questions of law raised by this appeal. I then handed down this composite judgment which deals with all these issues. 3. THE AWARDS All three relevant awards are detailed. The principal award sets out each finding of fact needed to resolve each issue and answers each issue in detail It is carefully structured. The section 57 award carefully addresses the issues raised by each party's application. FGL's application for further findings of fact was dismissed on the ground that these findings had not been sought in the list of issues that the parties had provided to the arbitrator for determination at the hearing. NEL's application was dismissed on the basis that the arbitrator's original quantification was correct. The section 57 award also dealt with a comment that the arbitrator had made to the parties after the principal award had been published and which had been referred to by FGL in its submissions. This was to the effect that it would be difficult for FGL to persuade him that it had a sustainable claim for loss of profit. The arbitrator commented that: "I have previously expressed my concern at the wholly disproportionate costs that have been incurred to date in relation to this reference and I felt that to meet my obligations in respect of time and costs under the Arbitration Act 1996, I should place the onus on FGL to make a decision on the pursuance of this head of claim." The arbitrator also acknowledged the he could not reach a conclusion about the loss of profit claim at that stage. Unlike the earlier awards, the costs award is not well structured. This is understandable since the arbitrator was seeking to respond to the detailed and, as I find in this judgment, largely irrelevant submissions that he had received from both parties. Given the radical and far-reaching changes to arbitration law and practice occasioned by the Act which, in the context of a costs appeal, have not previously been the subject of judicial consideration, it was not surprising that the submissions were in this form since they were founded on the pre-Act law and practice. The award starts with his acknowledgment that: "Whilst I am very conscious of the need to minimise cost, the costs of this Arbitration already far exceed the sums awarded and therefore the determination of costs and interest is of the utmost importance to both parties in this fiercely contested dispute. I therefore consider that it would not do justice to either side if I were to make an award without responding in some detail to the formal submissions made to me and commenting on the extensive authorities submitted in their support. I therefore propose to run through each submission setting out my reaction to the points made, also incorporating the parties' replies during the course of my analysis where relevant." The award takes each party's submission in turn and submits both to a point by point analysis followed by a short and succinct section entitled "Summary of Reasons on Costs" which it is helpful to set verbatim since it contains the core of the arbitrator's reasoning that is challenged in this appeal. This summary is as follows: "By way of summary, the following are the factors which I have taken into consideration in determining my award of the liability for costs:- 1. Costs are at my discretion provided I give my reasons. 2. I must have good reasons for departing from the rule that costs should follow the event and I find that there are justifiable reasons in this instance. 3. CIMAR Rule 13.3 clearly states that I should deal with the costs of the claim and counterclaim separately if I do not consider that they are so interconnected that they should be dealt with together. I have not been persuaded that the two are so interconnected. 4. The claimant made a very substantial recovery on its claim which was simple in format and presentation. 5. The magnitude of the counterclaim which had a deterrent effect on an early settlement and the fact that the hearing dealt solely with the counterclaim. 6. The loss of profit and fee claims were exaggerated. 7. The claimant was unsuccessful on five major issues at the hearing and the respondent's conduct was the subject of critical comment. 8. If I were to award costs on an issue by issue basis, this would risk prolonging the dispute. … I HEREBY FIND, DETERMINE, AWARD AND DIRECT:- 1. That the claimant be awarded its costs of the claim and that failing agreement, these costs be taxed by me [in accordance with the authority granted me by the parties]. 2. That each party should bear its own costs of the counterclaim." 4. SUMMARY OF FGL'S GROUNDS OF APPEAL FGL submitted that the costs award contained a number of errors of law and that it should be set aside. FGL also asked that I should substitute an appropriate costs award myself rather than remitting the award for reconsideration, with or without a direction, by the arbitrator. The errors of law contended for may be summarised as follows: The arbitrator erroneously relied on two crucial findings about the counterclaim: (1) it was exaggerated; and (2) its magnitude had a deterrent effect on an early settlement of the counterclaim. There was no evidence for these findings which were at variance with the actual size of the counterclaim award, the existence and contents of various settlement offers made during the reference and NEL's failure to make an appropriate offer to settle the counterclaim. The arbitrator failed to have regard to the offers of settlement. The arbitrator should not have relied on his criticisms of FGL's conduct contained in the principal award which related to its conduct during the contract. The arbitrator failed to take into account that: (1) the costs of the claim had been dealt with very differently by him despite NEL's lesser claim recovery compared to FGL's counterclaim recovery; and (2) that the vast majority of costs were incurred on the counterclaim which was all that was in issue at the hearing. The arbitrator failed to apply section 61 of the Act and Rule 13.1 of the applicable arbitration rules. In particular: (1) He failed to find what the relevant "event" was. Such a finding was essential before his costs award could depart from the mandatory starting point that, ordinarily, the winning party of an "event" was entitled to its costs. (2) He gave effect to matters which were neither material nor relevant. (3) He erroneously took into account certain irrelevant matters and failed to take into account certain relevant matters. (4) No consideration was given to the possibility of making a percentage reduction in the overall amount of FGL's counterclaim costs. (5) He gave inadequate reasons for his conclusion that FGL should recover none of its costs on the counterclaim. In summary, FGL contended that the costs award was not "judicially" arrived at. 5. THE ARBITRATOR'S DECISION TO AWARD COSTS An arbitrator's jurisdiction to award cots is dealt with in section 61 of the Act and any procedural rules affecting costs that the parties have agreed should govern the arbitration. These parties had agreed that the arbitration would be conducted in accordance with the 1998 edition of the Construction Industry Model Arbitration Rules ("CIMAR"). As a result, Rule 13 of CIMAR concerned with costs fleshed out the arbitrator's costs jurisdiction. Thus, the arbitrator derived his costs jurisdiction from the terms of the arbitration clause of the JCT IFC 84 form of contract, sections 59 and 61 of the Act and Rule 13 of CIMAR. It is helpful to set out the material parts of these provisions. 1. Clause 9 of JCT IFC 84 "9.3 … the Arbitrator shall, without prejudice to the generality of his powers, have power to … ascertain and award any sum which ought to have been the subject of or included in any certificate and to open up, review and revise any certificate, opinion, decision, requirement or notice and to determine all matters in dispute which shall be submitted to him in the same manner as if no such certificate, opinion, decision, requirement or notice had been given. 9.5 The parties hereby agree and consent pursuant to sections 1(3) (a) and 2(1) (b) of the Arbitration Act 1979 that either party (a) may appeal to the High Court on any question of law arising out of an award made in an arbitration under this Arbitration Agreement. … and the parties agreed that the High Court should have jurisdiction to determine any such question of law." 2. Sections 59 and 61 of the Act "59 (1) References in this Part to the costs of the arbitration are to (a) the arbitrator's fees and expenses (b) the fees and expenses of any arbitral institution concerned, and (c) the legal or other costs of the parties. (2) Any such reference included the costs of or incidental to any proceedings to determine the amount of the recoverable costs of the arbitration. 61(1) The tribunal may make an award allocating the costs of the arbitration as between the parties, subject to any agreement of the parties. (2) Unless the parties otherwise agree, the tribunal shall award costs on the general principle that costs should follow the event except where it appears to the tribunal that in the circumstances this is not appropriate in relation to the whole or part of the costs. 63(1) The parties are free to agree what costs of the arbitration are recoverable. (2) if or to the extent there is no agreement, the following provisions apply. (3) The tribunal may determine by award the recoverable costs of the arbitration on such basis as it thinks fit. If it does so, it shall specify (a) the basis on which it has acted, and (b) the items of recoverable costs and the amount referable to each. … (5) Unless the tribunal or court determines otherwise (a) the recoverable costs of the arbitration shall be determined on the basis that three shall be allowed a reasonable amount in respect of all costs reasonably incurred, and (b) any doubt as to whether costs were reasonably incurred or were reasonable in amount shall be resolved in favour of the paying party." 3. Rule 13 of CIMAR "RULE 13 : COSTS 13.1 The general principle is that costs should be borne by the losing party: see section 61 (Award of costs). Subject to any agreement between the parties, the arbitrator has the widest discretion in awarding which party should bear what proportion of the costs of the arbitration. 13.2 In allocating costs the arbitrator shall have regard to all material circumstances, including such of the following as may be relevant: (a) which of the claims had led to the incurring of substantial costs and whether they were successful; (b) whether any claim which has succeeded was unreasonably exaggerated; (c) the conduct of the party who succeeded on any claim and any concession made by the other party; (d) the degree of success of each party. See also Rule 13.9. 13.3 Where an award deals with both a claim and a counterclaim, the arbitrator should deal with the recovery of costs in relation to each of them separately unless he considers them to be so interconnected that they should be dealt with together. … 13.9 In allocating costs the arbitrator shall have regard to any offer of settlement or compromise from either party, whatever its description or form. The general principle which the arbitrator should follow is that a party who recovers less overall that was offered to him in settlement or compromise should recover the costs which he would otherwise have been entitled to recover only up to the date on which it was reasonable for him to have accepted the offer, and the offeror should recover his costs thereafter." 6.1 SUMMARY OF THE LAW AND PRACTICE 6.1.1 Earlier Arbitration Costs Regimes Costs awards and decisions of arbitrators have traditionally been difficult to challenge given the general discretion with regard to the award of costs that arbitrators have conventionally always had. There have recently been profound changes in the regime governing an arbitrator's costs powers and the judicial supervision of the exercise of those powers. Before 1979. Before 1979, an arbitrator's powers to award costs were expressed in the most general terms, most recently in section 18 of the Arbitration Act 1950.[2] Arbitrators rarely gave reasons for their costs awards but, since arbitrators were required to decide disputes in accordance with law, the courts always considered that an arbitrator's powers to award costs had to be exercised in the same way that a judge exercised analogous costs powers in court proceedings. An arbitrator, in consequence, had to "act judicially" which meant that he had to act in accordance with the same principles, and be subject to the same limitations, as a judge when exercising a judicial discretion to award costs. Any perceived failure to "act judicially" was regarded as constituting an excess of jurisdiction which could be challenged, but only challenged, as misconduct or, where reasons had been provided, as error on the face of the award since an arbitrator could never be required to state a case with regard to costs. Between 1979 and 1996. The Arbitration Act 1979, which had to be applied in conjunction with the Arbitration Act 1950, abolished both the case stated procedure and judicial control of errors appearing on the face of an award and replaced these with a limited right of appeal on questions of law arising out of an award. In consequence, the only way of challenging a costs award was by way of an appeal on a question of law.[3] However, the Arbitration Acts 1950 - 1979 left unchanged an arbitrator's statutory powers with regard to an award of costs. Thus, an arbitrator's costs powers were still regarded as being analogous to those of a judge when deciding a costs question. An appeal against a judicial costs decision could only have been brought if the judge who had made the relevant decision gave leave to appeal. A potential appeal usually involved challenging the discretionary exercise of the power to award costs rather than a question of law or jurisdiction. Thus, leave was rarely given. However, if a judge refused leave to appeal, it was possible to circumvent that refusal if the Court of Appeal could be persuaded that the original costs decision had been made in excess of jurisdiction. This procedure was regarded as a relevant analogy when a potential costs appeal from an arbitrator was being considered. Thus, an appeal from an arbitrator's costs award involved two hurdles. Firstly, it had to raise a question of law arising out of the award and, secondly, it had to raise a similar issue to one that could be raised in the Court of Appeal when a judge had refused leave to appeal his own costs decision. It followed that leave to appeal would normally only be given from a costs award, and an arbitrator's costs appeal could only be argued, where the appeal raised a question as to whether or not the arbitrator had acted within his jurisdiction and hence judicially. The usual way of framing this question was: "did the facts set out in the award provide grounds upon which the arbitrator could properly in law have exercised his discretion as to costs in the way he did?" This question raised a question of law.[4] Since 1996. The costs regime applicable to arbitrations has been radically changed by the 1996 Act once it came into force. Firstly, the Act spells out more clearly than before the express costs powers that may be exercised by arbitrators. Section 61 provides that an arbitrator may make a costs award but, in making it, the arbitrator should act on the general principle that costs should follow the event except where it appears to the arbitrator that in the circumstances this would not be appropriate in relation to the whole or part of the costs. In compliance with the general statutory principle of party autonomy[5], section 61 also provides that an arbitrator's costs powers are to be subject to any agreement as to those powers that has previously been reached by the parties. Secondly, the Act abolished judicial control of arbitrators on grounds of misconduct and has replaced it with the more limited power to intervene on grounds of serious irregularity if one of the statutorily defined grounds has been made out. For costs awards, the relevant grounds are: a failure to comply with the general statutory duties of fairness, impartiality and procedural regularity; an excess of powers; a failure to conduct the proceedings in accordance with the agreed procedure and a failure to deal with all the issues put to the arbitrator. Furthermore, in 1999 the Rules of the Supreme Court were replaced by the Civil Procedure Rules.[6] The CPR contain very different and more flexible costs powers in CPR 44.3 and a different regime governing appeals from a judge's costs decision in CPR 52.3 (6). Under the CPR, a potential appeal from the costs decision of a judge will usually involve a consideration of whether the judge had the power to make the relevant decision at all but, given the wide costs powers provided by Rule 44.3, this question will rarely arise in practice. Any potential appeal is no longer subject to the requirement that the judge from whom the appeal is to be brought must himself give leave or permission to appeal. Instead, a potential costs appeal may be brought with the permission of either the first instance judge or the Court of Appeal and is subject to the same requirements as to permission to appeal as any other appeal. The relevant considerations are whether the potential appeal has a real prospect of success or whether there is some other compelling reason why it should be heard. 6.1.2. The Current Costs Regime An appeal arising out of a costs award may be brought: "on a question of law arising out of an award" (section 69(1) of the Act). An arbitrator has a duty to provide reasons for his award (unless the parties have agreed otherwise) and, if these have not been stated sufficiently or at all, the court can order the arbitrator to state his reasons in sufficient detail (section 70(4)). Further, a costs award may be made the subject of a challenge under section 68 of the Act on the ground of serious irregularity of a kind defined in section 68(2). As I have already stated, that section includes, as one of the defined specific grounds for challenge, a complaint that the arbitrator exceeded his powers. If an arbitrator has potentially exceeded his powers, the irregularity will usually be capable of being raised as a question of law. There is, therefore, when a jurisdictional question is raised, a theoretical overlap between a potential appeal on a question of law and the judicial supervision of serious irregularity. If the jurisdictional question arises out of the reasoning in the award, the appropriate potential remedy is by way of appeal since, otherwise, the statutory restrictions on appeals being brought would be circumvented. When no question of law is raised, the only potential remedy is by way of an intervention on the grounds of serious irregularity. In the light of these provision of the Act, three related questions need to be asked in relation to a costs award which a party wishes to challenge. These are: 1. Does a question of law arise out of the award? 2. A related but not identical question: Did the arbitrator act within his jurisdiction? If so, is the complaint one which raises a question of law? 3. If the potential ground of challenge cannot be expressed as a question of law: Has there been any serious irregularity? It is no longer helpful to ask whether an arbitrator has acted "judicially" or has acted in an equivalent way as a judge would have acted in a similar situation when reaching a judicially determined costs decision. This concept was initially developed to fill the gap provided by the perceived lacuna in the general discretion given to arbitrators when awarding costs and by the absence of an appropriate yardstick and procedure to control those powers. However, the Act has now defined an arbitrator's costs powers with precision and also provides unequivocally that the relevant provisions of the Act are founded on the principle that the court should not intervene except as provided for by Part I of the Act which should be construed accordingly.[7] In those circumstances, it is no longer appropriate to imply any gloss or further restriction onto the exercise by an arbitrator of the statutory power to award costs. This is particularly so now that the CPR have replaced the RSC since the detailed costs regime that has been introduced for the courts, although similar to that provided for by the Act, particularly when read with CIMAR, is not identical to it. Thus, it is not appropriate to refine the limited statutory basis for judicial intervention into an arbitration that the Act makes available to the court by the introduction of the concept that the arbitrator must have acted "judicially". The function of the court is to ensure that the arbitrator has acted in accordance with the express powers given to him by the Act and the parties. It follows that judicial case law concerned with costs decision decided under the now repealed RSC, under the CPR costs and appeal regimes or in connection with costs awards made before the Act came into force will usually have no relevance for an arbitrator considering a costs question or for a court when considering whether leave to appeal should be granted from a costs award or when considering such an appeal. Rule 13 of CIMAR does not materially alter or gloss an arbitrator's statutory costs powers provided by section 61 of the Act. However, it provides in clear and practical language a detailed and helpful framework governing the award-making process by which an arbitrator's costs powers are to be exercised. Although the wording and effect of rule 44.3 of the CPR is similar to that of Rule 13 of CIMAR, a detailed comparison of the two rules is not helpful when considering the meaning and effect of Rule 13 since the relevant cost powers of an arbitrator conducting an arbitration under CIMAR are to be found exclusively in Rule 13 of those rules. 6.2. The Nature of a Costs Appeal When considering any complaint about a costs award, the court is embarking on an appeal, it is not undertaking a general review of the exercise by the arbitrator of the use of his discretion as to the award of costs nor or the process by which that award was made. For the complaint to arise in the form of an appeal, it must be one that can be expressed in the form of a clear question of law. Often, however, the complaint will be to the effect that the procedure used by the arbitrator was defective or that the decision he arrived at was wrong because of an error in his appreciation or understanding of the material used as the basis of the award. Such a complaint cannot be addressed at all unless it amounts to one of serious irregularity since it does not give rise to a question of law but, at best, gives rise to an attempt to review the costs award. However, where an arbitral tribunal is given jurisdiction to exercise a discretion, the decision making process must be made in accordance with the powers given to the tribunal. The arbitrator must not take into account matters which the law or the powers given him by the parties or the general law preclude him from acting on and, conversely, he must not fail to take account of and give effect to matters that the law requires him to take account of. Moreover, since the tribunal must observe and give effect to the law, the overall discretionary exercise must not be perverse nor one that a reasonable arbitration tribunal properly directing itself could not have reached. These criteria are similar to the so-called Wednesbury principles applicable to the potential review of the exercise of discretion by an administrative body or tribunal and the so-called Birkett v James principles applicable to the potential review by an appellate court of the exercise of judicial discretion at a lower judicial level. The question of whether these principles were followed or breached by an arbitrator has always been regarded as one of law, since it raises a question of jurisdiction or one as to the correct exercise in accordance with law of an arbitral tribunal's powers. 6.3. Question of Law or Question of Fact Any complaint about a costs award that may be made the subject of an appeal must raise a question of law, or the legal part of a mixed question of law and fact. No appeal may be brought on a question of fact. It is never easy to define what is meant by a question of law in the context of an arbitration appeal. Some guidance may be obtained from a consideration of what has been held to be a question of law in related fields where appeals or reviews are permitted in connection with questions of law. These include judicial review proceedings and judicial appeals in the tax or planning fields. However, as Steyn L.J. commented in Geogas S.A. v Tramno Gas Ltd (The "Baleares"): "what is a question of law in a judicial review case may not necessarily be a question of law in the field of consensual arbitrations."[8] In the context of a potential costs appeal, a question of law can arise in connection with the construction and true meaning to be given to an applicable rule governing an arbitrator's power to award costs. It can also arise if it is contended that the arbitrator misdirected himself by taking into account factors which he should not have done or by failing to take into account factors he should have done. As Donaldson J. put it in Tramountana v Atlantic Shipping: "In reviewing the arbitrator's decision on costs, it is of the greatest importance to remember that the decision is within his discretion and not that of the courts. It is nothing to the point that I might have reached a different decision and that some other judge or arbitrator might have differed from both of us. I would neither wish, nor be entitled, to intervene, unless I was satisfied that the arbitrator had misdirected himself."[9] However, it will often be difficult to characterise as a question of law a complaint that a particular exercise of discretion or the decision itself was one which no reasonable tribunal could have arrived at. Usually, such a complaint is seeking the impermissible, namely a review of an arbitrator's costs decision, rather than raising a question of law. What is more problematic is whether an appeal can arise when it is contended that there was no basis for, or evidence to support, critical findings of fact. This question was always, prior to the abolition of the case stated procedure, characterised as raising a question of law. Nowadays, it is important to consider carefully the context in which the question arises as to whether or not a finding of fact was based on any evidence. This context can include cases where the relevant finding was of primary fact where it is said that there was no supporting evidence or that the evidence was misunderstood or wrongly believed. Alternatively, the finding may have been an inference that it is said was erroneously drawn from the primary facts or was one involving the application of the facts to a relevant statutory or contractual label such as: "an adventure in the nature of trade" or "frustration".[10] Finally, the finding of fact may have been made as part of the exercise of a discretion as opposed to the determination of an issue arising as part of the substantive dispute. It is also necessary to consider the procedural context in which the question can arise. This can include, in an arbitration context, an appeal under section 69(1) of the Act or an application for leave to appeal under section 69(2)(b) of the Act. In other contexts, the question can arise as part of the judicial consideration of a case that has been stated by magistrates or special commissioners of income tax, as part of an appeal from a judicial discretionary decision or as part of a judicial review hearing. There is no reason why, in an appropriate case, it should not still be possible in an appeal under section 69 of the Act to raise as a question of law the question of whether or not there was any evidence to support a material finding of fact even though an arbitrator is no longer bound by strict rules of evidence.[11] This is because an arbitrator is bound to decide the dispute in accordance with the law chosen by the parties as being applicable. In a domestic dispute, the governing law will usually be the law of England and Wales which does not allow a decision as to a party's rights or obligations to be made where there is no evidence to support that decision.[12] The relaxation of the strict rules of evidence in arbitrations is a procedural provision which would not justify a finding which decides a dispute and which is not based on any supporting evidence at all. Three decisions where brought to my attention where it was questioned whether an appeal can still be brought under section 69(1) of the Act on this ground. These were The "Baleares", How Engineering Services Ltd v Lindner Ceilings Floors Partitions Plc and J A Payne Limed v GAJ Construction and another.[13] These cases show that where the suggested appeal is one attacking a primary finding of act on the basis of there being no evidence to support it or where an application for leave to appeal is being mounted under section 69(2)(b) of the Act, the decision of the arbitrator will almost invariably be accepted and may not usually be challenged. The parties have entrusted fact-finding functions to the arbitrator and the parties' autonomy must be respected by the court. However, where the finding is one of mixed law and fact [14] or where the suggested error is that the arbitrator's discretionary decision erroneously took into account facts which should not have been taken into account[15], a question of law can still arise in the context of an arbitration appeal. I conclude that if it can be shown that there was no evidence of any kind to support an arbitrator's finding, including an absence of evidence admissible by virtue of the relaxation of the strict rules of evidence, at least where the finding amounted to the taking into account of factors that should not have been taken into account, or was a mixed finding of fact and law or was part of the exercise of a discretion whose consequent exercise led to an error of principle, an absence of supporting evidence can give rise to a question of law. However, even if the arbitrator's finding was susceptible to an appeal, a court should give full weight to that finding since the arbitrator is the person whom the parties have chosen as the final determiner of fact. Only if that finding is nonetheless both material and clearly lacking any factual basis should a court consider allowing an appeal on the resulting question of law. 6.4. Substantial Error Where a costs award has been the subject of a successful appeal, the court provides an answer to the question of law that has arisen. It does not follow from that that the costs award will invariably be set aside or varied. Even if the appellant has succeeded on the question of law, the court has a discretion as to whether to give effect to that success by disturbing the award. This is because section 69(7) provides that, on an appeal, the court may by order confirm, vary, remit or set aside the award in whole or in part. It follows that if there has been a successful appeal, the court nonetheless has an option to confirm the award. The relevant considerations that a court would take into account when deciding whether to vary in some way the costs award or, alternatively to confirm it notwithstanding the result of the appeal, would include ones of proportionality. In other words, the court would consider the extent by which the reasoning supporting the arbitrator's overall costs award was vitiated by any identified error of law, the extent in financial terms of the costs consequences of any such error and the relative effect that correcting the error of law would have on the costs to be paid or incurred by the appealing party. 7. THE GROUNDS OF APPEAL 7.1 Introduction I will first summarise the relevant costs provisions that the arbitrator had to take into account when he considered his costs award, being those imposed by the Act and Rule 13 of CIMAR, with the passages on which the appeal is founded highlighted. The arbitrator summarised the material parts of Rule 13 in paragraph 20.00 of his award. In summary, these powers are as follows: 1. The general principle is that the costs should be borne by the losing party (Rule 13.1). 2. The arbitrator has the widest discretion in awarding which party should bear what proportion of the costs[16] of the arbitration (Rule 13.1). 3. Where an award deals with both a claim and a counterclaim, the arbitrator should deal with the recovery of costs in relation to each of them separately unless he considers them to be so interconnected that they should be dealt with together (Rule 13.3). 4. In allocating costs the arbitrator shall have regard to any offer of settlement or compromise from either party[17], whatever its description or form (Rule 13.9)[18]. 5. In allocating costs the arbitrator shall have regard to all material circumstances[19] including such of the following as may be relevant19: (a) which of the claims has led to the incurring of substantial costs and whether they were successful; (b) whether any claim which has succeeded was unreasonably exaggerated[20]; (c) the conduct of the party who succeeded[21] on any claim and any concession made by the other party; (d) the degree of success of each party (Rule 13.2)[22] 6. The arbitrator may determine by award the recoverable costs of the arbitration on such basis as he thinks fit (Section 63(3)). 7. The arbitrator, in departing from the general principle as to costs, should give reasons for his costs decision which should include an explanation as to the factors taken into account in departing from that general principle, why those factors were considered to be material and relevant and why, in the light of those factors, the order was made in the form it was (Section 52(4))[23]. 7.2 General Considerations The arbitrator directed that the costs hearing would be conducted on the basis of written submissions. The arbitrator also directed that he would deal with costs in two stages first deciding in principle who should pay the costs and in what proportions and then deciding all questions arising out of the detailed assessment. This two-stage approach to the assessment of costs was adopted at the request of the parties. The parties exchanged detailed submissions and followed this with a second exchange of reply submission. It is to be regretted that both parties' submissions failed to deal, in any detail, with the provisions of Rule 13 of CIMAR and concentrated, instead, on the arbitrator's suggested duty to act judicially when considering and making his costs award. Further, the submission examined in detail many costs decisions that dealt with the way that a court would have dealt with costs in an analogous case under the now defunct RSC. As I have already indicated, none of these submissions were relevant to the arbitrator's task. FGL's submissions, in summary, suggested that the arbitrator should treat the "event" for which costs should be awarded as the overall net recovery by FGL and that FGL should recover all its costs of that "event". Although the submissions referred to and rejected any approach to the award of costs on an issue by issue basis, no submission was addressed as to any other possible basis for the award of costs, such as by way of proportioning the costs on a percentage basis. The submissions made detailed reference to the settlement offers of both parties in seeking to show that FGL's conduct had been reasonable throughout the arbitration. NEL submitted that the arbitrator should deal with the costs of the claim and the counterclaim separately and that there should be no order as to costs on the counterclaim. NEL supported this submission with copious references to costs cases relating to costs decisions under the RSC and with an argument that the arbitrator should act judicially in awarding costs. In support of its argument that FGL should not recover any of its costs, NEL relied on FGL's alleged minimal recovery and on its conduct which NEL suggested had unreasonably and unnecessarily extended the length of the hearing. The conduct of FGL that NEL referred to included FGL's pursuit of a number of issues that it lost, FGL's conduct during the contract and its unwillingness to settle the counterclaim during the parties' without prejudice exchanges. Both parties' submissions referred to FGL's loss of profit claim, FGL submitted that this had occupied almost no time whatsoever in the arbitration as a whole and was settled promptly once FGL appreciated that it had not been as successful in the arbitration as it had hoped. The cost of pursuing it had been minimal. In reply, NEL submitted that the significance of this claim was in its contributory effect upon the parties being unable to achieve a realistic compromise given that it accounted for almost 50% of the counterclaim. NEL did not explain why or how the exaggerated loss of profit claim contributed to the parties' failure to achieve a compromise of the counterclaim. In his award, the arbitrator first decided to exercise his power to treat the costs of the claim separately from those of the counterclaim. In relation to the costs of the counterclaim it is clear that the arbitrator was particularly influenced by what he regarded as its exaggerated size, particularly in relation to the loss of profit claim, and the consequent effect on any potential settlement. The arbitrator's principal conclusion was that, had the counterclaim been more modest, an earlier settlement could in all probability have been reached and would not have been discouraged. Indeed, in one passage of the award, the arbitrator stated that the size of FGL's claim made it inevitable that a compromise could not be reached. The following extracts of the award show how heavily influenced the arbitrator was by his inference to this effect: "I am persuaded by the evidence presented to me that it was undoubtedly the magnitude of the counterclaim with its complex allegations relating to quality, standards of performance, the contract documentation, the role of the Contract Administrator and JRK which discouraged total settlement. . . . I place great weight on the effect of this substantial sum claimed and its deterrent effect on a settlement being reached at a much earlier date. . . . FGL had a claim well in excess of £200,000 firmly in its sights. This made it inevitable that a compromise could not be reached and the proceedings terminated. . . . The preconceived notion that (FGL) would be awarded an inflated sum for the counterclaim was more significant than the conduct of [FGL] in negotiations. . . The scale of the counterclaim did indeed prevent the possibility of sensible negotiations taking place."[24] 7.3 GROUND 1 – THE EXAGGERATION OF THE COUNTERCLAIM WHICH PRECLUDED ITS SETTLEMENT 7.3.1. Introduction The basis of this ground of appeal was that the arbitrator had erred in finding, firstly, that the counterclaim, and particularly the element concerned with FGL's alleged loss of profit, was exaggerated and that, secondly, it was this exaggerated element of the counterclaim which prevented it from being settled either at an early stage or at all. FGL argued, in essence, that these two finding were vital planks of the arbitrator's reasoning to support his unusual costs order and that they lacked any factual basis. Although these two vital findings were clearly linked, I will consider them separately since different considerations apply to each of them. 7.3.2 Exaggeration FGL firstly argued that it was not open to the arbitrator to find that the counterclaim or any of its constituent parts was exaggerated since its percentage recovery was not so minimal as to justify characterising it in this way. Furthermore, the arbitrator's reasoning was circular since he found that the counterclaim was exaggerated because it was so inflated as to deter a settlement and he also found that a settlement was deterred because the counterclaim was exaggerated. I regard the arbitrator's finding that FGL's loss of profit claim was exaggerated to be a finding of fact which cannot be made the subject of an appeal. Although part of the arbitrator's reasoning is circular, he also supported this finding by relying on its size relative to the sum claimed. He concluded that that disparity was sufficient to constitute the claim as one which was exaggerated. The meaning to be ascribed to a simple English word like "exaggerated" when used in the context of an arbitration claim gives rise to a finding of fact. Although the parties referred the arbitrator to a number of cases involving the question of whether or not a claim was exaggerated, those cases provided no assistance in deciding the question of exaggeration arising in this case. The arbitrator based his exaggerated finding on the totality of the evidence he had considered during the arbitration and on his observations of the parties' behaviour throughout the reference. Even if I had formed an unfavourable view as to this finding, which I do not, I could not entertain an appeal since the finding was clearly supported by evidence and was based on the arbitrator's decision that the facts as found were fairly described by the ordinary word "exaggerated" which is in wide general use. 7.3.3. No Evidence that the Settlement was Precluded 1. No Evidence The second finding of fact is more problematic. The finding that is attached, albeit that it was repeated with unhelpful frequency in the award in wording bearing different shades of meaning, was essentially that the exaggerated nature of the counterclaim for loss of profit precluded any settlement, whether at an early or a later stage of the arbitration, because FGL held an excessively enhanced belief as to its likely recovery from this claim. The only evidence supporting this finding relied on by the arbitrator was the size of the counterclaim when compared to the sum awarded (for JRK's fees) or agreed (for the loss of profit). This can be seen from other relevant findings that he made: (1) NEL's rejection of FGL's final offer to accept £45,000 plus all its costs clearly showed that there was no possibility of the counterclaim being settled and (2) the sheer magnitude of FGL's counterclaim was what affected any potential settlement.[25] It is also necessary to take account of the only other evidence referred to by the arbitrator in the award that might be said to be relevant to his critical finding. This was contained in the notes taken by the arbitrator at the Preliminary Meeting in February 1999 in which he had recorded that FGL had stated that its counterclaim exceeded NEL's claim by: "hundreds of thousands of pounds". The arbitrator had a clear recollection of this meeting since he referred to it on two occasions in his award.[26] However, neither party had any opportunity of commenting upon the accuracy of that entry and, even if it was accurate, it provided no support for his critical finding since it was not concerned with the reason why the counterclaim did not settle. Despite the number of occasions that the critical finding is repeated in the award[27], the only support for it is by way of an inference based on the size of the exaggerated claim and on NEL's rejection of FGL's final offer of settlement. This inference is, in fact, an inference which is contradicted by the evidence contained or summarised in the award and by the statements of both parties to which I will now turn. 2. Failure to Take Account of Offers of Settlement FGL contended that the evidence referred to in the award showed that the counterclaim did not settle at any stage simply because NEL was not prepared to make an offer of settlement whose effect would make FGL the net winner of the arbitration since NEL feared that if FGL accepted such an offer, NEL would have to pay the bulk of both parties' counterclaim costs. FGL relied heavily on the settlement offers to support this submission, particularly those occurring once NEL's claim had been settled. The settlement offers were referred to in the award and copies were provided to the court. There were 8 relevant offers, 3 by FGL and 5 by NEL. It is also relevant to consider that an unsuccessful mediation took place in November 1999. The offers were as follows: 1. In June 1999, NEL offered FGL a settlement on terms that FGL paid NEL £17,584.53 and all NEL's costs. This was rejected by FGL with a further offer amounting to an invitation to NEL to put forward a revised offer taking FGL's claims properly into account. 2. In early November 1999, NEL offered FGL a settlement on terms that FGL paid NEL the reduced sum of £10,000 and all NEL's costs. This was rejected by FGL on 12 November 1999. 3. On 12 November 1999, FGL offered to pay NEL £20,000 to settle only NEL's claim with the costs to be determined by the arbitrator. This was not acceptable to NEL. 4. The unsuccessful mediation took place and the proposed hearing was adjourned until late March 2000. 5. In January 2000, NEL offered FGL a settlement on terms that each party should drop its claims and should bear its own costs. FGL rejected this offer. 6. On 1 March 2000, NEL offered FGL a settlement of the claim alone which made as mall advance on FGL's November 1999 offer. This offer was accepted by FGL and the claim was settled. 7. On 13 March 2000, FGL offered NEL a settlement of the counterclaim on terms that NEL should pay FGL £45,000 together with all FGL's costs of the arbitration. This was rejected by NEL. 8. On 24 March 2000, NEL offered FGL a settlement in identical terms to its January 2000 offer, namely that each party should drop its claims and should bear its own costs. FGL rejected this offer and the hearing started soon afterwards. It can be seen from this summary that the parties had narrowed the difference on the counterclaim between them to £45,000 being the difference between the last two offers that were made. However, what principally divided the parties was FGL's costs. The inability to agree who should pay those costs was clearly a major factor precluding a settlement. FGL contended that the arbitrator erroneously failed to take the content of these settlement offers into account and, in consequence, failed to comply with Rule 13.9 of CIMAR which required him to have regard to these offers in allocating costs. In the award the arbitrator stated: "Referring to the 'without prejudice' correspondence, [counsel] maintains that FGL took a reasonable stance. However, I question this assertion and would rather give weight to the sheer magnitude of FGL's counterclaim and its effect upon any potential settlement".[28] In light of Rule 13.9 of CIMAR, a question of law arises as to whether the arbitrator was in error in leaving these settlement offers out of account when considering why the counterclaim had not been compromised. It is clear that the arbitrator did leave them out of account when reaching his vital conclusion and, given the terms of Rule 13.9, in doing so he fell into error. Had he taken their content into account, he would have appreciated that the parties' failure to settle the counterclaim arose because NEL was not prepared to offer more, by way of a principal sum, that it had recovered on the claim. The details of these offers would also have shown that the inference he sought to make that the exaggerated counterclaim of itself precluded settlement was not one he could properly have made. 3. The Parties Statements It is noteworthy that NEL never suggested in its submissions to the arbitrator that the counterclaim failed to settle because of its size or because of FGL's exaggerated view of the size of its potential recovery. At best, as NEL submitted, the size of the counterclaim was one factor leading to the lack of a settlement. Indeed, NEL accepted, in its answer to FGL's grounds of appeal, the accuracy of FGL's grounds of appeal to the effect that the counterclaim had not settled because NEL was not prepared to offer a larger sum in settlement than it was to recover on the claim because NEL would then risk having to pay all FGL's costs as to the "net loser" of the arbitration. The arbitrator himself appears to have accepted that that concern was motivating NEL's conduct in the arbitration. He found that NEL's sole reason for making its section 57 application was in the hope of bringing FGL's recovery down below the sum awarded by agreement on the claim.[29] 4. No Appropriate Sealed Offer by NEL The arbitrator should also have had in mind that if NEL had indeed been concerned with the exaggerated size of the counterclaim and was potentially inhibited from reaching a compromise because of that exaggeration, it could have given effect to those concerns in the sealed offers that it put forward. The obvious way for NEL to have made an offer to FGL whilst meeting its concern of its being a potential net loser in the arbitration and thus being in danger of having to pay FGL's costs of the counterclaim would have been for NEL to have made a sealed offer to FGL which either reserved the costs to the arbitrator or which made an offer to pay only a defined proportion of FGL's counterclaim costs. Had such an offer been rejected and had the award in favour of FGL been less than the whatever sum had been referred to by NEL in its offer, that success by NEL would have been a significant matter for the arbitrator to take into account in NEL's favour when giving effect to Rule 13.9 of CIMAR and in reaching his decision in the costs award. 5. Loss of Profit Claim It is also noteworthy how little work was undertaken in working up or considering the loss of profit claim. Apart from the insertion into the counterclaim pleading of a bald reference to a claim for £100,000 without any particulars, FGL provided no detail of this counterclaim until it served its accountant's report not long before the aborted November 1989 hearing. NEL did not work on this report and, soon after the proposed November hearing was adjourned, the loss of profit claim was separated from the counterclaim and ordered to be tried at a later stage. The claim only resurfaced briefly as a formal amendment to FGL's pleading when FGL amended its pleadings at the March 2000 hearing to bring them up to date. It would appear from the terms of the offers and counter-offers of each party, if they are had regard to, that the parties regarded this loss of profit claim as a make weight, or at least was one which was not being pursued with any enthusiasm by FGL. 7.3.4. Conclusion as to Whether a Settlement was Precluded by Exaggerated Claims The conclusion to be drawn is that there is no evidence to support the arbitrator's finding that the counterclaim failed to settle because of its exaggerated nature or because of FGL's erroneously exaggerated view as to the counterclaim's likelihood of success. At best, the exaggeration of the counterclaim may have inhibited settlement discussions in the early months after the Preliminary Meeting but it did not thereafter or generally inhibit a settlement. The failure to settle the counterclaim resulted from NEL's decision not to make a settlement offer in any sum that exceed the sum by which the claim was settled so as to avoid the risk of being held liable for all of FGL's costs. Thus, there was no evidence to support the critical finding of the arbitrator that: "the magnitude of the counterclaim had a deterrent effect on an early settlement" or any of the similarly expressed and related findings found within the award. It is important to consider the context in which this finding was made. Firstly, it was not a finding of primary fact but was instead an inference drawn by the arbitrator entirely from the fact that the counterclaim was exaggerated. This inference was not one that could reasonably have been made from that factual basis, particularly since it was made without any regard being paid to the contents of the various offers and counter-offers that had been drawn to the arbitrator's attention but which he had stated he would prefer not to give weight to[30]. As a direct consequence, the arbitrator's inference or conclusion was further vitiated by it having been arrived at without regard to the relevant and important factors which Rule 13.9 of CIMAR required to be taken into account. Secondly, the finding was made in the context of Rule 13.2 which requires the arbitrator to have regard to all material and relevant circumstances when deciding upon costs. However, the award does not identify the reason why the inference being made was either material or relevant to the arbitrator's discretionary power enabling him to proportion the costs. In the context of that Rule, the finding was one of mixed law and fact. Thirdly, the finding was not made in the context of a decision reached on the merits of the issues in dispute but in the context of a determination of relevant factors on which to base a discretionary exercise of the power to make a costs award. In undertaking that exercise, the arbitrator had to take into account all relevant matters and was not to take into account irrelevant matters. Taking all these factors into account, the finding is one which is susceptible to an appeal under section 69(1) of the Act. Since it was unsupported by any evidence, it was not one on which the arbitrator should have based the exercise of his costs discretion provided for by Rule 13 of CIMAR. In consequence, that discretion relied on matters that should not have been taken into account and was, in consequence, one which no reasonable arbitrator could have arrived at. 7.4 FGL's Conduct This ground of appeal is based on the finding of the arbitrator that FGL's conduct was the subject of critical comment. The conduct referred to was conduct occurring during the contract and it led to adverse findings against FGL and Mr Berkins in the principal award and to FGL losing some parts of the discrete issues that were determined in the principal award. These adverse findings included such findings as that Mr Berkins erred in not engaging a competent professional to advise on appropriate standards and finishes; in allowing inadequately detailed drawings to be given to NEL; in not involving Mr Little in the administration of the work; in not affording MEL an opportunity to return to site to make good the defects; in the manner in which he procured, organised and supervised the remedial works and in the pre-emptive manner in which he arranged for the destruction of the brasserie floor. The arbitrator appears to have considered that Rule 13 allowed him to take the conduct of FGL during the contract into account in deciding the incidence of costs. He did not make any finding that the conduct about which he was critical had been repeated during the arbitration nor that it had led to a significant increase in the parties' costs. It is clear that the conduct that is referred to in Rule 13.2(c) is the conduct of a party during, and whilst participating in, the arbitration. The Rule refers to "material circumstances" and to such conduct of FGL "as may be relevant". Thus, the conduct that is referred to is conduct connected with the arbitration and is clearly intended to be of a kind that increases the length of the hearing, unreasonably increases the parties' costs or otherwise adversely affects the time, trouble and expense of those involved. Of course, there may be exceptional conduct occurring during the time when the dispute was unfolding which it would be reasonable to take into account when reaching a decision about the incidence of costs. However, ordinarily, such conduct would not be material or relevant. If it was generally relevant, an arbitrator would not be able to give effect to the general principle that costs should follow the event and should be borne by the losing party but he would instead, in every case, have to consider whether to give effect to the winner's conduct during the course of the dispute. Thus, the arbitrator erred in considering that the conduct of FGL during the contract and the adverse views he formed about that conduct should count against FGL in deciding on the incidence of costs. Had he considered that this conduct should count against FGL, he should have made findings as to why that was so and why then finding was material and relevant to his costs decision. It may be that the arbitrator would have reached a conclusion adverse to FGL on the basis of at least some of the conduct he relied on but he never considered that point since he had already wrongly concluded that it was sufficient merely to make adverse findings about FGL's pre-arbitration conduct in the principal award. 7.5 Factors Wrongly Taken into Account and Wrongly Not Taken into Account FGL submitted that the arbitrator failed to take into account that the costs of the claim had been dealt with very differently by him despite NEL's smaller claim recovery compared to FGL's counterclaim recovery. FGL also submitted that the arbitrator erred in not taking into account that the vast majority of FGL's costs were incurred on the counterclaim which was all that was an issue after 8 March 2000 following the settlement of the claim. These complaints amounted to a complaint that the arbitrator did not take into account the degree of success of each party but they are not, however, borne out by the award. Amongst other findings, the arbitrator concluded that 80% of NEL's preparation time was incurred by reason of the counterclaim, that he would deal with the costs of the claim and counterclaim separately, that NEL had made a very substantial recovery on its claim which was simple in format and presentation and that FGL's success in percentage terms was very much less than NEL's.[31] It follows that I reject the basis of this ground of appeal which obviates the necessity of considering whether their grounds of appeal raise a question of law at all. It is, however, highly doubtful that a question of law is raised by these grounds since any decision to leave these factors out of account as being immaterial or to take them into account as being material would only give rise to a question of fact and discretion which is not susceptible to an appeal on a question of law. 7.6 The Arbitrator's Overall Approach in Reaching his Costs Decision FGL's final and overall ground of appeal was concerned with the arbitrator's overall approach to his costs decision. FGL argued that the arbitrator had, in effect, made four errors: (1) that he failed to determine what the "event" was with which he was concerned; (2) that he failed to give effect to the requirement that any adverse conduct by FGL should be material and relevant to the decision to deprive FGL of any part of its costs; (3) that he took into account matters that he should not have taken into account; (4) that he failed to consider whether any need to reduce FGL's costs entitlement should be achieved by a percentage reduction in its costs recovery and (5) that he gave inadequate reasons as to why his adverse findings were material or relevant and as to why the factors relied on had led to the conclusion that FGL should be deprived of all its costs. There is no substance in the first complaint. The "event" the arbitrator was considering was the counterclaim in its entirety including the loss of profit claim and its settlement. That is clear from the structure of the award and from the arbitrator's decision to treat the costs of the claim and counterclaim separately. Thus, it is not open to FGL to complain that the arbitrator did not have in mind what event he was concerned with. The second and third complaints, in so far as they have any substance, amount to additional ways of raising the three questions of law that I have already determined in FGL's favour. The arbitrator was not entitled to proceed on the basis that the exaggeration of the counterclaim precluded its settlement and he should have had regard to the offers of settlement. Equally, he was not entitled to proceed on the basis that FGL's conduct during the contract was open to criticism. This was because he had not gone on to make findings as to why these matters were material and relevant to a costs determination adverse to the winner of the "event" in question. The fourth complaint has more substance. The arbitrator acceded to FGL's submission that it would not be appropriate to consider making an issues costs order even though he had found in favour of NEL on a number of the many issues listed by the parties for his determination. The arbitrator reasonably concluded, given the time and difficulty that would be involved, that it would be wrong and disproportionate to attempt to assess costs on an issue by issue basis. However, the arbitrator then gave no consideration to other possible ways of awarding costs. He proceeded on the basis that, since he was not to separate out the costs on an issues basis, he would have to award FGL either all or none of its costs. He adopted his approach because the parties, for forensic reasons, had only dealt with their rival and competing contentions, from FGL, that FGL should be awarded all its costs on both claim and counterclaim and, from NEL, that FGL should be awarded no costs on either claim or counterclaim. In the light of the arbitrator's findings as to FGL's loss on certain issues and his other findings, it would have been open to him to have reduced the costs otherwise recoverable by a defined percentage or to have used his discretion to reduce particular elements of FGL's costs claim during the detailed assessment that has still to come. The arbitrator was given the "widest discretion in awarding which party should bear what proportion of the costs of the arbitration" by Rule 13.1 of CIMAR, a discretion which would have included the award of a percentage of costs otherwise awardable, yet the arbitrator wrongly limited and narrowed his discretionary exercise. In effect, he only considered which party should bear the costs and he did not consider the additional question of whether an order should be made proportioning FGL's costs.[32] This failure would have been even more marked had the arbitrator not also made the further errors of law that I have already dealt with. If a departure from the general principle that the winner of an event should ordinarily recover its costs was appropriate so far as FGL's costs were concerned, it was necessary for the arbitrator first to consider whether it would be appropriate and reasonable to make a costs order proportioning FGL's costs before making one depriving it of all its costs. As to the fifth complaint, the arbitrator did not appear to consider an intermediate award of costs and he gave no reasons as to why it was appropriate, in the light of his findings, to deprive FGL of all its costs of the counterclaim. Furthermore, the arbitrator's detailed reasons did not explain why his findings were relevant and material nor did it link those findings to the costs decision that he made. Indeed, they showed that he had taken into account factors he should not have done and that he had unduly circumscribed his discretion by not considering whether it was appropriate for FGL to recover not all but only a proportion of its costs. 8. CONCLUSION 8.1 Conclusion as to Arbitration Costs Appeals My overall conclusions are as follows: 1. An arbitrator, in considering and awarding costs, derives his powers and jurisdiction from section 61 of the Act and any procedural rules incorporated into the reference or agreed to by the parties concerned with the award of costs. 2. In considering whether an appeal will lie from an arbitrator's costs award, the court can only consider judicial intervention if the complaint about a costs award raises a question of law or one amounting to serious irregularity. It is no longer appropriate to consider whether or not the arbitrator acted judicially. 3. Neither an arbitrator not a court considering an application for judicial intervention should ordinarily consider judicial decisions as to costs nor the terms of the Civil Procedure Rules. The relevant matters to consider are the terms of the Act, any applicable procedural rules as to costs and any relevant material arsing in the reference whose costs are the subject of the arbitrator's costs award. 4. A court should ordinarily only consider a complaint of serious irregularity in relation to a costs award if the subject-matter of the complaint cannot additionally be expressed as a question of law. 5. A question of law arises if the complaint amounts to one that the arbitrator has taken into account factors that should not have been taken into account, has failed to take into account factors that he should have been taken into account, has reached a decision based on an error of law or has reached a costs decision which was one which no reasonable tribunal could have reached. 6. A question of law can arise where the costs award has been based on findings or inferences of fact which it is clear from the award and from any documents incorporated into the award were neither supported by any admissible evidence nor were ones that a reasonable arbitrator could have made. This is because the arbitrator has, in such circumstances, taken into account factors, namely the erroneous findings of fact, which he should not have taken into account. 7. In any consideration of an arbitrator's findings of fact grounding an award as to costs, full respect must be given to the arbitrator's findings and to the principle that the arbitrator is given primacy by both the Act and the parties so far as fact-finding is concerned. 8. Reviewable questions of law will not necessarily give rise to a successful appeal. A costs award will only be set aside if it can be shown that, as a result of the errors made by the arbitrator that have been disclosed by the court's answers to the questions of law, it is reasonable and proportionate to interfere with the costs award. 9. Ordinarily, the result of a successful appeal from a costs awards will be an order setting aside the award and a direction to the arbitrator to reconsider the costs award in the light of the judgment setting aside the first award.[33] 10. Where leave to appeal from an arbitrator's costs award is required, the potential appeal must, in addition to these requirements, pass the tests imposed by section 69 of the Act as preconditions to leave to appeal being granted by a judge. However, where as in this case, leave to appeal is not required, the court must consider the appeal on its merits in accordance with the principles set out above. 8.2 Conclusion as to the Questions of Law Raised by the Appeal The result of the appeal is that the arbitrator made the following errors: 1. He erroneously concluded that the magnitude of the counterclaim had a deterrent effect on an early settlement and he wrongly took that factor into account in reaching his discretionary decision as to costs. That factor had a decisive influence in the costs decision he arrived at. 2. He erroneously failed to have regard to the offers of settlement. 3. He erroneously took into account FGL's conduct during the contract even though he had not found any grounds that rendered such conduct material or relevant to his costs determination. 4. He erroneously fettered his wide discretion and failed to consider a proportionate or other intermediate award of costs in favour of FGL. 8.3 Conclusion as to the Appeal It follows that the award that the arbitrator made as to the incidence of costs on the counterclaim cannot stand in its present form since it was fundamentally flawed by these errors of law. The arbitrator both misdirected himself and erred in principle. The costs award was, in consequence, based on reviewable errors and cannot stand in its present form without reconsideration by either the arbitrator or the court. The extent of these errors and the significant potential effect on FGL's costs recovery are such that it is inevitable that the costs award should be set aside and reviewed again from scratch. 9. THE APPROPRIATE ORDER 9.1 The Applicable Law In the light of this finding as to the costs award on the counterclaim, I must now consider what order to make in consequence. It is clear that the errors of law that have arisen vitiate the costs award, particularly since it was grounded in a finding which, in the form it was made, was one that the arbitrator should not have taken into account. My powers as to what I should do in such circumstances are set out in section 69(7) of the Act which reads: "On an appeal under this section the court may by order- (a) confirm the award, (b) vary the award, (c) remit the award to the tribunal, in whole or in part, for reconsideration in the light of the court's determination, (d) set aside the award in whole or in part. The court shall not exercise its power to set aside an award, in whole or in part, unless it is satisfied that it would be inappropriate to remit the matters in question to the tribunal for reconsideration." The only additional guidance provided as to how these powers should be used is contained in the general principle set out in section 1 to the effect that: "General principles 1. The provisions of this Part are founded on the following principles, and shall be construed accordingly- (a) the object of arbitration is to obtain the fair resolution of disputes by an impartial tribunal without unnecessary delay or expense; (b) the parties should be free to agree how their disputes are resolved, subject only to such safeguards as are necessary in the public interest; (c) in matters governed by this Part [ie sections 1 – 84 of the Act] the court should not intervene except as provided by this Part." In addition, the Act defines the general duty of the arbitrator in these terms: "33(1) The tribunal shall- (a) act fairly and impartially as between the parties, giving each party a reasonable opportunity of putting his case and dealing with that of his opponent, and (b) adopt procedures suitable to the circumstance of the particular case, avoiding unnecessary delay or expense, so as to provide a fair means for the resolution of the matters falling to be determined. (2) The tribunal shall comply with that general duty in conducting the arbitral proceedings in its decisions on matters of procedure and evidence and in the exercise of all other powers conferred on it." The decision that I must make is, in summary, whether I should myself consider what proportion of FGL's costs it should be awarded or whether I should remit that question to the arbitrator to decide in accordance with the guidance I have provided in this judgment as to the approach that should be adopted in the light of sections 61 and 63 of the Act and Rule 13 of CIMAR. The award clearly cannot be confirmed in its present form. It would, however, be possible merely to set aside the costs award if I decided that it would be inappropriate to remit it to this arbitrator and also inappropriate for me to vary that award. If I did that, it would be possible for either party to seek a fresh appointment of a different arbitrator to determine the proportions and details of the counterclaim costs award. Thus, I have the jurisdiction and power to vary the costs award. However, given that an exercise of discretion is involved, it would ordinarily be more appropriate to remit that decision to the arbitrator. That course would appear to be more in conformity with the statutory general principle set out in section 1 of the Act and particularly with the principle of party autonomy which it enshrines. In general, a court exercising its statutory supervisory powers over arbitrators and arbitrations ought to seek to give effect to these principles so far as is reasonably possible. It follows that the power to vary ought to ordinarily only to be used where the necessary fact finding has already been completed by the arbitrator and the necessary answer is self-evident. Where a further role is to be performed by the arbitrator, particularly if there is insufficient information in the award to enable the court to decide on the appropriate variation to make to the award in the light of its findings on the question of law that have led to the appeal succeeding, the appropriate remedy would normally be to remit the award for his reconsideration.[34] This approach with regard to a costs award was the one that was followed by Judge Lloyd QC in Metro-Cammell Hong Kong Ltd v FKI Engineering plc, a costs appeal under the 1979 Act brought at a time when the RSC were still in force. Judge Lloyd had allowed the appeal because the arbitrator had disallowed the successful party two-thirds of its costs as a result of taking into account a factor he should not have done and because he had erroneously considered that he had an unfettered or absolute discretion as to costs. Judge Lloyd stated, in varying the costs award rather than remitting it to the arbitrator, and by then awarding the successful claimant in the arbitration and appellant in the appeal all of its costs: "The usual practice of an appellate court is to substitute its own discretion where the tribunal below has erred in law, rather than remitting it to the arbitrator. However, I must bear in mind that now "It is generally accepted that those who entrust decisions to arbitrators do so because they wish to rely upon the judgment, skill and fairness of those arbitrators." (The quotation is form the judgment of the Master of the Roll in the "Maria" as the result of decision on the meaning of the Arbitration Act 1979.) So I do not consider that the position of a court hearing an appeal from an arbitrator is necessarily quite the same as the ordinary appellate court. [Counsel for the appellant] however submitted that where the outcome of a remission was plain - on the assumption that the arbitrator exercised his discretion in accordance with ordinary principles of law - no purpose would be served by a remission (which would indeed increase further the already substantial costs of this reference by adding to the amount of the arbitrator's fees for dealing with the issues arising after his primary award). In my judgment this submission is correct. Remission is neither necessary nor desirable unless there is to be further consideration by the arbitral tribunal the outcome of which is not certain, i.e. where there remains matters which if the tribunal properly directs itself in accordance with the answer to the question of law are nevertheless capable of being decided in more than one way. . . . I am firmly of the view that no useful purpose would be served by remitting the matter to the arbitrator, since he would inevitably arrive at the decision (which any appellate court would also make), namely that the right order for costs in this case is (and would have been) that (the appellant) should have the whole of their costs of the claim and the counterclaim."[35] It is to be noted, however, that the 1996 Act has extended the power of the court with regard to remission. The 1979 Act only allowed the court to remit the award in full whereas the 1996 Act allows the court to remit the award in whole or in part.[36] Thus, for the first time, the court may vary part of the award and then remit the award as varied. This is what, in reality, FGL seeks since any variation of the award resulting in a partial award of costs in its favour would have to be followed by a remission of he award as varied so as to enable the arbitrator to undertake a detailed assessment of the proportion of FGL's costs provided for in that varied award. This alteration of the powers of the Court indicates that the court's power to vary has been widened in a significant respect, albeit that that more extensive power should be exercised with circumspection, given the terms of sections 1 and 33 of the Act. 9.2. The Parties' Submissions FGL contended that I should myself determine what if any proportion of its costs it should be awarded. FGL accepts that, ordinarily, I should remit this award if there remains a decision-making process to be undertaken. However, even if this is the case here, this case is none the less an exceptional one to which that principle should not apply. The arbitrator, in erroneously exercising his discretion as to costs, has made serious errors of principle during which he has shown, it was submitted, an adverse view of FGL and of Mr Berkins and a predisposition to deprive FGL of all of its costs of the counterclaim. Thus, FGL has a reasonable basis for considering that any subsequent exercise by the arbitrator of his costs discretion might lack objectivity. This view is one that any reasonable observer of this arbitration, if fully informed of the circumstances and contents of the costs award, would also share. FGL also submitted that, since it was accepted by both parties that a remission would result in a complete rehearing of the costs dispute by the arbitrator, a remission would involve further expense and delay whereas I could speedily determine the costs issue on the basis of the materials previously placed before the arbitrator. The previous costs hearing was conducted solely on the basis of the parties' detailed written submissions. Thus, I would not have to make any findings of fact since the factual basis for the exercise of the costs discretion that I would have to make is already set out in the four relevant awards and those written submissions. I would have to perform a similar exercise to that often performed by the Court of Appeal when it sets aside a first instance decision involving the exercise of discretion, particularly one related to costs, and substitutes its own decision. NEL challenged these submissions. It contended that the ordinary approach that I have already summarised should prevail and that since I have not made any adverse or critical findings about the conduct or capability of the arbitrator, the award should be remitted to him so that he retains the discretion that he has been given by the parties to decide what proportion of FGL's costs should be paid by NEL. There is no reason to suppose that he would do anything other than reconsider his exercise of that discretion in the light of the guidance provided by this judgment. In other words, the circumstances are those expressly provided for by section 69(7) (c) of the Act. 9.3. The Section 67(7) Discretion Before dealing with these submissions, I must first consider what factors I should take account of in exercising my discretion as to whether to remit, vary or set aside the award in the light of my decision on the appeal. I must, firstly, seek to uphold the general principles governing arbitration that are enshrined in section 1 of the Act and by which I am bound. The court should, whenever possible, support the arbitral process and the arbitral procedure that the parties have themselves chosen. In doing so, the court should seek to adopt a course for the dispute under appeal which will most likely obtain its fair resolution by an impartial tribunal without any further unnecessary delay or expense. In other words, I must look to the future and seek to adopt a course for the remaining stages of the dispute resolution process which is most likely to achieve these general principles. If that course can be achieved by a remission, that course should be adopted. However, if that course is more likely to be achieved by court intervention, such a course would be preferable. Any decision to intervene under section 69 of the Act should be governed by these general principles. Given the terms of section 1 of the Act, there is no additional need to consider whether and to what extent the process involving the exercise of my discretion should additionally be influenced by section 6 of the Human Rights Act 1998. That section makes it unlawful for a judge exercising independent judicial functions, which would include the exercise of this discretion, to act in a way that is incompatible with the European Convention on Human Rights. The relevant provisions of the Convention are contained within Article 6. They provide that parties are entitled, in the determination of their civil rights, to a fair hearing within a reasonable time by an independent and impartial tribunal established by law. In agreeing to arbitrate their disputes, the parties may be taken to have waived most of their Article 6 Convention rights. However, the court in acting in a supervisory role, must still, so far as is possible, itself act in a way that is compatible with the Convention. In this case, that would involve my seeking to ensure that the outstanding costs determination is resolved by a fair hearing and by an impartial tribunal within a reasonable time. These are the same considerations as arise from the application of section 1 of the Act. Clearly, in deciding what these terms mean in the context of this arbitration application, I should have regard to the meaning attributed to them in a Convention rights context. The Court of Appeal has, In re Medicaments and Related Classes of Goods[37] recently reconsidered the requirement that a tribunal should be impartial in the light of the Human Rights Act 1998 and, having done so, it ordered the Restrictive Practices Court to recuse itself. The governing principles, set out by Lord Phillips of Worth Maltravers MR delivering the judgment of the court, is as follows: "We would summarise the principles to be derived from this line of cases as follows. (1) If a judge is shown to have been influenced by actual bias, his decision must be set aside. (2) Where actual bias has not been established the personal impartiality of the judge is to be presumed. (3) The court then has to decide whether, on an objective appraisal, the material facts give rise to a legitimate fear that the judge might not have been impartial. If they do the decision of the judge must be set aside. (4) The material facts are not limited to those which were apparent to the applicant. They are those which are ascertained upon investigation by the court. (5) An important consideration in making an objective appraisal of the facts is the desirability that the public should remain confident in the administration of justice. This approach comes close to that in R v Gough [1993] AC 646 (HL). The difference is that, when the Strasbourg court considers whether the material circumstances give rise to a reasonable apprehension of bias, it makes it plain that it is applying an objective test to the circumstances, not passing a judgment on the likelihood that the particular tribunal under review was in fact biased. . . . The court must first ascertain all the circumstances which have a bearing on the suggestion that the judge was biased. It must then ask whether those circumstances would lead a fair-minded and informed observer to conclude that there was a real possibility, or a real danger, the two being the same, that the tribunal was biased."[38] FGL did refer to what was submitted to be a comparable exercise of discretion in an arbitration application context: Hagop Ardahalian v Unifert International S.A.[39] That was a case of misconduct decided under the Arbitration Act 1950. The case involved an application to set aside an award because the arbitrator had expressed a view in his award as to what his decision would have been, had he decided it, on an issue still to be determined in a subsequent award. This comment was found to amount to a decision on a matter that he had not been asked to decide and it amounted to technical misconduct and the award was set aside. The applicant then sought an order removing the arbitrator rather than one remitting the award to the same arbitrator on the grounds that it had lost all confidence in the arbitrator. The Court of Appeal, in the facts, held that remission was still appropriate but it did so having applied this test that was adumbrated by Ackner L.J. in his judgment: "Do there exist grounds from which a reasonable person would think that there was a real likelihood that [the arbitrator] could not, or would not, fairly determine the safe port issue on the basis of the evidence and arguments to be adduced before him? It seems to me that that is a satisfactory way of expressing the objective test which, to my mind, is the appropriate approach."[40] The court declined to remove the arbitrator because it concluded that all the arbitrator was doing was to provide a preliminary indication of what his view might be, subject, of course, to further argument, in order to assist the parties as to whether they really wanted a full-dress hearing involving additional expense at a later stage. Unfortunately, in error, the language adopted in the award went too far. However, that mistake was insufficient to lead a fair-minded bystander to conclude that the arbitrator, a well-known and highly experienced arbitrator in his field, could not deal with the remitted dispute with a fair and open mind. I regard the tests annunciated in these cases to be comparable and that both are applicable to this case. In exercising my discretion, therefore, I must consider, on the basis of the material before me and, in particular, the language and conclusions set out in the arbitrator's reasons supporting award no. 5, whether an objective bystander might reasonably conclude that there would be a real possibility that FGL will not obtain a fair and impartial rehearing of its costs application. In considering that question, I stress, as did the Court of Appeal in the In re Medicaments and Related Classes of Good case, that I am not concerned to pass judgment on the likelihood that this particular arbitrator would in fact be biased. The test is what the reasonable observer might conclude as being a real possibility. 9.4. Remission, Variation or Setting Aside The costs award of the arbitrator was vitiated by a number of serious errors of law. The crucial and erroneous finding that the exaggerated size of the counterclaim was such as to make this settlement impossible or extremely unlikely, was repeated on eleven occasions in the award. The relevance and materiality of some of the crucial findings to the decision that FGL should recover none of its costs was not identified and the reasoning supporting the decision to deprive FGL of all, as opposed to some, of its costs was based on more than one error of law. These were not merely technical or formal errors. They were made in relation to what had become by far the single most significant issue, as to costs, on which most of the very considerable financial consequences of the arbitration turned. Any tribunal asked to reconsider afresh its exercise of discretion in such circumstances would have difficulty in retaining the confidence of both parties, the more so given the nature and extent of the errors that have led to the need for a fresh consideration. That is why, ordinarily, an appeal court itself re-exercises a procedural or costs discretionary exercise if it has set aside the first instance decision as having been exercised on the wrong grounds. I am satisfied that FGL has shown that a remission might well result in the resulting costs rehearing failing to meet an objective test of impartiality and fairness. A particular reason for this conclusion is that the rehearing, whether by the court or the arbitrator, would have to restart from scratch. I could give detailed directions as to how that hearing should be conducted and as to the extent to which fresh material and arguments could be relied on by both parties. Indeed, both parties agree that a rehearing is needed. If, objectively, there are grounds for concern that, at the first hearing, the arbitrator showed a potential predisposition to find against FGL, such grounds would be reinforced at any such rehearing, even if it was conducted without any error of law. In these circumstances, none of the relevant factors that I must take into account would suggest that a remission is appropriate since it would have the potential for both unfairness and a lack of impartiality. A remission would also incur the additional costs and delay or a reheating before the arbitrator, which would have to be concluded within three months, with the potential for yet further costs and delay in a possible subsequent court challenge of the new award. On the other hand, I can take the necessary decision within a few weeks, confining myself to the material now on the record and to a short hearing. This would not involve me in any fact-finding exercise and would involve a discretionary weighing up of all the relevant and material factors and then forming a view as to the reasonable proportion of FGL's costs (if any) that it should recover. The exercise of varying the award will be one which will involve a consideration of what proportion of FGL's costs incurred on the counterclaim should be recoverable. No possible answer to that question would be ruled out in advance so that the final decision could be anywhere in the range from 100% to nothing. If that latter course was decided upon, the variation to the award would be to the effect that: "The court having reconsidered what costs should be recovered, it is confirmed that each party should bear its own costs of the counterclaim." Thus, the exercise by the court of a discretion would conform to section 70(2) of the Act which provides that, where the award is varied, the variation has effect as part of the award. Having reached this conclusion, I must finally consider whether I should vary the award or set it aside and leave the costs decision to be taken by a freshly appointed arbitrator. That course would maintain the primacy of the parties' decision to have their disputes resolved by arbitration but would involve even greater expenditure and delay than a remission. Thus, although the statutory precondition for setting aside, namely that it would be inappropriate to remit that question for reconsideration, has been met, variation remains a more satisfactory option to setting aside. The further question is whether it would be appropriate for the arbitrator to retain jurisdiction to assess the detailed costs of the claim and the counterclaim under section 63 of the Act and Rule 13.10 of CIMAR once the award, as varied by me, has been finalised. Both parties suggested that it would remain appropriate for the arbitrator to conduct this final stage of the dispute even if I had previously conducted a variation hearing of the costs award. I agree with this jointly held view. 10. THE PROPORTION OF FGL'S COSTS OF THE COUNTERCLAIM 10.1. Overriding Considerations In considering what proportion of its costs FGL should be entitled to recover, a number of salient facts relating to the overall nature and conduct of the arbitration must be kept in mind. Essentially, the arbitration arose out of disputes as to the quality of the kitchen and brasserie floors constructed by NEL for FGL. These disputes were wide ranging in that they covered: (1) factual disputes as to who undertook the design of the floors; (2) what NEL's contract obligations were, particularly as to the materials to be supplied and the falls to which the floors were to be laid; (3) who was the supervising officer and what approval that person had given to the quality and finish of the floors; (4) whether the works, particularly the floors, had achieved practical completion and, if so, when; (5) what defects and design deficiencies the floors had; (6) what remedial work was reasonably necessary, whether NEL had been given a reasonable opportunity to undertake that work and whether it had been prepared to do so; (7) what the reasonable measure of damages was for NEL's proved breaches of contract and what damages should be awarded; (8) what liquidated damages FGL could recover for the remedial work and for alleged loss of profit flowing from the defective work and (9) the reasonableness of the professional fees charged by JRK in its investigations and in the supervision of the remedial work that was undertaken by other contractors. The nature of these disputes and their close inter-relatedness led the parties, against the wishes of the arbitrator, to agree to apply jointly for an adjournment of the hearing and to press for a refixed hearing devoted to all issues. This request was made because both parties accepted that the issues had to be heard and determined together. However, soon afterwards, the parties and the arbitrator all agreed to hive off the loss of profit claim since that raised discrete issues which might never arise and which could and should be dealt with separately. Following that decision, neither party incurred any further costs on that issue, indeed save for minimal expenditure by NEL, only FGL had incurred any costs at all on that issue. The parties made several unsuccessful attempts to settle all counterclaim issues including, at a late stage, a mediation exercise. Sealed offers were made, on NEL's side with the intention throughout that it would not offer more than it either thought it would recover or that it had recovered, on the claim. NEL never gave thought to making an offer on the counterclaim exclusive of costs or which left the award of costs to the arbitrator. The decision to identify issues was made by the parties at a late stage and the list of issues was presented to the arbitrator as an agenda for the hearing. This was a convenient way of focusing the evidence, submissions and the award but, overall, NEL's claim dealt with at the hearing was a monetary claim for damages based on repair costs and for JRK's fees. The loss of profit claim remained effectively stayed pending an award on these other claims. The arbitrator found for FGL on certain crucial issues, particularly on the need to relay the floors and on its entitlement to recover damages based on the cost of employing other contractors to do the work. Hence, NEL lost on the issue that it should have been able to repair the floors and that FGL's damages should be limited to the notional cost of NEL undertaking those repairs. NEL won on issues relating to the use of concrete drainage channels, whether or not the floor should have been laid to floors and as to the dates of practical completion. On the issues of design and supervision, the result was effectively a draw with FGL winning on the question as to whether the work had been approved by FGL's supervisor (it had not) and NEL winning on the issue of who was the supervisor. The arbitrator made adverse comments about the conduct of FGL's principal witness, Mr Berkins, during the course of the work. Moreover, the nature of this evidence, much of which the arbitrator did not accept, required additional witnesses and hearing time which would have been saved has his recollection of events been more accurate. There was only one discrete issue which did not clearly interlink with the mass of floor issues. That related to the reasonable fees that JRK could charge. The arbitrator reduced this head of claim substantially but the overall hearing time devoted to it was not great. The arbitrator decided to separate the costs of the claim from the counterclaim. Given the separate nature of the claim from the counterclaim and the relatively small amount of costs that must have been expended by each party in preparing for and ultimately settling the claim, this was clearly a reasonable decision for the arbitrator to have taken. 10.2. NEL's Objections NEL put forward four grounds for seeking an order relieving it of any costs liability and in support of the arbitrator's costs awards. 1. NEL's Relative Success NEL contended that it had won on five of the seven issues determined by the arbitrator. This contention overlooked the fact that the list of issues had been prepared at a late stage of the arbitration and had been prepared by both parties as a means of focusing the minds of the parties and the arbitrator at the hearing. The issues were, in truth, topics to be covered by the evidence and they set out certain key areas where factual findings would be required of the arbitrator. These issues did not refer to the voluminous schedule of defects which the arbitrator also had to make findings about. The issues were not, therefore, discrete nor were they readily identifiable component parts of the counterclaim disputes. NEL's further difficulty was that it was impossible for it to give any clear or meaningful indication, even in outline, of how much of the hearing time or of the pre-hearing costs had been devoted to the issues which it claimed to have won. Finally, its so-called victories were not clear-cut, even on the issues it claimed to have won. It follows that a small but not readily identifiable proportion of FGL's costs were incurred in dealing with disputed issues and facts on which it lost and that a small reduction in FGL's recoverable costs would be appropriate on this ground. 2. Exaggerated Claims NEL relied on the finding of the arbitrator in his costs award to contend that FGL had greatly exaggerated the claims it was making. In essence, the claims refereed to were the loss of profit claim and the claim for JRK's fees. The other claims were not exaggerated although they were marginally reduced in the award. This relative lack of reduction on the defects claims arose because of the arbitrator's finding that the costs of repair could reasonably be related to the costs incurred in employing other contractors. This finding was not appealed by NEL. Clearly, an exaggerated claim can reasonably lead to a reduction or total elimination of a successful party's costs. However, ordinarily, any exaggeration must be shown to have led to an unreasonable increase in costs or to have acted as an unreasonable stumbling block to settlement. In this case, the parties attempted mediation, made several settlement offers to each other and hived off for separate determination the largest claim at an early stage. Overall, the real battle on the counterclaim related to FGL's claims for defective work. Thus, a relatively small reduction in FGL's recoverable costs is appropriate as a result of its exaggeration to take account of the marginal increase in both parties costs occasioned by the exaggeration that occurred and to mark the possible hindrance to settlement discussions that that exaggeration might have created. It follows that some relatively small reduction of FGL's costs should reasonably flow from the exaggerated elements of its claims but that reduction should be narrowly confined. 3. Mr Berkins' Conduct I have already summarised this complaint. Mr Berkins' conduct during the work was unreasonable and no doubt exacerbated the tense relationship that developed between the parties and his evidence also increased the length of the hearing and the preparation costs. However, the respects in which he was criticised cannot be said to require more than a modest reduction in FGL's costs recovery. Much of the criticism contained in the award was a direct corollary of the adverse findings of fact that were made by the arbitrator which, in turn, were a necessary concomitant of a disputed arbitration which had within it a complex factual background that had to be unravelled. 4. Cost of the Special Damages Claim Costs were incurred by FGL in preparing its accountant's report which was served at a relatively late stage and was then never used. FGL should reasonably bear its own costs of arranging for the preparation of this report. 10.3. Conclusion On analysis, NEL was principally seeking to reinstate the arbitrator's reasoning which had been so heavily based on the arbitrator's erroneous finding that FGL's conduct and its exaggerated claim had led to a situation in which it was impossible for the arbitration to be settled. If those aspects of FGL's conduct that it is reasonable to refer to and take into account are given effect to, I conclude that FGL should recover about two thirds of its costs and should bear all its accountancy expert's costs. In order to provide a reasonable and workable figure, I have rounded the recoverable percentage of FGL's costs down to 65%. 11. CERTIFICATE AND LEAVE TO APPEAL NEL seeks leave to appeal the principal questions of law that I have determined. This application is made under section 69(80 of the Act which provides that: ". . . no . . . appeal [to the Court of Appeal] lies without the leave of the court which shall not be given unless the court considers that the question is one of general importance or is one which for some other special reason should be considered by the Court of Appeal." It is clear from the decision of the Court of Appeal in Henry Boot Construction (U.K.) Ltd v Malmaison Hotel (Manchester) Ltd.[41] that this section involves a two-fold decision by me and that neither decision is subject to further review by the Court of Appeal if I decide either against NEL. I must decide whether permission to appeal should be granted (the "permission test") and I must also decide whether the disputed question or questions of law are ones of general importance or are ones which for some other special reason should be considered by the Court of Appeal (the "Act test"). Section 69(8) of the Act changes the position from that pertaining to arbitration appeals under the 1979 Act. Under the previous practice, it was for the judge at first instance to certify that a question of public importance was raised and the refusal of such a certificate was conclusive and not renewable in the Court of Appeal. However, the subsequent grant of leave to appeal, if a certificate was given, was for either the judge at first instance or for the Court of Appeal if leave was initially refused by the judge. I regard the two tests as being closely inter-linked and to be decided together albeit that they are separate hurdles for NEL to overcome. Furthermore, I regard the permission test as to whether there should be permission to appeal as being similar to the test imposed on potential litigants seeking permission to appeal a final judgment to the Court of Appeal under the CPR. That test requires the judge, or the Court of Appeal, to be satisfied that the appeal has a real prospect of success or that there is some other compelling reason why the appeal should be heard.[42][43] Since FGL's first appeal to the TCC was brought without the need for leave to have first been obtained, the relevant questions of law were never clearly spelt out. The questions of law must be ones: "arising out of an award made in the proceedings". The wording of the questions of law that arise were the subject of some debate and this wording was never finally settled. I believe that the questions that have arisen during the course of this appeal are, in summary: 1. What is the correct test for an arbitrator to apply when considering an award as to costs? 2. What is the correct test for the court to apply in considering whether a question of law arises out of a costs award? 3. Are findings or inferences of fact that were relied on by the arbitrator as the basis of his costs award which were not supported by any evidence capable of giving rise to a question of law? Did the arbitrator, in relation to the disputed findings of fact, take into account matters he should not have done, fail to take into account matters he should have done or otherwise reach a decision that no reasonable arbitrator could have arrived at. 4. Is the award of the arbitrator one which took into account matters it should not have done or failed to take into account matters it should have done? 5. In the light of the answers to the questions of law, should the costs award be set aside? 6. If the costs award is set aside, should the award be remitted or varied? In deciding that question, how should the discretion provided by section 67(7) of the Act be exercised? It can be seen from my judgment that the first three questions of law give rise to general questions of law which arise for determination under the Arbitration Act 1996 for the first time and which have a considerable bearing on arbitration costs hearings and on costs awards appeal, particularly for the many construction arbitrations conducted under the CIMAR Rules. Any judgment of the Court of Appeal will be reported and will be available for general consideration and guidance. Such guidance will be welcomed by the construction arbitration community. Furthermore, the sixth question raises a significant question or principle as to the significance to be given by the court to potential unfairness to one party if there is to be a remission when it exercises the wide powers given to it by section 67(7) of the Act following a successful appeal. There is no reported authority concerned with these questions. However, they are of some importance, particularly where the parties do not require leave to appeal, which is a situation which occurs with some frequency in construction arbitrations. I am therefore satisfied that the general questions of law are ones which satisfy the Act test that there should be a special reason for giving leave to appeal pursuant to section 69(8) of the Act. If these questions are to be made the subject of an appeal, it will be necessary for the Court of Appeal to have before it the facts and circumstances of this case and, in consequence, the remaining questions need to be considered as well and should, in consequence, also be permitted to be made the subject of a second appeal to the Court of Appeal. Since this is my view when considering the Act test provided for by section 69(8), it would be nonsensical, as I see it, if I then concluded that the permission test was not satisfied. In other words, I cannot, reasonably, decline to certify that there are other compelling reasons for a second appeal. I should record that NEL in seeking the appropriate certificate, did not include the sixth question within its application but, since I am certifying the other questions, it is right that I should include this question too and leave it to the parties, if a second appeal is brought, to decide whether to pursue that question as well. Since I have concluded that this case and the questions of law that I have been concerned with merit a certificate on broad public interest grounds, there is no need for me to express any view as to the prospects of success that nay such appeal might have and I do not do so. I conclude that leave to appeal under section 69(8) of the Act should be given to NEL for all the questions of law that have arisen on the hearing of this appeal. 12. ASSESSMENT OF COSTS OF THE SECTION 69 ARBITRATION APPLICATIONS I have carried out a summary assessment of costs using a schedule prepared by the parties which sets out the costs claimed by FGL and the responses of NEL to each item in the schedule that was disputed. My assessments were set out in that schedule which was provided separately to the parties. 13. OVERALL CONCLUSION The appeal will be allowed. The arbitrator's costs award will be varied pursuant to section 69(7)(b) of the Arbitration Act 1996 so that NEL is to pay FGL 65% of its costs of the counterclaim. Such costs are not to include the costs of and associated with the expert accountant's report. Failing agreement, such costs are to be taxed by the arbitrator. NEL shall have the leave of the court to appeal to the Court of Appeal pursuant to section 69(8) of the Arbitration Act 1996 the questions of law set out in paragraph 126 above. HH Judge Thornton QC Technology and Construction Court 2 December 2001 Note 1   [1999] ADLRJ 83.    [Back] Note 2   “Unless a contrary intention is expressed therein, every arbitration agreement shall be deemed to include a provision that the cots of the reference shall be in the discretion of the arbitrator or umpire, who may direct to and by whom and in what manner those costs or any part of them shall be paid …”.    [Back] Note 3   See Blexen Ltd v G Percy Trentham Ltd [1990] 2 EGLR 9, (CA).    [Back] Note 4   See Everglade Maritime Inc. v Schiffahrtsgesellschaft Detlef Von Appen. The “Maria” [1993] Q.B. 780, (CA) per Sir Thomas Bingham M.R. at page 789; FKI Engineering Plc v Metro-Cammell Hong Kong Limited (1996) 77 BLR 84, Judge Lloyd QC sitting on Official Referees’ Business.    [Back] Note 5   Section 1(c) of the Act which provides that the parties should be free to agree how their disputes are resolved and that the court should not intervene except as provided in Part I of the Act.    [Back] Note 6   For a short period, between 1 February 1997 and 29 April 1999, the Act was in force alongside the RSC. The CPR then came into force. No discernibly different regime was in force in this period to that now in force with the CPR but there were no reported decisions so no firm view about this may be stated.     [Back] Note 7   Section 1(c) of the Act.    [Back] Note 8   [1993] 1 Lloyd’s Rep 215 at page 231 (CA).    [Back] Note 9   [1978] 2 All ER 870. This case was decided under the pre-1979 Act procedure where costs awards were only susceptible to a misconduct application.    [Back] Note 10   See Edwards v Bairstow [1956] AC 14, (HL) and The “Nema” [1982] AC 724, (HL) at page 738 per Lord Diplock.    [Back] Note 11   Section 34(2)(f) of the Act provides that it shall be for the tribunal to decide all procedural and evidential matters including whether to apply strict rules of evidence (or any other rules) as to the admissibility, relevance or weight or any material sought to be tendered on any matters of fact or opinion.    [Back] Note 12   For a recent example of this principle being applied (in a successful judicial review of an appeal decision of the Crown Court on appeal from Licensing Justices) see R v Warrington Crown Court, ex parte RBNB (a company) [2001] 2 All ER 851 at paragraph 39.    [Back] Note 13   ibid.; [1999] CILL 1521, 24 June 1999, Dyson J, TCC, TCC website; Unreported, 16 March 2001; Judge Gilliland QC, Manchester Mercantile List.    [Back] Note 14   See The “Lucille” [1983] 1 Lloyd’s Law Reports 387, Bingham J at page 393 affirmed on appeal [1984] 1 Lloyd’s Law Reports 245, (CA).    [Back] Note 15   Everglade Maritime Inc v Schiffahrtsgesellschaft Detlef on Apen m.b.h., The “Maria”, ibid.    [Back] Note 16   Paragraphs 80 - 81 below.    [Back] Note 17   Paragraphs 61 - 64 & 68 below.    [Back] Note 18   The remainder of Rule 13.9, concerned with what is to happen if a party recovers less overall than was offered to him in settlement or compromise, was not applicable since FGL recovered more than the sums offered by way of settlement in the various without prejudice offers made by NEL.    [Back] Note 19   Paragraphs 69, 73 & 83 below.    [Back] Note 20       [Back] Note 21   Paragraphs 53 - 55 below.    [Back] Note 22   Paragraphs 72 - 74 below.    [Back] Note 23   Paragraphs 75 - 76 below.    [Back] Note 24   Paragraph 83 below.    [Back] Note 25   These passages are to be found in paragraphs 27.00, 36.00, 38.00, 45.00, 48.00, 54.00 & 62.00 of the award.    [Back] Note 26   See paragraphs 22.00, 26.00 & 25.00 of the award.    [Back] Note 27   See paragraphs 15.00 & 22.00 of the award.    [Back] Note 28   See paragraph 52 above.    [Back] Note 29   Paragraph 25 of the award.    [Back] Note 30   Paragraph 31.00 of the award.    [Back] Note 31   Paragraph 25.00 of the award.    [Back] Note 32   Paragraphs 6.00, 32.00, 65.04 and 48.00 respectively of the award.    [Back] Note 33   It is true that in paragraph 30.00 of the award the arbitrator refers to his “absolute discretion”. In context, this is a reference to his decision to treat claim and counterclaim separately and to his view that the costs of the counterclaim should be award to FGL on an “all or nothing” basis. This reference, therefore, supports the conclusion that the arbitrator was fettering his discretion by omitting consideration of an intermediate costs award.    [Back] Note 34   See paragraph 91 below.    [Back] Note 35   See River Plate Products Netherlands BV v Etablissement Coargrain [1982] 1 Lloyd’s Rep 628 and Marc Rich & Co AG v Beogradska Plovidba, The “Avala” [1994] 2 Lloyd’s Rep 363.    [Back] Note 36   (1996) 77 BLR 84 at pages 105 - 106    [Back] Note 37   Section 1(2)(a) of the Arbitration Act 1979 provided that, on the determination of an appeal, the High Court might: “confirm, vary or set aside the award or remit the award for the reconsideration of the arbitrator together with the court’s opinion on the question of law which was the subject of the appeal.”    [Back] Note 38   [2001] 1 WLR 700, (CA). The court of first instance, the Restrictive Practices Court, sat as a tribunal of three being a High Court judge and two lay members. The complaint related to the conduct of one of the lay members and the effect of the Court of Appeal’s judgment was that that a member should have recused herself. This case was not cited in argument but it confirms and states in authoritative terms the governing principle that FGL contended as being applicable.    [Back] Note 39   Paragraphs 83 - 86 of the judgment of the court.    [Back] Note 40   [1984] 2 Lloyd’s Rep. 84, (CA).    [Back] Note 41   At page 89 (left hand column).    [Back] Note 42   [2000] 3 WLR 1824, C.A.    [Back] Note 43   CPR 52.6.    [Back]

CIVIL Appellate JURISDICTION Civil Appeal No. 562 of 1985 From the Judgment and Order dated the 28th January, 1985 of the Calcutta High Court in F. M. A. T. No. 970 of 1984. Somnath Chatterjee, H. K Puri for the Appellants. N. Kacker, ,4. K Ganguli for the Respondents. The Judgment of the Court was delivered by CHINNAPPA REDDY, J Special leave granted. The West Bengal State Electricity Board is the principal appellant in this appeal by special leave which we have just number granted. The first respondent, a permanent employee of the West Bengal State Electricity Board, filed the writ petition out of which the appeal arises in the Calcutta High Court to quash an order dated march 22, 1984 of the Secretary, West Bengal State Electricity 1016 Board terminating his services as Deputy Secretary with immediate effect on payment of three months salary in lieu of three months numberice. The order gave numberreasons for terminating the services of the respondent and there was numberhing in the order which companyld possibly be said to attach any stigma to the respondent. Apparently the order was made under Regulation 34 of the Boards regulations which enables the Board to terminate the services of any permanent employee by serving three months numberice or on payment of salary for the companyresponding period in lieu there-of. The High Court companytrasted Regulation 34 with Regulation 33 which provides for the termination of services of both permanent and temporary employees of the Board on attaining the age of superannuation, as a result of the disciplinary action etc. For the sake of companyvenience we extract below Regulation 33 and the first paragraph which alone is relevant of Regulation 34 33 1 Unless otherwise specified in the appointment order in any particular case, the services of a permanent employee of the Board may be terminated without numberice- i On his attaining the age of retirement or by reason of a declaration by the companypetent medical authority that he is unfit for further service or as a result of disciplinary action if he remains absent from duty, on leave or other wise, for a companytinuous period exceeding 2 years. In the case of a temporary employee, his service may be terminated by serving of- a one months numberice on other side or on payment of a months salary in lieu thereof or b numberice on either side for the period specified in the appointment order or companytract or on payment of salary in lieu thereof, as the case may be. c the service of a temporary employee shall also be deemed to have been terminated automatically if the period of extraordinary leave without pay and or of unauthorized absence from duties exceeding s a maximum period of 90 days. 1017 34. in case of a permanent employees, his services A may be terminated by serving three months numberice or on payment of salary for the companyresponding period in lieu thereof. Contrasting Regulations 33 and 34 the High Court came to the companyclusion that Regulation 34 was arbitrary in nature and suffered from the vice of enabling discrimination. The High Court, therefore, struck down the first paragraph of Regulation 34 and as a companysequence quashed the order terminating the services of the first respondent. The learned companynsel for the West Bengal State Electricity Board submitted that Regulation 34 did number offend Art. 14 of the Constitution, that sec. 18A and 19 of the Electricity Supply Act laid down sufficient guidelines for the exercise of the power under Regulation 34 and in any case the power to terminate the services of a permanent employee was vested in higher ranking officials and might be expected to be exercised in a reasonable way. We are number impressed with the submission of the learned companynsel for the Board- On the face of it, the regulation is totally arbitrary and companyfers on the Board a power which is capable of vicious discrimination- It is a naked hire and fire rule, the time for banishing which altogether from employer-employee relationship is fast approaching. Its only parallel is to be found in the Henry VIII class so familiar to administrative lawyers In Moti Ram Deka v. North East frontier Railway l Rules 148 3 and 149 3 of the Indian Railway Establishment Code were challenged on the ground that they were companytrary to Art. 311 2 of the Constitution. The challenge was upheld though numberopinion was expressed on the question whether the rule offended art 14 of the Constitution. Since then Art. 14 has been interpreted in several decisions of this Court and companyferment and exercise of arbitrary power on and by the State or its instrumentalities have been frowned upon and struck down by this companyrt as offending Art. 14. In S. S. Muley v. J.R. T Tata and Ors. 2 P. B- Sawant, J- of the Bombay High Court companysidered at great length Regulation 48 a of the Air India Employees Service Regulations which companyferred similar power on the Corporation AIR 1964, S C. 600. 2 1979 2 S.L.R. 438. 1018 as Regulation 34 companyfers on the Board in the present case. The learned judge struck down Regulation 48 a and we agree with his reasoning and companyclusion. In Workman, Hindustan Steel Ltd. v. Hindustan Steel Ltd. l this Court had occasioned to hold that a Standing Order which companyferred such arbitrary, uncanalised and drastic power to enable the employer to dispense with an inquiry and to dismiss an employee, without assigning any reason, by merely stating that it was expedient and against the interest of the security to companytinue to employ the workman was violative of the basic requirement of natural justice. The learned companynsel for the appellant relied upon Manohar P. Kharkhar v. Raghuraj 2 to companytend that Regulation 48 of the Air India Employees Service Regulations was valid.

Bose, J. This judgment will govern Civil Appeals Nos. 146 and 147 of 1952 as well. We will first deal with the questions that are companymon to them all. They arise out of three petitions made in the Bombay High Court for writs of mandamus under article 266 of the Constitution. The writs have been granted and the State of Bombay appeals. The facts are these. The Governor of Bombay, acting through the Assistant Controller of Accommodation, issued orders under section 6 4 a of the Bombay Land Requisition Act, 1948, in Civil Appeals Nos. 145 and 146 of 1952 and under section 5 1 in Civil Appeal No. 147 of 1952, requisitioning the premises of the three respondents. The question is whether these orders are ultra vires. They are attacked on a number of grounds the first of which goes to the root of the matter. It is companytended that these two sections are ultra vires articles 19 1 f and 31 2 of the Constitution. The respondents are either the owners or the tenants of the premises requisitioned. In Civil Appeal No. 145 of 1952 the respondents are uncle and nephew. The uncle, who is the first respondent, is the tenant. The second respondent in his nephew. He and his family live with the first respondent in the requisitioned premises. In Civil Appeal No. 146 of 1952 the premises are owned by a trust. The first and second respondents are the trustees and the third respondents claims to be a licensee living on the premises. The State of Bombay companytends that he is a tenant but that is numberlonger of companysequence because of the assurance given by the learned Attorney-General that the possession of the petitioners in this case will number be disturbed for any reason arising out of these proceedings. In Civil Appeal No. 147 of 1952 there is only one respondent, a private limited companypany which occupies the requisitioned premises as a tenant for the purposes of its business. The Act of 1948 would have expired in April, 1950, but its life was extended by Bombay Act II of 1950. Later, sections 5 and 6 were amended by Bombay Act XXXIX of 1950. As the later Acts were after the Constitution and as the life of the main Act was extended after the Constitution came into force, it is said that they are all hit by article 19 1 f and 31 2 , firstly, because the restrictions imposed on the right to hold, acquire and dispose of property are neither reasonable number in the interests of the general public and, secondly, because the Act does number require that there should be a public purpose. We will first deal with Civil Appeals Nos. 145 and 146 of 1952 where tenants and licensees are companycerned. In our opinion, article 19 1 f does number apply to them. In The State of West Bengal v. Subodh Gopal Bose 1954 S.C.R. 587 , and Dwarkadas Shrinivas of Bombay v. The Sholapur Spinning and Weaving Co. Ltd. Others 1954 S.C.R. 674 , the majority of the Judges were agreed that articles 19 1 f and 31 deal with different subjects and companyer different fields. There was some disagreement about the nature and scope of the difference but all were agreed that there was numberoverlapping. We need number examine those differences here because it is enough to say that article 19 1 f read with clause 5 postulates the existence of property which can be enjoyed and over which rights can be exercised because otherwise the reasonable restrictions companytemplated by clause 5 companyld number be brought into play. If there is numberproperty which can be acquired, held or disposed of, numberrestriction can be placed on the exercise of the right to acquire, hold and dispose of it, and as clause 5 companytemplates the placing of reasonable restrictions on the exercise of those rights it must follow that the article postulates the existence of property over which these rights can be exercised. In our opinion, this was decided in principle in A. K. Gopalan v. The State of Madras 1950 S.C.R. 88 , where it was held that the freedoms relating to the person of a citizen guaranteed by article 19 assume the existence of a free citizen and can numberlonger be enjoyed if a citizen is deprived of his liberty by the law of preventive or punitive detention. In the same way, when there is a substantially total deprivation of property which is already held and enjoyed, one must turn to article 31 to see how far that is justified. It was argued as against this that this rule can only apply when there is a total deprivation of property and article 19 1 f cannot be excluded if there is the slightest vestige of a right on which the article can operate. This has also been answered in substance in Dwarkadas Shrinivas of Bombay v. The Sholapur Spinning and Weaving Co. Ltd. Others 1954 S.C.R. 674 . These articles deal with substantial and substantive rights and number with illusory phantoms of title. When every form of enjoyment which numbermally accompanies an interest in this king of property is taken away leaving the mere husk of title, article 19 is number attracted. As was said by one of us in Dwarkadas Shrinivas of Bombay v. The Sholapur Spinning and Weaving Co. Ltd. Others 1954 S.C.R. 674 , at page 734 - By substantial deprivation is meant the sort of deprivation that substantially robs a man of those attributes of enjoyment which numbermally accompany rights to, or an interest in, property. The form is unessential. It is the substance that one must seek. In the present case, the right to occupy the premises has gone as also the right to transfer, assign, let or sub-let. What is left is but the mere husk of title in the leasehold interest a forlorn hope that the force of this law will somehow expend itself before the lease runs out. That brings us to article 31. The Act provides for companypensation in section 8, so all we have to see is whether the requisition was for a public purpose. The main Act is pre-Constitution and at that time there were numberfundamental rights, accordingly it is understandable that the Act as then framed did number require or specify a public purpose but despite that it did say, in the preamble, whereas it is expedient to provide for the requisition of land, and sections 5 and 6 as number amended companytain the words for the purpose of the State or any other public purpose. Our present Chief Justice Mahajan J. as he then was pointed out in The State of Bihar v. Maharajadhiraja Sir Kameshwar Singh of Darbhanga 1952 S.C.R. 889, 940 that - It is unnecessary to state in express terms in the statute itself the precise purpose for which property is being taken, provided from the whole tenor and intendment of the Act it companyld be gathered that the property was being acquired either for purposes of the State or for purposes of the public and that the intention was to benefit the companymunity at large. Following that decision we hold that the Act is number invalid for this reason. We number turn to the orders of requisition. They can only be upheld if they companyform to the provisions of the Act. The first question, therefore, is, whether they were made for a State or public purpose as set out in sections 5 1 and 6 4 ? Civil Appeals Nos. 145 and 146 of 1952 have similar orders. We will examine them first. They are of different dates but in each case the order runs Whereas, on inquiry, it is found that the premises specified below had become vacant on or after - the month of May 1950. Now, therefore, in exercise of the powers companyferred by clause a of sub-section 4 of section 6 of the Bombay Land Requisition Act, 1948 Bom. XXXIII of 1948 the Government of Bombay is pleased to requisition the said premises etc. The petitions in these two cases were filed on the 30th and 4th of April, 1951, respectively. Affidavits in reply were made on the 18th and 19th of June, and then in August, 1951, the following order was served on the petitioners In companytinuation of the order dated etc the Government of Bombay is pleased to declare that the premises mentioned in that order were requisitioned for a public purpose, namely housing a person having numberhousing accommodation on the date of the said order cited above. It was argued that this subsequent specification of the purpose is of numberavail and that in any case it is an evident afterthought and number true. In our opinion, it is number necessary to set out the purpose of the requisition in the order. The desirability of such a companyrse is obvious because when it is number done proof of the purpose must be given in other ways and that exposes the authorities to the kind of charges we find here and to the danger that the Courts will companysider them well founded. But in itself an omission to set out the purpose in the order is number fatal so long as the facts are established to the satisfaction of the Court in some other way. The underlying principle of our decision in Biswabhusan Naik v. The State of Orissa applies here. In the present set of cases there is proof of a public purpose. It is given in the affidavits made on behalf of the State and in the subsequent orders just quoted, namely to house the homeless. At that time the housing situation in Bombay was acute, largely due to the influx of refugees. Questions of public decency, public morals, public health and the temptation to lawlessness and crime, which such a situation brings in its train, at once arose and the public companyscience was aroused on the ground of plain humanity. A race of proprietors in the shape of rapacious landlords who thrived on the misery of those who companyld find numberdecent roof over their heads sprang into being. Even the efficiency of the administration was threatened because Government servants companyld number find proper accommodation. Milder efforts to companye with the evil proved ineffective. It was necessary therefore for government take more drastic steps and in doing so they acted for the public weal. There was companysequently a clear public purpose and an undoubted public benefit. An attempt was made in argument to view the matter narrowly by companycentrating on the individual and picking hole in isolated passages in the affidavit in reply. The argument was as follows. The facts are taken from the affidavit. In the year 1947 the Government of Bombay passed the Bombay Land Requisition Ordinance and invited applications for the allotment of vacancies from the general public. So far a general public purpose for the public good may be inferred. But the proper working of this scheme depended on the companyoperation of the landlords and tenants who were required by the law to give numberice of vacancies in occupation as they arose. It was found that in a very large number of cases this was number done with the result that much of the accommodation which should have been available for distribution was suppressed. Government accordingly introduced another class of beneficiaries, namely, those who gave information about what it called suppressed vacancies and numberinal occupation. It was decided to allot premises thus discovered to be vacant to the first informant provided he genuinely needed accommodation. The allottees in the present appeals are from that class. Despite this it was found that the number of applications so far exceeded the number of vacancies that there was number enough accommodation even for Government servants and Government purposes. Accordingly, in 1949, and again in 1950, Government declared that it would number companysider further applications from the public as it had decided to restrict the allotments to Government and other public purposes. The result is that at the time of the present allotments there was numberintention to benefit the public at large but to keep a privileged preserve for government servants, and in order to put pressure on landlords and tenants to disclose vacancies which companyld be added to this privileged pool rewards were handed out to houseless first informers by giving them the vacancies they were instrumental in discovering. This, it was hoped, would show landlords and tenants that suppression did number pay and so they might as well obey the law, and that, in turn, would enable Government to benefit the only privileged class of persons it had any real intention of benefiting, namely its own officers and servants. This companyclusion is strengthened by the fact that when the decision about suppressed vacancies and first informers was made in 1947, and again when the Bombay Land Requisition Act was passed in 1948, there was numberneed for a public purpose. So runs the argument. Another argument was that in the affidavit in reply the State of Bombay says that the purpose of the legislation was to effect an equitable distribution. The policy of the Government was that having regard to the fact that but for such intimation a vacancy would number have companye to light at all, it was fair and just and companyducive to an equitable distribution of accommodation that the premises should be allotted to the first informant provided he genuinely needs accommodation. It was companytended, and the companytention prevailed in the High Court, that a decision to set apart a section of the much needed vacancies for the use of spies and informers as a reward for their services, whether their need was as great as that of other houseless persons or number, was number equitable, and as the purpose of the legislation was said was said to be the equitable distribution of vacant accommodation this fell outside its scope. In our opinion, this is number a proper approach to the problem. The Constitution authorises requisitions for a public purpose. The purpose here is finding accommodation for the homeless. If therefore a vacancy is allotted to a person who is in fact houseless, the purpose is fulfilled. It might be possible to attack a given allotment on other grounds, such as fraud, invidious discrimination, nepotism, bribery or companyruption, but numbere of that is alleged here. All that is said is that there was numberpublic purpose. A wide discretion must be left to Government to carry out the policy of the Act. If the number of vacancies is small and the number of the homeless large, it is evident that there must be some picking and choosing. So long as this is done on broad lines of principle and reasonably, the Courts cannot interfere simply because other methods are also possible, even if the Courts think they are better, for in the end Government must be left to determine which of many possible schemes is the best. Government had to weigh many companyflicting factors the urgency of the situation, the need of reasonable dispatch, the expenditure of public funds which would be inevitable on long and protracted inquiries about the private affairs of thousands of applicants for accommodation, the maintenance of public morale by ensuring that the honest landlord who did his duty did number suffer as against the dishonest person who suppressed his vacancies and made large and illicit profits under his puggree and in addition the equitable maxim that equity helps the vigilant. We hold that neither the order of requisition number the order of allotment in Civil Appeals Nos. 145 and 146 of 1952 is ultra vires. In Civil Appeal No. 146 of 1952 a further question arises. Under the Act only premises to which a special meaning is given within the meaning of section 4 3 can be requisitioned. It was urged that the premises in this case were number premises within the meaning of that definition, so it was said they companyld number be requisitioned. The question turns on whether the premises were let or intended to be let. The learned trial Judge threw the burden of proof on the State Government and told its learned companynsel that he should proceed to prove this fact if he so desired. He replied that he did number intend to lead any evidence. It was explained to us that Government took up this attitude as it wanted a decision about where the burden lay as the question arises companytinually and cannot be decided when both parties adduce evidence. The learned Attorney-General gave an assurance that the possession of the petitioners in this case would number be disturbed all he wanted was a decision on the point. In the absence of any companynter evidence the learned trial Judge accepted the fact proved by the petitioners affidavit and decided the matter in their favour. On appeal the learned Chief Justice of the Bombay High Court and Bhagwati J. upheld the view of the learned trial Judge Tendolkar J. In our opinion, the burden was wrongly placed. The petitioners came to Court with the allegation that Government had passed an illegal order against them. On the face of it, the order is number illegal. Government has authority under the law to make such orders, and prima facie the order companyplies with the provisions of the statute. It was therefore the duty of the petitioners to show that the order was illegal. This is particularly so here as the question whether the petitioners had let or had intended to let the building or a part of it was matter on which they had special means of knowledge. However, in view of the learned Attorney-Generals assurance, there is numberneed to go into this matter any further. This appeal will accordingly be dismissed because of the assurance given and there will be numberorder about companyts throughout. In Civil Appeal No. 147 of 1952, the order of requisition was under section 5 1 but the same questions arise. As in the other two cases, numberpublic purpose is mentioned and, as before, a second order setting out the purpose, housing a person without accommodation, was made in August, 1951. For the reasons already given, we held that there was a public purpose and that the orders here were valid. The only other question, namely, whether a mandamus can issue number, becomes unnecessary. Civil Appeals Nos. 145 and 147 of 1952 are allowed and the petitions in these two cases will be dismissed but here also there will be numberorder about companyts throughout. Civil Appeal No. 146 of 1952 will be dismissed because of the undertaking given by the learned Attorney-General, and the order of the High Court will stand. In view of this we need number decide whether a mandamus can or should have been issued.

V.RAVEENDRAN, J. The appellant runs a barge repair workshop on a private land at Oudossim, Cortalim on the banks of river Zuari within the jurisdiction of Panaji Port. According to the appellant, there are two types of barge workshops one is dry dock workshop, and the second is where the barges anchored in the river along side the workshop are repaired. Appellants workshop falls under the second category as it undertakes repair of barges only when the barge is floating above the waterline. About 1300 sq. mtrs. of the river area adjoining the workshop is used by the anchored barge under repair. The Zuari being a tidal river, the water level therein recedes during low tide and rises back during high tide. Consequently, the barge under repair moored alongside the river bank, would settle on the riverbed during low tide and rise with the water during high tide. Appellant opened its workshop in the year 1983, after securing a NOC dated 25.7.1983 from the Captain of Ports, Government of Goa. The said NOC was renewed every year. On 29.8.1989, the appellant sought an amendment to NOC seeking permission to manufacture fishing trawlers etc. The Captain of Ports sent a reply dated 15.11.1989 calling upon the appellant to settle the outstanding dues rental charges for use of river area adjoining the workshop before companysidering the request for issue of a modified NOC. Appellant replied on 27.11.1989 stating that it was number using any government land to repair barges, and all its activities were carried on within its own plot and therefore the question of any dues did number arise. Some years later, the Captain of Ports issued a show cause numberice dated 15.5.1992 alleging that the appellant was using government riverine land for the workshop without paying the prescribed rental charges, in spite of demand letter dated 15.11.1989, and therefore, the appellant should show cause why the NOC issued to it on 25.7.1983 for setting up the workshop, which was being renewed every year, should number be revoked or withdrawn for number-payment of the outstanding rental charges for use of the government riverine land from 1983. The demand was reiterated on 13.7.1992. By letter dated 1.11.1993, the Captain of Ports informed the appellant that unless there was companypliance with the demand, action will be taken to revoke the NOC and evict the appellant. In view of the said threat, the appellant, without prejudice to its rights and under protest, sent a payment of Rs.145000/- on 25.9.1995 stating that the amount paid was calculated with reference to the use of 1000 sq.m. of river area. The appellant filed W.P. No.131/1996 companytending that it was number liable to pay any rent and the demand was illegal. It challenges the validity of the amendments to Goa, Daman Diu Port Rules, 1983, providing for payment of rental charges. Alternatively, it companytended that even if the said Amendment Rules were valid and there was any liability under the said Rules, the rental charges would be payable only from 3.3.1994 when the 1994 amendment to the said rules came into force. It therefore prayed a for a declaration that the Goa Ports Amendment Rules, 1992 and Rule 54A of the Goa Ports Amendment Rules, 1994 were ultra vires the Indian Ports Act, 1908 b for quashing the demand for rental charges by letter dated 1.11.1993 and c for a direction to the respondents to refund the amounts paid by appellant towards rental dues. The High Court by a companymon order dated 11.4.2001, dismissed the appellants writ petition and other similar petitions. It found that the challenge was only to the 1992 and 1994 amendments and number to the unamended Goa, Daman and Diu Port Rules, 1983 that the Port Authorities were entitled to levy rental charges on open land from the date when the said Rules came into force on 15.4.1984 , under Rule 64 read with Entry 21 4 A-iv in the First Schedule of the said Rules that the term open land included riverine land and the amendments to the rules in 1992 and 1994 merely clarified the said pre-existing position and that as the power to levy rental charges was number created for the first time under the 1992 or 1994 amendment to the rules, but existed even under the unamended rules which were number challenged, the appellant companyld number avoid liability to pay the rental charges demanded. The said judgment is challenged in this appeal by special leave. Relevant Legal Provisions Before adverting to the companytentions of the parties, it will be useful to refer to the relevant provisions of law. 5.1 The Indian Ports Act, 1908 Act for short extends i to the ports mentioned in the First Schedule to the Act ii to the ports navigable rivers channels companyered by previous enactments relating to ports and iii to other ports or parts of navigable rivers and channels to which the Act is extended by the Government in exercise of the power companyferred under the Act vide section 1 2 of the Act . Section 3 companytains the definitions and clause 4 thereof defines port as including also any part of a river or channel in which the said Act, for the time being, is in force. Section 4 relates to power of the Government to extend or withdraw the Act or certain provisions thereof. It reads as under Power to extend or withdraw the Act or certain portions thereof Government may, by numberification in the Official Gazette, - a extend this Act to any port in which this Act is number in force or to any part of any navigable river or channel which leads to a port and in which this Act is number in force b specially extend the provisions of section 31 or section 32 to any port to which they have number been so extended c withdraw this Act or section 31 or section 32 from any port or any part thereof in which it is for the time being in force. A numberification under clause a or clause b or sub-section 1 shall define the limits of the area to which it refers. Limits defined under sub-section 2 may include any piers, jetties, landing-places, wharves, quays, docks and other works made on behalf of the public for companyvenience of traffic, for safety of vessels, or for the improvement, maintenance or good government of the port and its approaches whether within or without high-water-mark, and, subject to any rights of private property therein, any portion of the shore or bank within fifty yards of high-water-mark. In sub-section 3 the expression high-water-mark means the highest point reached by ordinary spring tides at any season of the year. Section 5 enabled the Government to alter the limits of any port in which the Act is in force. 5.2 By numberification dated 29.11.1967, issued in exercise of the power companyferred under section 4 of the Act, the government extended the Act to several ports in Goa, Daman, Diu, including the Port of Panaji and also specified the areas companyprised in the said port and limits thereof. As per the numberification, the Panaji Port would include number only the port, but all the waters of rivers Mandovi, Mapusa and Naroa as also the waters of river Zuari eastward of the Agassaim - Cortalim ferry. 5.3 Section 6 enabled the Government to make such rules, companysistent with the Act, as it thinks necessary, for any of the following purposes a for regulating the time and hours at and during which, the speed at which, and the manner and companyditions in and on which, vessels generally or vessels of any class defined in the rules, may enter, leave or be moved in any port subject to this Act b for regulating the berths, stations and anchorages to be occupied by vessels in any such port xxxxxx e for regulating vessels whilst taking-in or discharging passengers, ballast or cargo, or any particular kind of cargo, in any such port, and the stations to be occupied by vessels whilst so engaged ee for regulating the manner in which oil or water mixed with oil shall be discharged in any such port and for the disposal of the same xxxxx f for keeping free passages of such width as may be deemed necessary within any such port and along or near to the piers, jetties, landing-places, wharves, quays, docks moorings and other works in or adjoining to the same, and for marking out the spaces so to be kept free g for regulating the anchoring, fastening, mooring and un-mooring of vessels in any such port h for regulating the moving and warping of all vessels within such port and the use of warps therein for relating the use of the mooring buoys, chains and other moorings in any such port xxxxxx jj for regulating the use of piers, jetties, landing places, wharves, quays, warehouses, and sheds, when belonging to the government and for fixing the rates to be paid for the use of the same. m for enforcing and regulating the use of signals or signal-lights by vessels by day or by night in any such port n for regulating the number of the crew which must be on board any vessel afloat within the limits of any such port o for regulating the employment of persons engaged in cleaning or painting vessels, or in working in the bilges, boilers or double bottoms of vessels in any such port. Note By Amendment Act 15/1997, clause jj was substituted by clauses jj and jja which read as follows jj for regulating the use of piers, jetties, landing places, wharves, quays, warehouses and sheds when belonging to the government jja for fixing the rates to be paid for the use of piers, jetties, landing places, wharves, quays, warehouses and sheds of any port, other than a major port, when belonging to the government 5.4 In exercise of the powers companyferred under section 6 read with sections 33, 35, 46 and 47 of the Indian Ports Act, 1908, the Lieutenant Governor of Goa, Daman and Diu made the Goa, Daman and Diu Ports Rules, 1983 Rules for short . Rule 64 relates to levy of port dues and other fees and provides Port dues and other fees shall be levied at all the ports at the rates specified in the Schedule. The First Schedule to the said rules prescribes the schedule of fees and dues chargeable under the said rules. Entry 21 relates to fees chargeable for occupation of godowns, sheds, platforms and open plots. Item A-iv prescribed a fee of Rs.10 per sq.m. for occupation of open plots. Note F thereto provided that the occupation of open space shall be subject to the companyditions imposed by the Port Authority under the Rules. The Rules were amended by the Amendment Rules, 1992, whereby item 4 A-iv of Entry 21 of the First Schedule relating to open plots, was amended to include the words and or open riverine land after the words open plots. 5.5 The Rules were next amended by the Amendment Rules, 1994 whereby the following Rule 54A was inserted A Use of Government riverine land - 1 No Government riverine land shall be used for any purpose by any person without prior written permission of the Captain of Ports and without making advance payment of rental charges at the rate of Re.1/- per sq. metre per month. Whoever uses the Government riverine land in companytravention of the provision of sub-rule 1 shall be punishable with fine which may extend to Rs.1500/- or imprisonment of one year or both. Whoever companytinues to use Government riverine land as aforesaid and fails to restore it to its pristine companydition after receipt of a written order to that effect form the Port Authority, shall, in addition to the fine specified in sub-rule 2 , be liable to pay an amount of Rs. 150/- per day till such use stopped and such land restored to its pristine companydition. Simultaneously, clause ff was inserted in Rule 2 companytaining definitions, by the Amendment Rules 1994, whereby the term Government riverine land was defined as meaning any land falling within or without high-water mark and, subject to any rights of private property therein, any portion of a shore or bank, within 50 yards of high water mark. 5.6 The Goa Barge Tax Act, 1973 was enacted to impose a tax on barges in Goa, Daman and Diu. Section 3 of the said Act provides that a tax at the rates fixed by the government shall be levied and companylected on all barges used or kept for use in Goa, Daman and Diu. Contentions of the respondents The demand for rental charges was authorized, legal and justified. Rule 64 of the Rules read with Entry 21 4 A-iv of the First Schedule thereto enabled and authorized the port authorities to levy and companylect charges for occupation of any open land at all ports. The term open land includes riverine land also. The amendment to the Rules in 1992 and 1994, expressly providing for levy of charges for use of open riverine land, were merely clarificatory. The appellant having voluntarily paid the rental charges demanded, is estopped from challenging the validity of the levy of rental charges. The term port extends to the part of river Zuari as numberified and the riverbed of such part of the river when exposed for whatever period during a day, on account of low tide, becomes open land under the companytrol of the port and therefore, anyone using such land for whatsoever purpose, is liable to pay the charges as prescribed under Entry 21 4 A-iv of the First Schedule to the Rules. When Government riverine land forms part of any landing place mentioned in clause jj of section 6 of the Act, the government has the power to regulate the use of government riverine land and levy fees charges for use of such government riverine land. Under the Act, the port authority has very wide powers of supervising and regulating the affairs of the port and all activities in the areas falling within the jurisdiction of the port including movement of crafts, licencing of crafts, loading and wharfage and other related matters. Clause jj of section 6 of the Act enabled the government to make rules for the use of and fixing the rates to be paid for the use of piers, jetties, landing places, wharves, quays, warehouses and sheds. In view of it, the government companyld make rules regulating the use of government riverine land and also fix and recover the charges for use of such government riverine land. The amount sought to be recovered is neither a tax number a fee, but a charge levied for use of government property. The source of authority for levy of such a charge is derived in part from the ownership and partly with reference to the statutory rules. While levy of tax and fee would require express authority or sanction of law, claiming rental charges for permitting user does number require such express authority as it is incidental to the right of ownership and supervision. Therefore, even without reference to the Rules, the port authority was entitled to demand and recover rental charges for use of government property. Contentions of the appellant Open land does number refer to river, riverbed or river surface. Nor is it a riverine land. Therefore, under the Rules as originally made and brought into effect on 5.4.1984, there was numberpower to levy any rental charges in regard to riverine land. Section 6 is specific about the matters in regard to which rules companyld be made by the government. Clause jj of section 6 specifically authorizes the government to make rules regulating the use of piers, jetties, landing places, wharves, quays, warehouses and sheds of any port, when belonging to the government and for fixing the rates for the use thereof. Riverine land which is part of riverbed which gets exposed during low tide, is neither a pier, number a jetty, landing-place, wharf, quay, warehouse or shed. Therefore, the Government has numberpower to make rules either for regulating the use of Government riverine land or for fixing the rates to be paid for the use of such Government riverine land. The amendment to the Rules in 1992 and 1994, providing for levy of a charge or fee for the use of riverine land is therefore ultra vires the provisions of the Act. All barges using the river pay a barge tax. Therefore, numberseparate fee or charge can be levied for use of any river space for anchoring or mooring any barge in any part of the river. Landing place refers to a land abutting the river or other navigable water, used for loading and unloading of goods or for embarking or disembarking of passengers or the terminus of a road on a river or other navigable water for the purpose of loading, unloading, embarking or disembarking. In short, landing place, is a place where people can embark disembark and or where goods can be loaded unloaded, from or into a vessel. The term landing place is used along with the words piers, jetties, wharves, quays, warehouses and sheds which are all associated with loading, unloading and storing of goods or embarking and disembarking of passengers. Clause jj of section 6 authorizes the State Government to make rules regulating the piers, jetties, landing places, wharves, quays, warehouses and sheds, and number government riverine land which is a part of the river bed which gets partially exposed for a few hours in a day during the low tide period. Alternatively, even assuming that the amendments to the Rules, made in 1992 and 1994 were valid, and therefore, there was power to levy charges on Government riverine land, such levy companyld be only be prospective when the rules were specifically amended in 1994 with effect from 3.3. 1994 authorizing and enabling the Port Authorities to levy charges for use and occupation of such Government riverine land. Therefore, the demands and forcible recovery under threat and companyrcion, of such charges for the period 1983 to 3.3.1994 was wholly illegal and companysequently any amount recovered in respect of such period is liable to be refunded. Questions for decision On the companytentions raised, the following questions arise for our companysideration Whether the appellant, whose workshop is situated on the banks of river Zuari, used government riverine land. Whether the amendments to the Goa, Daman and Diu Port Rules, 1983, by the Amendment Rules, 1992 and 1994, relating to levy of rental charges for the use of government riverine land is ultra vires the provisions of the Indian Ports Act, 1908? Whether the Goa, Daman and Diu Ports Rules, 1983 companyfers authority on the Port Authorities to demand and recover rental charges for the use of government riverine land, even before the amendment by the Amendment Rules of 1992 and 1994. Whether the Port Authorities have the power and authority to claim rental charges for the use of government riverine land, retrospectively for the period 5.4.1984 to 3.3.1994? Re Question i The Indian Ports Act applies to Panaji Port. It is number disputed that the workshop of appellant falls within the port limits of Panaji Port, in view of the extended definition of the word port in Ports Act and the numberification dated 29.11.1967 defining the areas falling within Panaji Port. The barge boat repair workshop of appellant, situated on the bank of river Zuari used exclusively, portion of the river adjoining the workshop for berthing beaching mooring the barges boats which came for repairs. The barges boats that were repaired in appellants workshop were moored that is made fast by attaching a cable or rope to a fixed object on the shore or the bank of the river along side the workshop during high tides. The barges boats would settle down on riverbed during low tide. The barges boats remained moored for periods extending from few hours to even a few weeks, depending upon the extent and nature of repairs to be carried out. Consequently, that portion of the river surface during high tides and riverine land during low tides alongside the workshop companyld number be used by anyone else for berthing, mooring, anchoring, or navigating. Thus, a portion of the river and the riverbed below, belonging to the government, alongside the appellants workshop was regularly and exclusively used by the appellant for the mooring of barges boats which companye for repairs. If several such areas of the river adjoining the banks were demarcated and put to exclusive use by private workshops and Boat operators without any regulation, it will affect the river traffic, navigation and mooring of vessels in the river. The port authorities have to ensure that numberstructures are erected in the river, that rivernine land is number encroached, that siltation does number occur, and that there is numberpollution by workshops or industries situated on the banks of the river. All these are incidental to the permission given by the port authorities to operate a workshop by berthing barges and other vessels in the river, alongside the workshop and carry out and undertake repairs. The term landing place is number defined in the Act or the Rules. Landing place refers to a place on a river or other navigable water for loading and unloading of goods, or for receiving and delivering of passengers. The term landing place is used in this sense in Rules 34, 38, 40, 41, 42, 54 and 55 of the Port Rules. But the term landing place would refer number only to places earmarked or designated or specified as landing places, but to any and every place which is used as a landing place. Berthing of barges and other vessels in the river, alongside the workshop, for repairs would mean that there will be regular movement of men and material from the berthed vessel to the workshop and vice versa. Any area with a prepared berth in which craft can lie, can properly be described as a landing place. See - Blacks Law Dictionary, Strouds Judicial Dictionary . In effect, therefore, the river side of every warehouse or workshop on the banks of a river, which has a prepared berth in which vessels craft can lie, with facilities for unloading or loading of men and material, will be a landing space, though number a designated landing place. The river surface during high water period and river bed during low water period alongside the workshop, belonging to the government will also be a part of such landing place workshop. A boat barge repairing workshop situated on the river bank, can therefore, be said to be using the government riverine land. Re Questions ii iii Section 6 of the Act enables the Government to make rules in respect of the several matters enumerated therein. This includes regulation of the time and hours at and during which, the speed at which, and the manner and companyditions in and on which, vessels generally or vessels of any class defined in the rules, may enter, leave or move in any port regulation of the berths, stations and anchorages to be occupied by vessels in any such port regulation of vessels whilst taking-in or discharging passengers, ballast or cargo, or any particular kind of cargo, in any such port regulation of the manner in which oil or water mixed with oil can be discharged in any such port regulation of traffic and maintaining free passages of such width as may be deemed necessary within any such port and along or near to the piers, jetties, landing places, wharves, quays, dock moorings and other works in or adjoining to the same regulation of anchoring, fastening, mooring and un-mooring of vessels in the port regulation of the moving and warping of all vessels within any such port and the use of warps therein regulation of the use of the mooring buoys, chains and other moorings in the port regulation of the use of piers, jetties, landing places, wharves, quays, warehouses and sheds belonging to the Government and fixation of the rates to be paid for the use of any port facility or any part of the port. It is thus clear that the scope and ambit of supervision and companytrol of the port authorities under the Ports Act in regard to areas declared as ports, is very wide. As numbericed above, section 6 jj of the Act, in particular, enables the State Government to make rules for regulating the use of landing places, piers, jetties, wharves, quays, warehouses and sheds belonging to the Government and fixing the rates to be paid for the use of the same. It is numberdoubt true that the landing place in the usual sense refers to the river bank alongside the river used for loading unloading or embarking/ disembarking and number any portion of the river itself. But where the bank of the river used for the workshop is a private land, and the area of river adjoining such workshop or riverine land alongside the workshop where the vessel is moored and remains floating during high water period or settles on the riverbed during low water period, is also a part of the landing place. When the entire river and the riverbed belong to the government and is under the companytrol of port authorities, and when exclusive use of a part of such river area riverine land adjoining the river bank is permitted by the port authorities, they can demand a fee for such regular or exclusive use, whether such use is companytinuous and intermittent. The right or authority to demand such charges can also be traced to the right to regulate the use of the port area. The port area as numbericed above includes the waters of the river and the riverine land. The state is therefore empowered to make rules regulating the use of the river surface riverine land alongside the workshop and also prescribe a rental charge for such use. We may in this companytext refer to the decision of this Court in State of Rajasthan vs. Municipal Board, Allahabad 1992 Supp 3 SCC 91 where the question whether a Municipality which had a right to regulate user of public street, had the right to realize Tehbazari or ground rent from hawkers, shopkeepers and other squatters on the patri on the public street, was companysidered. Section 220 of the UP Municipalities Act, 1916 which governed the issue provided that numberitinerant, vendor or other persons shall be entitled to use or occupy any public street or place for the sale of articles or for exercise of any calling or for setting up any booth or stall without the permission of the Municipal Board given in accordance with the bye-laws, numberwithstanding any right or privilege previously acquired, or accrued or enjoyed. This Court held that the number obstante clause superimposed the right of the municipality to regulate the user of public street by venders and other persons and companysequently, the municipality has the right to realize ground rent from them. We therefore hold that the 1992 amendment and the 1994 amendment to the Goa, Daman and Diu Ports Rules, 1983 which enable the Port Authorities to levy, charge and recover a fee or charge for using open Government riverine land from the person who is permitted to use such Government riverine land is within the rule making power of the State, and cannot therefore be said to be ultra vires the rules making power under the Act. In fact, even without specific rules, the port authorities in exercise of domain over riverine land and the river, companyld object to or prohibit the exclusive mooring by vessels which call at the workshop. The port authorities can also enter into an arrangement of lease licence with the users of such riverine land demarcated river surface alongside the workshop or establishment. But in the absence of specific rules and in the absence of stipulation of any special companydition when granting permission, the persons permitted to have their establishment on private land on the banks of the river falling within the port area , companyld well presume that the permission to have their establishment, included implied permission to use the riverine land river alongside their establishments. Be that as it may. Re Question iv The term government riverine land is defined under Rule 2 ff inserted with effect from 3.3.1994. It refers to any land within fifty yards of high water mark subject to any right to private property therein including a any land falling within high water mark b any land falling without or alongside the high water mark c any portion of a shore or a bank. Even river bed which is companyered by water during the high water period, and exposed during the low water period, is therefore riverine land. In fact several enactments have defined land submerged in water as land for the purposes of those enactments. Therefore, we do number see why land or river bed which is companyered by water during only a part of the day and exposed to the sky during the remaining hours of the day cannot be treated as land or riverine land for purposes of the Act. But in the absence of a special or deeming definition, the term open plot cannot be read as referring to the river bed which is companyered by water for part of the day and exposed for remaining part of the day. Open plot refers to a plot of land which is open to sky. A land which is companyered by any companystruction or water, cannot obviously be termed as an open plot. When the Rules were brought into force on 5.4.1984, there was numberprovision for levy of any fee or charge for use of riverine land. The Rules only provided for a fee for the occupation of open plots. Only by the 1992 amendment, the words open riverine land was added under Entry 21 4 A-iv of the First Schedule so as to subject the occupation of open riverine land to payment of fees. Prior to the 1992 amendment, the First Schedule to the Rules did number provide for levy of any fees for occupation of riverine land. However, it was only by the 1994 amendment, with effect from 3.3.1994, the Rules were amended by inserting clause ff in Rule 2 companytaining the definition of government riverine land and by inserting Rule 54A specifically providing that numbergovernment riverine land shall be used, without prior written permission of the Captain of Ports and without making advance payment of rental charges at the prescribed rate. Therefore, prior to the said amendment to the Rules in 1994, neither the Act number the Rules authorized or enabled the Government to levy any fee charge for use of government riverine land. It is true that ever since 1989, Port Authorities were making sporadic demands from the workshops and other units situated on the banks of the river and making use of the river riverbed for payment of some fee. Some users also paid the amounts demanded. But several users did number pay the amount and refused to pay the amount on the ground that the Port Authorities had numberright to demand the same. Some of companyrse, paid the amount without prejudice or under protest, when threatened with cancellation or withdrawal of NOC for running the workshop. Therefore, the fact that the Port Authorities were demanding a fee for use of riverine land even prior to 1992/1994 or that some workshop owners were paying such amount, did number mean that the demand was lawfully made in pursuance of authority vested in them to make such demand, or that the persons on whom the demands were made, were bound to pay the same. It is clear that when various workshop owners on whom demand was made for such payment refused, pointing out the absence of authority for demand thereof, the State thought it fit to amend the Rules. Initially, it amended the Rules by adding the words and or open riverine land in Entry 21 4 A-iv with effect from 13.7.1992. The addition of the words and or open riverine land to open plots clearly implies that open plots did number include open riverine land. At all events, any riverine land which is companyered by water for nearly half the day, cannot obviously be referred to as an open plot. Therefore, it is evident that before the 1992 amendment, there was numberprovision in the rules for demanding any fee charge for use of the riverine land. Even after the 1992 amendment, it was found that there was some companyfusion as open riverine land had number been defined. The numbermal meaning of riverine land is riparian land, that is, land adjacent to along the banks of the river. Whether the riverbed itself which was number companyered by water during a part of each day, companyld be companysidered as riverine land, was obviously still an issue. Therefore, the Rules were again amended in 1994 inserting the definition of government riverine land which included number only the portion of the bank within fifty yards of high-water-mark but also the land falling within the high-water-mark. The 1994 amendment also made a special provision under section 54A for use of government riverine land. We may next companysider whether the 1992 and 1994 amendments to the rules were retrospective in operation. In Zile Singh vs. State of Haryana - 2004 8 SCC 1, this Court held It is a cardinal principle of companystruction that every statute is prima facie prospective unless it is expressly or by necessary implication made to have a retrospective operation. But the rule in general is applicable where the object of the statute is to affect vested rights or to impose new burdens or to impair existing obligations. Unless there are words in the statute sufficient to show the intention of the legislature to affect existing rights, it is deemed to be prospective only. emphasis supplied The amendment rules do number provide that they are retrospective in operation. Nor do the circumstances warrant such an inference. In fact, the companytention of the respondents is number that power to levy fees charges for use of riverine land was created vested in the port authorities, by virtue of the amendment rules and that such power was given to levy fees charges retrospectively. The companytention has been that the power to levy fees charges existed ever since the Rules came into force on 5.4.1984 and that position was merely clarified by the amendment rules in 1992 and 1994. We have already held that the amendment rules of 1992 and 1994 are number clarificatory, but are provisions investing the port authorities with the power to levy and companylect charges for occupation of government riverine land. Therefore, the demand for charges for use of government riverine land is valid only from 3.3.1994. Therefore the Port Authorities companyld number demand or recover any amount for the period prior to 3.3.1994. The Port Authorities are therefore liable to refund any amount recovered within three years prior to the date of the writ petition. Obviously, any amount paid during a period beyond three years from the date of the writ petition, is number recoverable as barred by delay and laches. We therefore allow these appeals in part as follows The amendment of Entry 21 4 A-iv in the First Schedule, and insertion of Rule 54A and clause 2 ff by the Goa, Daman and Diu Ports Amendment Rules, 1992 and Goa, Daman and Diu Ports Amendment Rules, 1994, are upheld.

Judgment of the Court of First Instance (First Chamber) of 12 July 1991. - Automobiles Peugeot SA and Peugeot SA v Commission of the European Communities. - Competition - Distribution of motor vehicles - Block exemption regulation - Provisional measures. - Case T-23/90. European Court reports 1991 Page II-00653 Summary Parties Grounds Decision on costs Operative part Keywords ++++ 1. Competition - Administrative procedure - Ending of infringements - Adoption of provisional measures - Powers of the Commission - Conditions of exercise (Council Regulation No 17, Art. 3(1) ) 2. Competition - Agreements, decisions and concerted practices - Prohibition - Block exemptions - Regulation No 123/85 - Intermediaries between the distributor and the final user - Conditions - Exclusion of professional intermediaries - Prima facie not permissible (Commission Regulation No 123/85, Art. 3(11); Commission communication of 12 December 1984) 3. Competition - Administrative procedure - Ending of infringements - Adoption of provisional measures - Prior finding of a prima facie infringement (Council Regulation No 17, Art. 3(1) ) 4. Competition - Administrative procedure - Ending of infringements - Adoption of provisional measures - Urgency - Balance of all the interests involved (Council Regulation No 17, Art. 3(1) ) 5 Procedure - Costs - Applicable rules - Applicability ratione temporis Summary 1. It is for the Commission, in the exercise of the supervisory powers conferred on it by the Treaty and by Regulation No 17, to decide pursuant to Article 3(1) of that regulation whether it is appropriate to take interim measures when asked to do so. However, such measures must be provisional and be restricted to what is necessary in the circumstances of the case and must come within the framework of the final decision which may be adopted. The Commission remains within that framework by requiring a supplier of motor vehicles to refrain, within certain limits, from complying with a circular which gives various instructions to the dealers in its distribution system until a decision is given on the substance, since that decision concerns the question whether or not that circular constitutes an infringement of Article 85(1) of the EEC Treaty. 2. By providing that the block exemption created by Regulation No 123/85 for certain distribution agreements in the motor-vehicle sector is to apply also where the distributor undertakes "to sell motor vehicles within the contract programme or corresponding goods to final consumers using the services of an intermediary only if that intermediary has prior written authorization to purchase a specified motor vehicle and, as the case may be, to accept delivery thereof on their behalf", Article 3(11) of that regulation intends to preserve the possibility of the intervention of an intermediary provided that there is a direct contractual relationship between the distributor and the final user. No provision whatsoever is made for the possibility of refusing to register orders for vehicles placed by an intermediary and to supply such vehicles to it. Since there was nothing in the position taken by the Commission, either in its communication of 12 December 1984 or in its reaction to an informal notification of a draft circular originating from a manufacturer and addressed to its distributors, to give the impression that such a refusal was permissible in relation to intermediaries acting in a professional capacity, it cannot be considered that by adopting a provisional measure requiring that manufacturer to refrain from having its distribution system prohibit the meeting of orders from such an intermediary, which it regards as being in breach of Article 85(1) of the Treaty, the Commission undermined the principle of legal certainty. 3. Where the Commission decides to adopt provisional measures under Article 3 of Regulation No 17, it is not required to establish a prima facie infringement of the competition rules with the same degree of certainty as that required for a final decision. 4. A case of urgency exists, justifying the adoption of provisional measures under Article 3(1) of Regulation No 17, prohibiting a motor-vehicle manufacturer from implementing certain measures intended to hamper the business of an undertaking acting as an intermediary in the motor trade where the effect of their application would be that the very existence of that intermediary would be jeopardized even though its business is in any event liable to have only a minimal impact on the operation of the manufacturer' s distribution system, in view of the fact that those measures limit the intermediary' s business to its previous volume. 5. Since they are in part a matter of substantive law in so far as they directly affect the interests of the parties to the proceedings, the rules to be applied for the apportionment of costs are those of the Rules of Procedure which are in force at the time when the oral proceedings are closed and the case enters the deliberation stage and not those in force on the date of delivery of judgment, that date in any event being uncertain. Parties In Case T-23/90, Automobiles Peugeot SA and Peugeot SA, companies governed by French law and having their registered offices in Paris, represented by Xavier de Roux, of the Paris Bar, with an address for service in Luxembourg at the Chambers of Jacques Loesch, 8 Rue Zithe, applicants, v Commission of the European Communities, represented initially by Jacques Bourgeois, Principal Legal Adviser, then by Giuliano Marenco, Legal Adviser, acting as Agents, assisted by Francis Herbert, of the Brussels Bar, with an address for service in Luxembourg at the office of Guido Berardis, a member of its Legal Service, Wagner Centre, Kirchberg, defendant, supported by Eco System SA, a company governed by French law, having its registered office in Rouen, France, represented by Robert Collin, of the Paris Bar, and Nicolas Decker, of the Luxembourg Bar, with an address for service in Luxembourg at the latter' s Chambers, 16 Avenue Marie Thérèse, Bureau Européen des Unions de Consommateurs (BEUC), an international association governed by Belgian law, represented by Philip Bentley, Barrister, of Lincoln' s Inn, and Konstantinos Adamantopolous, of the Athens Bar, both of Messrs Stanbrook and Hooper, Brussels, with an address for service in Luxembourg at the Chambers of A. Kronshagen, 12 Boulevard de la Foire, and United Kingdom, represented by Hussein A. Kaya, acting as Agent, with an address for service in Luxembourg at the British Embassy, 14 Boulevard Roosevelt, interveners, APPLICATION for the annulment of the Commission Decision of 26 March 1990 in a proceeding under Article 85 of the EEC Treaty (IV/33.157 Eco System/Peugeot - Provisional measures), THE COURT OF FIRST INSTANCE (First Chamber), composed of: J.L. Cruz Vilaça, President, R. Schintgen, D.A.O. Edward, H. Kirschner and R. García-Valdecasas, Judges, Registrar: H. Jung, having regard to the written procedure and further to the hearing on 17 April 1991, gives the following Judgment Grounds The facts 1 The contested decision was adopted following a complaint submitted to the Commission by Eco System on 19 April 1989 against Automobiles Peugeot SA and three of its authorized resellers in Belgium on the ground that, since March 1989, they had created obstacles which prevented Eco System from carrying on business in Belgium and Luxembourg as an agent acting on behalf of French final consumers prepared to buy Peugeot vehicles through it. In its complaint, Eco System also asked the Commission to adopt provisional measures putting an end to the serious damage caused to it by the aforementioned obstacles. 2 On 9 May 1989, Peugeot SA distributed a circular, through the subsidiary companies of Automobiles Peugeot SA, asking approved dealers and resellers in France, Belgium and Luxembourg to suspend deliveries to Eco System and no longer to register orders for new Peugeot vehicles from Eco System whether on its own account or on behalf of its principals. About three weeks earlier the text of that circular had been sent to the Commission. 3 On 27 November 1989, the Commission initiated against Automobiles Peugeot SA and Peugeot SA the procedure provided for by Regulation No 17 of 6 February 1982, the First Regulation implementing Articles 85 and 86 of the EEC Treaty (Official Journal, English Special Edition 1959-1962, p. 87). 4 By decision of 26 March 1990, the Commission ordered Peugeot SA and Automobiles Peugeot SA, on pain of periodic penalty payments, to send within two weeks to all their dealers and agents a letter suspending the operation of the circular of 9 May 1989 until a final decision had been adopted in the main proceedings commenced following the complaint by Eco System and fixed a quota - 1 211 vehicles a year and no more than 150 a month - for the transactions which Eco System might, during the same period, conduct on behalf of its customers and on the basis of a prior written authorization, with the Peugeot distribution system, and to which the applicants could not object. Finally, the Commission ordered the applicants to instruct the approved members of their distribution system in France, Belgium and Luxembourg to inform it of the number and models of vehicles sold through Eco System. 5 In its decision, the Commission justified the adoption of the provisional measures by the finding, based on the facts established, that there was a sufficient likelihood of an infringement of Article 85(1) of the EEC Treaty, that serious and irreparable damage was likely to be caused to Eco System unless conservatory measures were ordered and in consequence that it was urgent that such measures should be adopted. 6 In fixing the annual volume of transactions which Eco System might conduct with the Peugeot distribution system while those measures applied, the Commission relied on the volume of transactions achieved during the 12 months preceding 9 May 1989, the date on which the aforementioned circular from Peugeot was sent out. The monitoring of those transactions was to be carried out by dual notification: on the one hand by the dealers concerned to the Commission - which in turn would inform Peugeot without disclosing the identity of the buyer - and, on the other, by Eco System which would concurrently inform the Commission, as it had undertaken to do at the Commission' s request for such purposes as might be appropriate. 7 The Court also takes note of the fact that on 25 August 1985 Eco System had lodged a first complaint against Peugeot-Talbot SA concerning the refusal by dealers in the Peugeot distribution system in Belgium to sell new vehicles to it. The investigation of that complaint, which gave rise to several requests for information and the taking of a provisional position by Commission officials, was brought to an end when, on 18 January 1988, Eco System withdrew its complaint. Procedure 8 By application received at the Registry of the Court of First Instance on 24 April 1990, Automobiles Peugeot SA and Peugeot (hereinafter jointly referred to as "Peugeot") brought the present action under the second paragraph of Article 173 of the EEC Treaty for the annulment of the Commission Decision of 26 March 1990 in a proceeding under Article 85 of the EEC Treaty (IV/33.157 Eco System/Peugeot - Provisional measures). 9 By a separate document received at the Registry of the Court of First Instance on the same day the applicants also made application under Article 186 of the EEC Treaty for suspension of the operation of the contested decision. 10 By order of 21 May 1990, the President of the Court of First Instance dismissed that application. 11 By order of the Court of First Instance (First Chamber) of 5 July 1990, Eco System SA was granted leave to intervene in support of the defendant. By orders of the Court of First Instance (First Chamber) of 24 September 1990, the Bureau Européen des Unions de Consommateurs (BEUC) and the United Kingdom were granted leave to intervene in support of the defendant. 12 Upon hearing the report of the Judge-Rapporteur, the Court of First Instance (First Chamber) decided to open the oral procedure without any preparatory inquiry. The parties presented oral argument and replied to questions put to them by the Court at the hearing on 17 April 1991. At the end of the hearing, the President declared the oral procedure closed. 13 In their application, the applicants claim that the Court should: (i) annul the decision of the Commission of the European Communities of 26 March 1990; (ii) order the Commission to pay the costs. 14 The Commission contends that the Court should: (i) dismiss the application as unfounded; (ii) order the applicants to pay the costs. 15 Eco System contends that the Court should: (i) dismiss the application as unfounded; (ii) order the applicants to pay the costs. 16 The Bureau Européen des Unions de Consommateurs (BEUC) contends that the Court should: (i) dismiss the application as unfounded; (ii) order the applicants to pay the costs, including those incurred in respect of BEUC' s intervention. 17 The United Kingdom contends that the Court should: (i) dismiss the application as unfounded; (ii) order the applicants to pay the costs, including the costs occasioned by the United Kingdom' s intervention. The substance 18 In support of their claims, the applicants rely essentially on two pleas in law. First, they claim that, since the Commission did not establish in law any prima facie indication of an infringement, it was not empowered to adopt provisional measures. Their second plea in law is that the Commission produced no evidence of urgency or of any serious and irreparable damage to Eco System. 19 Before considering the applicants' arguments in support of their claim that the contested decision should be annulled, this Court notes that, as the Court of Justice held in its order in Case 729/79 R Camera Care v Commission [1980] ECR 119, it is for the Commission, in the exercise of the supervisory powers conferred on it by the Treaty and by Regulation No 17, to decide pursuant to Article 3(1) of Regulation No 17 whether it is appropriate to take provisional measures when asked to do so. However, such measures must be of a temporary and conservatory nature and be restricted to what is required in the circumstances of the case. 20 Moreover, as the Court of Justice also made clear in its judgment in Joined Cases 228 and 229/82 Ford v Commission [1984] ECR 1129, the provisional measures which the Commission may adopt on a temporary basis must come within the framework of the final decision which may be adopted by the Commission. 21 In the present case, in reviewing the legality of the Commission' s decision, this Court must establish in the first place whether the Commission was entitled, in its decision, to take the view that, at first sight, Peugeot' s conduct, in ordering its dealers to refuse to sell to a duly authorized trade intermediary, exceeded the limits allowed to it by the applicable provisions of Community law, thus giving rise to serious doubts as to its compatibility with those provisions. 22 It must also consider whether the measures ordered are of a temporary and conservatory nature and are restricted to what is necessary to uphold the effective exercise of the Commission' s right of decision, in other words whether there was an urgent need to adopt them in order to avoid, pending the adoption by the Commission of a decision on the substance of the case, any risk that serious and irreparable damage might, in the absence of provisional measures, result from continuation of the practices at issue. A - The plea as to the failure to establish, in law, any prima facie indication of an infringement 23 In the applicants' view, the Commission has misinterpreted the Community provisions and exceeded the bounds of its powers. That view is essentially based on four arguments. 24 The applicants claim, first, that Commission Regulation (EEC) No 123/85 of 12 December 1984 on the application of Article 85(3) of the Treaty to certain categories of motor vehicle distribution and servicing agreements (Official Journal 1985 L 15, p. 16) exempts from the application of Article 85(1) of the Treaty exclusive and selective distribution agreements concluded in the motor vehicle sector, provided that they meet several conditions laid down in that regulation, particularly in Article 3(11) thereof, which provides that the exemption is also to apply where the distributor undertakes "to sell motor vehicles within the contract programme or corresponding goods to final consumers using the services of an intermediary only if that intermediary has prior written authorization to purchase a specified motor vehicle...". According to the applicants, those conditions are included in the standard dealership contract which Peugeot concludes with its distributors. 25 Furthermore, since in its Communication 85/C 17/03 of 12 December 1984 concerning its Regulation No 123/85 (Official Journal 1985 C 17, p. 4, hereinafter referred to as "the communication of 12 December 1984"), the Commission interpreted Article 3(11) of Regulation No 123/85 as meaning that an intermediary "who carries on an activity equivalent to that of a reseller" cannot rely on Article 3(11) and may be subject to the restrictions imposed by the manufacturer on those conditions, the applicants consider that they were fully entitled to take the view, prima facie, that the business of Eco System was equivalent to that of a reseller within the meaning of the Commission' s communication. In their view, Eco System offers consumers an alternative source of Peugeot vehicles under conditions equivalent to those of any car dealer, since it gives commitments as to the maximum prices and delivery times for such vehicles, makes payment itself for the vehicle that it obtains for the final customers, finds and offers financing for the purchase and opens sales outlets, in particular on supermarket premises (in this instance, at "Carrefour" stores) where vehicles are displayed. It follows that the measures taken by Peugeot in the circular of 9 May 1989 with a view to protecting its selective distribution system are, at first sight, compatible with the exemption granted by Regulation No 123/85. 26 In reply, the Commission states first that, in its judgment in Case 10/86 VAG France v Établissements Magne [1986] ECR 4071, the Court of Justice stated, with respect to Regulation No 123/85, that agreements restricting competition which are capable of affecting trade between Member States are automatically void, unless the provisions of Article 85(1) have been declared inapplicable by the Commission in accordance with Article 85(3). 27 In the defendant' s view, it is essential, to give real effect to the final consumer' s possibility of buying a vehicle from any member whatsoever of the approved distribution system in any Member State whatsoever, that the final consumer should be able to use the services of an intermediary to whom prior written authorization has been given in order to purchase and, if appropriate, accept delivery of a specified vehicle. There is no provision in Regulation No 123/85 to indicate whether the intermediary authorized by the final consumer to purchase a vehicle on his behalf and for his account should act as such by way of trade or on an occasional basis. 28 The intervener, Eco System, states that the legal framework for the occupation of motor trade agent is set out in Regulation No 123/85. According to Eco System, that regulation lays down the three essential conditions under which selective distribution is compatible with Article 85 of the EEC Treaty. First, freedom of choice for the final consumer, within the territory of the Community, as to where he decides to buy his vehicle; secondly, the placing of improper obstacles in the way of any such purchase is prohibited; and finally, the final consumer is entitled to use the services of a professional intermediary who offers assistance for the purchase of a vehicle in another Member State. Moreover, in Eco System' s opinion, to exclude a professional agent from the benefit of Regulation No 123/85 would be tantamount to preventing a final consumer from obtaining the desired vehicle at the best price from any approved dealer in any Member State as a result of the many steps to be taken and the complex formalities to be completed in order to move a motor vehicle from one Community country to another. 29 At the hearing, Eco System denied that it held any stock of cars for display and sale purposes. The only cars in its possession were those bought on behalf and for account of its principals. It was only during the short period between the arrival of the vehicles and the completion of the administrative formalities necessary before delivery to the owners that those vehicles remained within the control of Eco System and might have been displayed at its premises. Only one Peugeot vehicle, lent by one of Eco Systems principals, had in fact been displayed at the Carrefour stores, and then only for a period of about 10 days. The applicants did not challenge those statements. 30 The United Kingdom submits that there appears to be a strong prima facie case of infringement of the competition rules since it is clear from the express words of Article 3(11) of Regulation No 123/85 that the exemption conferred by that provision does not apply to the withholding of supplies in circumstances where an intermediary has prior written authorization to purchase a specified motor vehicle and, as the case may be, to accept delivery of it on behalf of final consumers, 31 It must be borne in mind that, in implementation of Article 85(3) of the EEC Treaty, Regulation No 123/85 declares Article 85(1) inapplicable to certain categories of distribution and sales and after-sales service agreements in respect of motor vehicles provided that those agreements fulfil a number of conditions laid down in the regulation. 32 Pursuant to Article 3(11) of Regulation No 123/85, the exemption granted under Article 85(3) of the EEC Treaty also applies where the dealer undertakes "to sell motor vehicles within the contract programme or corresponding goods to final consumers using the services of an intermediary only if that intermediary has prior written authorization to purchase a specified motor vehicle and, as the case may be, to accept delivery thereof on their behalf". 33 It is apparent from the scheme of that provision that its aim is to preserve the possibility of the involvement of an intermediary provided that there is a direct contractual relationship between the dealer and the final consumer. That contractual relationship must, according to Regulation No 123/85, be established by a prior written authorization given by the buyer of the vehicle to the intermediary. 34 In its circular of 9 May 1989, Peugeot instructed its dealers, first, not to register in respect of Peugeot vehicles that were new or had been registered for less than three months orders placed by Eco System either on its own behalf and for its own account or on behalf and for account of its principals, and, secondly, not to supply any such vehicles to it. 35 It must be emphasized that Article 3(11) of Regulation No 123/85 does not envisage the possibility of refusing to register orders for vehicles placed by an intermediary and to supply such vehicles to it where it is acting on behalf and for account of its principals. 36 It has not been shown in the present case, even as regards the vehicles displayed on its premises and at Carrefour stores, that Eco System made any approach to dealers in the Peugeot distribution system otherwise than within the framework of the authorizations granted to it by final consumers. 37 The Commission was therefore right to consider that, at first sight, the said circular did not meet the conditions laid down by Article 3(11) of Regulation No 123/85 in order to escape the prohibition laid down by Article 85(1) of the EEC Treaty. 38 Secondly, the applicants claim that the Commission also contravened the principle of legal certainty in that it departed from the interpretation which it had itself given of Article 3(11) of Regulation No 123/85 in its communication of 12 December 1984. That breach of the principle of legal certainty was exacerbated, in the applicants' view, by the fact that in the present case the draft circular had been submitted in advance to the competent Commission officials and they had not objected to it. 39 The Commission considers that the applicants' argument concerning legal certainty, with reference to the communication of 12 December 1984, is inapposite since that communication merely made it clear that where an intermediary acts on behalf of a final consumer, the provisions of Article 3(10) and (11) of Regulation No 123/85 do not allow the members of an approved distribution system to be prohibited from supplying him. The Commission adds that, even if it were the case that the communication went further than the text of Article 3(11) in that an intermediary with proper authorization might be denied deliveries, that communication could not in any circumstances take precedence over the legislative content of Regulation No 123/85. 40 As regards the complaint concerning the fact that the draft circular had been submitted in advance to the competent Commission officials, the Commission observes that the draft was sent on or about 18 April 1989, on a personal basis, to Mr Cadieux, Deputy Director-General in the Directorate-General for Competition (DG IV). Since he had replied that he would have the circular examined by his officials in order to identify the problems raised by it, on 25 April 1989 Peugeot indicated to Mr Cadieux that the circular in question was to be regarded as having been sent on an official basis. In reply, Mr Cadieux stated that he was not able to take any position on the matter since his officials had not yet completed their examination. 41 The Commission also states that the very fact of sending the circular undermines the applicants' thesis, according to which the content of the circular was clearly covered by the interpretation of the provisions of the regulation given in the communication of 12 December 1984. It adds that the applicants should have notified the circular to it in the prescribed manner in order to guarantee absolute legal certainty regarding the need for any reaction on the part of its officials. 42 The intervener, Eco System, observes in that regard that, contrary to the applicants' contention, in its communication of 12 December 1984 the Commission clearly defined the cases in which sales may be legitimately refused to certain third parties and the case in which a duly authorized third party may not be prevented from conducting its business. The second part of paragraph I.3 of the communication draws a distinction between, on the one hand, certain activities in respect of which a refusal to sell is justified and, on the other, an activity in respect of which no such refusal is justified, and there can be no doubt, in the light of Regulation No 123/85, that a third party whose existence has been disclosed in advance to the dealer within the distribution system and who acts on behalf and for account of the final consumer must be allowed to conduct his business without being obstructed. 43 The intervener, BEUC, submits that Regulation No 123/85, in particular Article 3(10) and (11) thereof, is sufficiently clear for it to be unnecessary to refer to the interpretation of it given in the communication of 12 December 1984. In any event, in BEUC' s opinion, that communication cannot alter the content of the regulation since the Commission cannot enter into commitments which conflict with legislative provisions. BEUC also states that Peugeot had already been alerted to the illegality of its conduct by a letter - produced in the proceedings by the defendant with its rejoinder - of 15 June 1987 from Mr Stoever, Head of Department in Commission DG IV, which was sent to Peugeot-Talbot SA in the course of the investigative procedure commenced following the complaint lodged by Eco System on 25 October 1985 (see paragraph 7, above). BEUC thus concludes that the applicants were aware that even if the communication had some legal value, which was not the case, it would not enable them to refuse to sell motor vehicles to the customers of an agent with prior written authorization. 44 The United Kingdom considers that the Commission communication cannot derogate from the provisions of Regulation No 123/85 which, on its proper construction, does not purport to do so. The United Kingdom therefore considers that Peugeot' s arguments in that regard, if upheld, would deprive Article 3(11) of the regulation of much of its force and would seriously limit the scope for professional intermediaries to operate in that field. 45 In view of those matters of fact and law, and without its being necessary at this stage to make any judgment as to the legal value of the communication of 12 December 1984 or the interpretation to be given of the term "activity equivalent to that of a reseller", this Court observes that, according to the very terms of the Commission communication, "The European consumer must be able to make use of the services of individuals or undertakings to assist in purchasing a new vehicle in another Member State" (paragraph I.3). There is no immediately apparent reason why the final consumer should not be able to use a professional intermediary for the purchase of a new vehicle. The only obligation imposed by Article 3(11) of Regulation No 123/85 on an intermediary or final consumer - an obligation mentioned also in paragraph I.3 of the communication - is to give the dealer within the distribution system prior written evidence that the intermediary, in buying and accepting delivery of a vehicle, is acting on behalf and for account of the final consumer. 46 Prima facie, it cannot therefore be concluded that, by referring to "... a third party (who) carries on an activity equivalent to that of a reseller", the communication of 12 December 1984 purported to exclude professional intermediaries with prior written authorization from the buyer. 47 It must also be emphasized that, although they disclosed the draft circular to the Commission about three weeks before it was sent to the dealers in the Peugeot distribution system, the applicants did not effect a formal notification for the purpose of obtaining an individual declaration that Article 85(1) did not apply to that circular. In the present case, only such a notification would have placed the Commission staff under an obligation to reply and, thus, to afford the applicants the legal certainty upon which they seek to rely in relation to the legality of the contested circular under Article 85 of the EEC Treaty and Regulation No 123/85. In any event, after receiving the complaint lodged by Eco System and the draft circular from Peugeot, the Commission twice asked the applicants to provide information and subsequently sent them, on 6 December 1989, two statements of objections concerning the imposition of provisional measures and the main proceedings respectively. 48 Finally, it must be pointed out that, as is apparent from the abovementioned letter from Mr Stoever of 15 June 1987, the applicants already knew the views of the Commission officials regarding the assimilation of the activities of certain intermediaries to those of an unapproved reseller and in particular regarding the expression "activity equivalent to that of a reseller" used in the communication of 12 December 1984. Paragraph 3.2 of that letter clearly stated that "provided that an intermediary assumes the type of entrepreneurial risk that is appropriate for a service undertaking and not an entrepreneurial risk of the kind ... appropriate to the business of buying and reselling, the business of that intermediary cannot be described as an 'activity equivalent to that of a reseller' within the meaning of the communication...". In that letter, the Commission officials came to the conclusion that Peugeot and the undertakings in its distribution system should refrain from withholding deliveries or having deliveries withheld from intermediaries such as Eco System, which had proper authorization, and asked Peugeot to send a circular giving notice of that fact to the members of its distribution system in Belgium and Luxembourg. 49 It follows from the foregoing that the applicants have no grounds for alleging that the contested decision is in breach of the principle of legal certainty. 50 The applicants claim, thirdly, that according to a decision of the Court of Justice (Joined Cases 228 and 229/82 Ford, cited above, paragraphs 19 and 22), the measures that the Commission may adopt on a provisional basis must come within the framework of the final decision which may be adopted and consequently that the Commission has no authority to convert, by means of a provisional decision, a condition to which the grant or maintenance of an exemption is subject into a separate enforceable order which leaves no choice to the undertaking concerned. However, that, they claim, is what the Commission did in adopting the contested decision. 51 The Commission, whilst recalling that the Ford judgment was given prior to the entry into force of Regulation No 123/85, observes that the present situation is wholly different from the one underlying that judgment; in the present case, the provisional decision falls precisely within the framework of the envisaged final decision. According to the Commission, the final decision entails, in addition to a finding that the circular constitutes an infringement of Article 85(1) of the EEC Treaty, the withdrawal for the countries in question (Belgium, Luxembourg and France) of the benefit of the exemption granted by Regulation No 123/85, the possibility of such a withdrawal being envisaged in Article 10(2) of that regulation. 52 BEUC states in that regard that the concerted practice which the circular of 9 May 1989 is intended to put into effect does not fall within the scope of the block exemption granted by Regulation No 123/85 and, moreover, was not the subject of any application for individual exemption. BEUC considers that, in those circumstances, the Commission may confine itself to finding an infringement of Article 85(1) of the Treaty, with respect to that practice, regardless of any withdrawal of the benefit of the block exemption for the standard exclusive dealership agreement. A provisional measure compelling the undertakings concerned to bring an infringement to an end falls, in BEUC' s opinion, entirely within the framework of the final decision which may be adopted. 53 The United Kingdom maintains that the provisional measures adopted fall within the framework of any final decision which the Commission may adopt and that the present situation is totally different from that under consideration in the Ford case. 54 It must be borne in mind that, as was held in the Ford judgment (paragraph 19), "the interim measures must come within the framework of the final decision which may be adopted by virtue of Article 3" of Regulation No 17. In that case, the Court of Justice emphasized that since the main proceedings were concerned with the dealer agreement between Ford AG and its dealers, an order intended to bring to an end a refusal to deliver, which, "according to the Commission, does not infringe either Article 85 or Article 86 of the Treaty" did not come within the framework of any final decision that the Commission might adopt under Article 3(1) of Regulation No 17 (paragraphs 20 and 21). 55 In the contested decision, on the other hand, the Commission confines itself, in a procedure under Article 3 of Regulation No 17 intended to appraise the legality of the circular sent by Peugeot to its dealers in the light of Article 85(1) of the EEC Treaty and, more particularly, the provisions of Regulation No 123/85, to requiring the applicants to refrain, within the limits set by the decision itself, from complying with that circular until a decision is given on the substance, in other words partially and temporarily to return to the previous situation as regards the registration of orders and the supply of vehicles to Eco System, an intermediary acting on behalf and for account of its principals. 56 By contrast with the situation examined by the Court of Justice in the Ford case, the contested circular in this case constitutes the subject-matter of the main proceedings. The final decision which the Commission will have to take on conclusion of the proceedings concerns the question whether or not that circular constitutes an infringement of Article 85(1) of the EEC Treaty. 57 It follows that the conservatory measures adopted by the Commission come within the framework of the final decision to be adopted by it and, consequently, that the applicants have no grounds for criticizing the Commission for converting, by means of those measures, a condition to which the maintenance of an exemption is subject into a separate enforceable order. 58 Finally, the applicants claim that the Commission was not empowered to take provisional measures since the situation was not sufficiently clear as a matter of law and the Commission has not shown that there was any particular likelihood of the existence of an infringement. They refer, in support of their views, to the Opinion of Advocate General Sir Gordon Slynn in the Ford cases (cited above, at p. 1168) and the order made by the President of the Court of First Instance in the present case (order of 21 May 1990 in Case T-23/90 Peugeot v Commission [1990] ECR II-195), according to which certain issues in the present case raise serious problems of interpretation. 59 The Commission, whilst criticizing the applicants for deliberately misconstruing the terms of the order of the President of the Court of First Instance out of their context, replies that the effect of their views is to place on exactly the same footing both the requirement of a prima facie infringement in relation to a decision prescribing provisional measures and the requirement of certainty in relation to the final decision, an approach which is contrary to consistent case-law of the Court of Justice (orders in Case 3/75 R Johnson and Firth Brown v Commission [1975] ECR 6; Case 232/81 R Agricola Commerciale Olio Srl and Others v Commission [1981] ECR 2199; Case 42/82R Commission v France [1982] ECR 856; and Case T-23/90R Peugeot, cited above). The defendant thus concludes that such problems of interpretation as may arise regarding the term "activity equivalent to that of a reseller" are not in any way incompatible with a finding of a prima facie infringement which enables provisional measures of limited scope to be adopted. 60 In the United Kingdom' s view, there appears to be a strong case that Peugeot' s conduct is in breach of the EEC Treaty competition rules. The Commission therefore acted correctly in taking the action that it did pending final determination of the relevant factual and legal issues. 61 It must be pointed out that in proceedings relating to the legality of a Commission decision imposing provisional measures, the requirement of a finding of a prima facie infringement cannot be placed on the same footing as the requirement of certainty that a final decision must satisfy. 62 As this Court states in paragraph 37 above, the circular that Peugeot sent to its dealers does appear, at first sight, to exceed the bounds permitted by Regulation No 123/85 and in particular Article 3(11) thereof, since it undermines the possibility of final consumers obtaining vehicles through a third party to whom they give prior written authorization. 63 The Commission was thus fully entitled to take the view that, at first sight, there were serious doubts as to the legality of the circular in relation to the Treaty competition rules and that it could therefore adopt provisional measures pending a decision on the substance. 64 It follows from the foregoing that the applicants' plea concerning the lack of any legal determination of a prima facie infringement is unfounded. B - The plea that the decision does not contain an adequate statement of reasons regarding evidence of urgency or of serious and irreparable damage to Eco System 65 The applicants also complain that the Commission did not produce evidence of urgency or of any serious and irreparable damage to Eco System. In support of that view, they rely essentially on two arguments. 66 In the first place, the applicants claim that the Commission did not produce evidence either that Eco System was on the verge of insolvency or of any causal link between that alleged financial situation and the contested Peugeot circular. On the contrary, the applicants maintain that the accounts of Eco System made up to 31 August 1989 reflect a trading position which is not only normal but is in fact clearly improving, thus providing "glaring" evidence that Eco System is not on the point of going out of business. Moreover, the applicants observe that Eco System is still offering Peugeot vehicles for sale in its advertising material. In the applicants' view, that commercial availability and that financial prosperity clearly show that the urgency on which the provisional measures were based is non-existent. 67 The Commission states, first, that whilst it is true that it is entitled to adopt provisional measures only in cases of proven urgency, the fact remains that such urgency may derive from a risk arising from a situation likely to cause serious and irreparable damage (orders of the Court of Justice in Case 729/79 R Camera Care, cited above, paragraph 1, and Joined Cases 229/82 and 228/82 R Ford v Commission [1982] ECR 3091, paragraph 13). 68 As regards proof of urgency, the defendant contends that it is apparent from the contested decision, and in particular paragraphs 15 and 21 thereof, that the circumstances on which its finding of urgency was based relate to the direct and undeniable impact of the circular on the business of Eco System. The Commission states that following distribution of the contested circular, the number of Peugeot vehicles imported by Eco System from Belgium and Luxembourg fell by 93%. Furthermore, it adds, whereas in 1988 imports of Peugeot vehicles accounted for 35.23% of Eco System' s business, that figure fell to 5.36% for the period from May to December 1989. 69 The defendant also considers that the fact that, after distribution of the circular, Eco System is still offering Peugeot vehicles is irrelevant since it is normal for Eco System, confronted by supply problems that it considers to stem from unlawful conduct, should continue to promote transactions in which it is involved as an agent protected by Community law. The same applies to the arguments based on Eco System' s financial statements, since they relate to the year to 31 August 1989 and it is apparent both from the table in paragraph 15 of the decision and from those included in the defence that the adverse impact of the circular made itself felt as from July 1989. 70 Eco System confines itself to stating that the drop in its sales following distribution of the contested circular was very considerable since, after falling by half in the first three months, its volume of sales continued to decrease, falling as low as one-third, and then one-quarter, of the volume of sales for the same month of the previous year. 71 The United Kingdom considers that even if Eco System could have survived without the adoption of provisional measures, it is very doubtful whether the subsequent award of damages could adequately have compensated it for the damage done to its business in the meantime. 72 It must be stated that, as appears from the information given in paragraph 15 of the Commission' s decision, which has not been challenged by the parties, the number of Peugeot vehicles imported by Eco System from Belgium and Luxembourg following distribution of the contested circular fell by 93%, whereas imports of such vehicles had previously accounted for about one-third of Eco System' s business. Such a situation is liable to endanger the very existence of that undertaking, which has had a substantial proportion of its sources of income taken away from it and which, if the situation persists, is liable to have to cease trading and thereby to suffer serious and irreparable damage. In that connection, the argument that Eco System' s accounts to 31 December 1989 show not only normal but clearly improving results is unacceptable since those accounts cannot reflect the effects of the circular sent to the dealers in the distribution system less than four months earlier. 73 The applicants maintain, secondly, that the provisional measures ordered by the Commission do not affect Eco System but, on the other hand, affect Peugeot, in that they give rise to irreversible disruption of the distribution system and undermine the group' s brand image and the credibility of its exclusive distribution system, which thus loses its exclusivity. In the applicants' view, the overall effect of the Commission' s decision is provisionally to suspend the benefit of the rights granted to the members of the distribution system by Regulation No 123/85 and, consequently, to negate the raison d' être of Peugeot' s exclusive distribution system. The applicants conclude from this that the damage that they have suffered exceeds the permissible consequences of the normal application of the EEC Treaty competition rules. 74 The Commission replies that the applicants' complaint that it is Peugeot that will suffer serious and irreparable damage was one of the main arguments put forward in the application for interim measures and, as such, has already been rejected by the order of the President of the Court of First Instance of 22 May 1990. Moreover, the Commission emphasizes that the number of vehicles affected by the provisional measures adopted by it accounts for only 0.24% of the total number of registrations of Peugeot vehicles in France in 1988. The balance of interests here thus confirms that the contested decision is well founded. The defendant also observes that the balance of interests to which it is obliged to have regard must also take account, first, of the interests of the French final consumers who wish, in accordance with the principles of Article 85 of the EEC Treaty and Regulation No 123/85, to obtain vehicles from other Member States and, secondly, of the general interest in maintaining an effective structure for both "intra-brand" and "inter-brand" competition. 75 BEUC contends that Peugeot has not suffered any damage, observing, first, that the provisional measures allow the applicants to decline to sell to Eco System' s customers more than 1211 vehicles a year, even if Eco System is acting with prior written authorization, and, secondly, that Eco System' s business brings customers to the applicants' distribution system, not only for the sale of Peugeot cars but also for maintenance and after-sales service. 76 It must be pointed out that, by fixing an annual volume of transactions equal to that carried out by Eco System in the 12 months before the contested circular was sent out, the Commission' s decision confines itself, at the present stage of the procedure, to restoring, solely for Eco System' s benefit and until the adoption of the final decision, a pre-existing situation which, from the standpoint of the impact on the total number of sales of the Peugeot distribution system in France, represents about 0.24% and consequently has only a minimal effect on the operation of Peugeot' s exclusive distribution system. It cannot therefore be contended that the provisional measures adopted by the Commission are of such a kind as to cause the applicants serious and irreparable damage by irreversibly detracting from Peugeot' s brand image and the credibility of its exclusive distribution system. 77 It follows from the foregoing that the plea in law concerning the lack of a proper statement of reasons concerning proof of urgency and of the existence of serious and irreparable damage for Eco System is also unfounded and that, consequently, the application must be dismissed. Decision on costs Costs 78 Under Article 69(2) of the Rules of Procedure of the Court of Justice, which under the third paragraph of Article 11 of the Council Decision of 24 October 1988 are applicable mutatis mutandis to proceedings before the Court of First Instance until the entry into force of the Rules of Procedure of the Court of First Instance, the unsuccessful party is to be ordered to pay the costs if they are asked for in the successful party' s pleadings. The Rules of Procedure of the Court of First Instance (Official Journal 1991 L 136, p. 1), adopted on 2 May 1991, entered into force, by virtue of Article 130 thereof, on 1 July 1991. Although Article 87(2) of the Rules of Procedure of the Court of First Instance likewise provides that the unsuccessful party is to be ordered to pay the costs, if they have been applied for in the successful party' s pleadings, Article 87(4), unlike the Rules of Procedure of the Court of Justice, provides that the Member States and institutions which intervened in the proceedings are to bear their own costs. Since the United Kingdom has intervened in the present proceedings, it is necessary to decide which Rules of Procedure should apply to the award of costs in the present case. 79 Pursuant to Article 73(b) of the Rules of Procedure of the Court of Justice (Article 91(b) of the Rules of Procedure of the Court of First Instance), expenses necessarily incurred by the parties for the purpose of the proceedings, in particular the travel and subsistence expenses and the remuneration of agents, advisers or lawyers, are regarded as recoverable costs. 80 The rules laying down the criteria applicable to the award of costs are in part a matter of substantive law in so far as they directly affect the interests of the parties to the proceedings. When the Rules of Procedure of the Court of First Instance entered into force the oral procedure in the present case had already been closed and the case was in deliberation. In this regard, it is not permissible for the applicable rules to vary according to the date of delivery of the judgment, which is not predetermined, the entire procedure having been conducted under the old Rules of Procedure. The relevant provisions of the Rules of Procedure of the Court of Justice must therefore be applied. 81 Since the applicants have been unsuccessful, it is appropriate, pursuant to Article 69(2) of the Rules of Procedure of the Court of Justice, to order them jointly and severally to pay the costs, including those of the application for interim measures and those of the interveners. Operative part On those grounds, THE COURT OF FIRST INSTANCE (First Chamber) hereby: 1. Dismisses the application; 2. Orders the applicants jointly and severally to pay the costs, including those of the application for interim measures and those of the interveners.

LORD JUSTICE MUMMERY: The Appeal On 12 August 1993 the Civil Service Motoring Association Limited (CSMA) appealed to the Value Added Tax and Duties Tribunal against a standard rate assessment to VAT dated 3 March 1993 in the sum of £29,248. In their decision dated 13 March 1996 the Tribunal allowed the appeal, holding that CSMA were entitled to the benefit of an exemption from VAT under Schedule 6 to the VAT Act 1983 (the 1983 Act). On 24 January 1997 Sedley J dismissed the appeal by the Commissioners of Customs and Excise (the Commissioners) against the Tribunal's decision. The Commissioners now appeal to this Court, seeking a re-instatement of the original assessment. An appeal from the Tribunal lies only on a point of law. The point of law on this appeal is whether the Tribunal correctly interpreted and applied to the facts of this case the exemption from VAT for "the granting and the negotiation of credit and the management of credit by the person granting it" in Article 13 B (d) 1. of the Sixth EC Directive (77/388) and for "the making of arrangements for any transaction .... for the granting of any credit" in the 1983 Act, Schedule 6, Group 5-Finance, Items 2 and 5. The issue arises from the supply of services by CSMA in connection with an "affinity" credit card scheme of a kind which is increasingly common. A considerable number of claims have been made for the benefit of this exemption. The Commissioners submit that the point of construction is of "great practical importance" and contend that this Court should not reject their contentions on the construction of the scope of "negotiation of credit" in Article 13 B of the Sixth Directive without making a reference to the European Court of Justice under Article 177 of the Treaty of Rome. Factual Background The relevant facts, which can be gathered from the twenty one page decision of the Tribunal and the Appended documents, can be summarised briefly. In my view, it was unnecessary for the Tribunal to include in their decision as much detail as they conscientiously did about the oral evidence, the correspondence, the legislation, the case law and the competing arguments. The duty of the Tribunal is to make relevant findings of fact on the oral and documentary evidence, preferably as clearly and concisely as possible; to identify and then apply the relevant legislative provisions to those facts; and to state short reasons for the conclusion so reached on the appeal. It is usually unnecessary to set out in the decision the detailed evidence and the rival submissions extensively or to embark on a discursive review of the decisions of Tribunals and courts in other cases. (1) CSMA is a non-profit making, non-charitable voluntary association incorporated as a company limited by guarantee with the object of providing to its 300,000 subscribing members motoring, leisure, financial and related services, including access to third party credit card facilities on favourable terms. (2) CSMA negotiated with Frizzell Banking Services (FBS) for the introduction of its members to the benefits of the FBS Credit Card Scheme on favourable terms, in substitution for a scheme operated with the Royal Bank of Scotland on terms and conditions laid down by that bank between 1986 and 1991. In consideration of supplying a service to FBS (described by Mr K Parker QC, on behalf of the Commissioners, as that of "co-operating with FBS to produce a credit product") CSMA, from 1 July 1991, received commission calculated on the basis of 0.25% of all credit transactions concluded between members of CSMA and FBS. It is common ground that, unless exempted under Schedule 6, the services supplied by CSMA to FBS fall within Section 3 (2)(b) of the 1983 Act. (3) A formal agreement between CSMA and FBS was concluded on 22 November 1990 when CSMA accepted the proposal of FBS to replace the Royal Bank of Scotland in 1991 as the supplier of the CSMA Master Card. That acceptance covered a proposal submitted by FBS with a letter dated 8 October 1990, read in conjunction with subsequent correspondence. The thirteen page proposal submitted by FBS to CSMA set out the respective requirements of the members of CSMA, of CSMA and of FBS; sought to establish what is described in the proposal as "The partnership"; and identified what the members, the CSMA and FBS would bring to that partnership. The partnership is described in the following terms on page 5 of the proposal: "It is important to stress the need to approach this development on a joint basis. The success or failure of the payment card will stand on the clear understanding of each other's needs and requirements. FBS propose to set up a joint team to deal with the development of the card up to launch, this would necessarily involve, technical, marketing and management input. We would seek the involvement of the CSMA in this development, particularly on the marketing front and as may be required by the Club. On a perpetual basis, regular meetings would need to take place to consider the performance and proposed peripheral marketing activities that related to the payment card, as well as the principal marketing approach to selling the card itself. This meeting, to be attended by appointed operational and marketing representatives of both organisations. By these means regular reviews can take place in order to "freshen up" the product and the marketing activities on a proactive basis in order to ensure maximum economic utilisation of the payment card." The proposal form described what CSMA would bring to the partnership by reference to the following list: "Members Membership communications Knowledge of members needs An existing cardholder portfolio A good understanding of the Frizzell approach Existing involvement in offering affinity cards to members." (4) The activities of CSMA under the "partnership" agreement were described to the Tribunal by Mr Michael Sayer, Group Financial Controller, whose evidence was accepted, and in documents produced to the Tribunal in the form of minutes of regular meetings between CSMA and FBS on the CSMA credit card and in correspondence. Senior executives of CSMA and FBS met regularly to discuss ideas and decide on the strategy for the benefits and services to be provided by FBS to CSMA. A variety of matters were discussed and negotiated at the meetings: level of annual fee, rates of interest, running costs, benefits to customers, design and nature of advertising, discount schemes, plus points schemes for new business, promotions, arrangements for vetting individual card applications, contributions by CSMA to promotional costs and card fees. The position was that CSMA and FBS worked together in the "partnership". There was more than simply a grant by CSMA to FBS of the right to develop, market and issue an affinity card bearing the CSMA logo with the object of encouraging the CSMA members to take up that card. CSMA were not acting simply as an introducer, but were involved in customer handling, marketing, setting prices, discussing interest rates, negotiating the provision of benefits, providing an arbitration service and holding joint discussions on operational and market issues for the protection of its members. There was no finding by the Tribunal that CSMA acted as an intermediary between their members and FBS for the purpose of bringing them together in particular transactions for the specific grant of credit. The Relevant Law There is no dispute between the parties on the relevant provisions of European Union and domestic law or on the general principles relevant to the application of those provisions to the facts of this case. A. Sixth EC Directive Article 13 B provides under the heading "Other exemptions": "Without prejudice to other Community provisions, Member States shall exempt the following under conditions which they shall lay down for the purpose of ensuring the correct and straightforward application of the exemptions and of preventing any possible evasion, avoidance or abuse; (d) the following transactions: 1. the granting and the negotiation of credit and the management of credit by the person granting it;" The Commissioners accept that "negotiation" in this context is not used in the specialised sense of negotiating bills of exchange, promissory notes, cheques or other instruments transferable by one person to another by endorsement or delivery. This point was impressively demonstrated to the Court by Mr Parker's reading of relevant parts of the different language texts of the Sixth Directive. B. The 1983 Act The provisions intended to implement the obligation imposed on Members States by Article 13 B of the Sixth EC Directive are contained in Schedule 6 Group 5 setting out exemptions from Value Added Tax in relation to "finance" under the following items (judicially described in an early case as "a statutory jigsaw puzzle"): "Item No 1. ........ 2. The making of any advance or the granting of any credit 3. ......... 4. ......... 5. The making of arrangements for any transaction comprised in items 1, 2, 3 or 4......" C. Case Law In the approach to construction of the exemption provisions in the 1983 Act it is common ground that: (1) ".... it is for a United Kingdom Court to construe domestic legislation in any field covered by a Community Directive so as to accord with the interpretation of the Directive as laid down by the European Court of Justice, if that can be done without distorting the meaning of the domestic legislation." Per Lord Keith in Webb -v- Emo Air Cargo Limited [1993] 1 WLR 49 at 59 E-G. (2) If the words of exemption in Group 5 of the Sixth Schedule to the 1983 Act are so clear and unambiguous that they are capable of only one meaning and that meaning fails to give effect to the provisions of Article 13 B of the Directive, it is not open to the Commissioners to rely on the provisions of the Directive, since to do so would be to allow the State to rely on its own failure to fulfil its obligations under the Directive. See, for example, National Smokeless Fuels Limited -v-IRC [1986] STC 300. (3) The exemptions provided for in Article 13B and in the implementing provisions of the 1983 Act are to be interpreted strictly: Muys' en de Winter -v- Staatsecretaris van Financien (Case C - 281/91) [1993] ECR 1 -5405, paragraph 13 on page 5431; though the court should not adopt an interpretation of Article 13 B (d) which "would restrict the exemption in a way which is not supported by the wording of the provision in question". See Sparekassernes Datacenter -v- Skatteministeriet [1997] STC 933 at 954, paragraph 56. (4) If a question is raised before this Court on the interpretation of Article 13B, the court may "if it considers that a decision on the question is necessary to enable it to give judgment, request the Court of Justice to give a ruling thereon": Article 177 of the Treaty. It is not necessary for a reference to be made if this Court considers that the correct interpretation of the provisions is so obvious as to leave no scope for any reasonable doubt as to the manner in which the question raised would be resolved. In coming to such a conclusion, this Court must be convinced that the matter is equally obvious to the courts of other Member States and the Court of Justice: CILFIT -v- Italian Ministry of Health [Case 283/81] 1982 ECR 3415. The Decision of the Tribunal The Tribunal accepted the submission of CSMA that the consideration received by them from FBS for the supply of services to FBS was exempt from VAT. The services in question fell within the "negotiation of credit" in the Sixth Directive, as CSMA "did negotiate the global terms on which its members would be eligible for the credit card". The services also fell within items 2 and 5 of Group 5 of the Schedule 6 to the 1983 Act, as CSMA "made arrangements" with FBS for granting credit to its members on favourable terms. The Tribunal held that CSMA's submissions were justified on the facts. The Tribunal said at page 21 of their decision: "The arrangement which the Appellant reached with FBS had the object of enabling the members of the Appellant to have access to credit on advantageous terms. There was, without doubt, on the facts a close relationship, "a nexus" in the arrangement between the Appellant and FBS and the granting of credit. The whole purpose of the arrangement with FBS was the ultimate granting of credit, and the granting of the credit was the immediate consequence of that arrangement. The evidence does not lead to the conclusion that the Appellant was a passive partner, concerned only with promotion and allowing access to its list of members. The Appellant did negotiate, did assist in supervision at regular meetings, did express views, apparently with success on important issues such as the fee for the card. The fact that the members of the Appellant benefitted was the natural consequence of the negotiation. In simple terms it could be said that the Appellant said to FBS "we wish to arrange with you for our members to have access to credit on terms advantageous to them and we will enter into a partnership with you which involves regular contacts and negotiation for that purpose", and that this purpose was accomplished. That seems to the Tribunal on the facts of this appeal to satisfy both terms of the directive and the terms of Items 5 and 2 of group 5." The Decision of Sedley J Sedley J dismissed the appeal and rejected the main submission advanced on behalf of the Commissioners that the exemption contained in the Directive and in the Sixth Schedule was confined to the supply of services by an intermediary who is rewarded by the lender specifically for bringing together the borrower and the lender and establishing the terms and conditions upon which the credit would be granted. He held that the arrangement between CSMA and FBS was an arrangement for the granting of credit to CSMA's members and so fell within the exemption. Although he accepted the Commissioners' contention that the exemption was to be narrowly construed, he acceded to the submission of Counsel for CSMA that the construction of the exemption could not be as narrow as the Commissioners suggested. He said ( page 9 B-E): "It cannot, for example, be such that the meaning of "any transaction" limits exemption to arrangements for issuing single credit cards to individuals. To do so would be to dislocate the statute from the Directive which requires the generic exemption of "the granting and negotiating of credit" (albeit this features in a list of what the Directive calls "transactions"). Accepting this, Mr Parker nevertheless submits that the exemptions still stop short of a general arrangement of the kind in issue here: where the line comes it may be impossible to say a priori, but it must on any view exclude as remote and general an arrangement of the present one." The judge concluded at page 11 A that: "While the approach which Mr Parker argues for is not unknown in law, it has the drawback of being impressionistic to a point which may defeat the principle of legal certainty. It would certainly defeat the Directive's requirement that Member States are to lay down conditions for the purpose of ensuring the correct and straightforward application of the exemptions. I prefer Mr Milne's submission that the unqualified effect of items 2 and 5 of Group 5 in the Schedule is to exempt the making of arrangements for the granting of any credit. Upon the facts found by the Tribunal, which it is not open to this court to revise or impugn, the arrangement between CSMA and FBS was an arrangement for the granting of credit to CSMA's members and so fell within the scheduled exemption." Submissions of the Commissioners Mr Parker QC made the following submissions on behalf of the Commissioners in support of his contention that the appeal should be allowed or that, alternatively, it should not be finally be determined without a reference to the Court of Justice on the interpretation of Article 13 B. (1) The exemption should be narrowly construed. (2) The reference in Article 13 B of the Directive to "the negotiation of credit" is limited to the case of an intermediary bringing together the principals to a transaction and arranging particular exempt transactions between them for the specific grant of credit. It does not extend to the supply of "support services" of a broad kind, such as a general preparatory marketing arrangement, whereby the parties agree jointly to devise, develop and market credit products. The fact that such an arrangement includes discussion of, and agreement on, the terms and conditions governing and leading to specific grants of credit following the making of such an arrangement is not sufficient to bring it within the exemption for the "negotiation of credit". (3) On similar reasoning the exemption in Group 5 of the Sixth schedule, with its reference to "transaction", is confined to the case where an intermediary arranges a transaction for a specific grant of credit by a creditor to a borrower, a feature not present in the supply of services by CSMA to FBS. (4) Mr Parker accepted that this construction of the Directive and of the Sixth Schedule meant that the exemption might not in practice have much scope for application to credit cards. In the case of credit cards there would not appear to be an identifiable group of intermediaries performing the function of arranging specific grants of credit under particular transactions to card holders. He submitted that, nevertheless, the exemption for "negotiation of credit" did not have to be applicable to every type of credit and that, on the Commissioners' construction, the exemption would still retain "a very wide scope of application". (5) It was clear on facts of this case that CSMA did not arrange for any specific grant of credit under a particular transaction. The CSMA members decided for themselves whether they would take advantage of the arrangements described in the Tribunal's decision. (6) Although there was no decision of the Court of Justice to support this interpretation, there was a decision of 12 January 1989 of the highest tax court in Germany (the Federal Court) on the German VAT Law of 1973, holding that the "negotiation of credit" exemption did not include the activities of a person who was merely obtaining the addresses of interested investors for an investment advisor. Mr Parker referred to a passage in the translation of the judgment in FG Munster (EFG 1984, 417) which referred to negotiation as being an activity "with both parties to the contract, in other words with the client and the third party aimed at concluding a contract". "Negotiating" ("Vermitteln") cannot therefore be regarded as someone laying down some condition or other for the contract to be concluded. What is at least required is rather that the "negotiator" ("Vermittler") instigates contacts with the third party and influences the latter to conclude a contract with the client. The plaintiff did not do that. She did not initiate such contact with either the investors or the person disposing of the shares." (7) If he was wrong on this point, Mr Parker submitted that there was sufficient ambiguity in the term "negotiation of credit" in Article 13 B to justify a reference, particularly having regard to the practical importance of the issue and the desirability of the uniform interpretation in the European Union of exemptions from VAT. Conclusion In my judgment, the Tribunal made no error of law in their construction of the exemption provisions in the Directive and in the Sixth Schedule to the 1983 Act. They were entitled to conclude, on the facts found by them, that the services supplied by CSMA to FBS were exempt, because they could be properly regarded as "the negotiation of credit" and as "the making of arrangements for any transaction for the granting of any credit". Sedley J was right to reject the appeal by the Commissioners. My reasons for following the same course as Sedley J are as follows: (1) It is common ground that- (a) FBS entered into exempt transactions granting credit in the form of credit cards to members of CSMA; but the exemption is not limited to a supply by the person granting credit; (b) CSMA supplied services to FBS in connection with the granting of that credit to its members and, in consideration of those services, received a commission calculated by reference to the total amount of credit granted; (c) There is no express reference in either the Directive or in the Sixth schedule to the 1983 Act to "particular" transactions or to the "specific" grant of credit. (2) The critical question is whether the expressions "negotiation of credit" and "making of arrangements for any transaction for granting of any credit" are to be construed as implicitly restricted to activities in relation to particular transactions for the specific grant of credit. Neither the purpose nor the context of the exemption justify placing this restricted meaning on the wide general language of the Directive and of the 1983 Act. Both the "negotiation of credit" and "the making of arrangements" for the granting of credit refer to the doing of things antecedent to, and directly leading to, the results sought to be achieved by the doing of those things. The result to be attained is of a general rather than a specific nature, namely the "granting of any credit". In some cases intermediaries between principals will be involved in achieving that result. In other cases they will not. It is neither expressly nor impliedly necessary that they should be involved as a condition of the application of the exemption to those who do not actually grant credit. (3) The activities of CSMA, in respect of which FBS paid commission, can reasonably and sensibly be described as negotiation of, or making arrangements for any transaction for, the grant of credit. I am unable to detect either in the purpose of the exemptions or in the language and context in which they are expressed any distinction between (a) the negotiation, or making arrangements for particular transactions for the specific grant of any credit and (b) these negotiations or arrangements planned and designed by joint efforts for the specific purpose of leading directly to the grant of credit by FBS to members of CSMA. (4) It is unnecessary to refer a question to the Court of Justice on the interpretation of the Directive. Although the European Court of Justice has not given a ruling on this particular point, the above interpretation of the Directive is accurately reflected in the provisions of the 1983 Act and is sufficiently clear to enable this appeal to be determined without the necessity of a reference under Article 177. For all those reasons I would dismiss this appeal. LORD JUSTICE PILL: I agree and I also agree with the Judgment of Lord Justice Hobhouse which I have had the opportunity of reading in draft. LORD JUSTICE HOBHOUSE: I agree that this appeal should be dismissed for the reasons given by Mummery LJ. It is however necessary to emphasise the comment that must be made concerning the Statement of Decision of the Tribunal in this case. It runs to 21 pages yet it does not contain any clear findings of fact on the critical issues. It has only been possible to discover the facts summarised in the judgment of Mummery LJ with the assistance of counsel and an examination of the documents apparently referred to in the Statement. The Tribunal rehearses and comments on the oral evidence which they heard, it may be thought at excessive length. But what they do not then do is to make any clear findings of fact upon that evidence. It is the duty of a fact finding tribunal to clearly set out the relevant facts and make findings upon the disputed questions of fact. This is necessary for two main reasons. First the parties are entitled to know why they have won or lost. Secondly, where there is a right of appeal, particularly where it is on a point of law only (as is the case from the Value Added Tax and Duties Tribunal), it is essential to the exercise of the right of appeal and its determination that the facts shall have been found by the tribunal from which the appeal is brought. In the present case it was central to the determination of the appeal to be clear what the service was which CSMA rendered to Frizells in return for which Frizells paid CSMA the commission upon which it was said that VAT was chargeable. Once this had been ascertained, the legal question of applying the legislation to the relevant facts became relatively straightforward as appears from the Judgment of Mummery LJ. It must be stressed that in every case the Tribunal should distinguish between the recitation of evidence and the finding of facts and be sure to make clear and adequate findings of fact. This it did not do in the present case. ORDER: Appeal dismissed with costs; leave to appeal to the House of Lords refused. (Order not part of approved judgment)

Delay companydoned. Special leave granted. We have heard the learned companynsel for the parties. This appeal arises out of a writ petition filed by the respondents who are employed as Associate Professors in the Andhra Pradesh Agricultural University, hereinafter referred to as the University. They were claiming the benefit of the Merit Promotion Scheme which, according to them, is still in operation. The stand of the State Government, however, is that the Merit Promotion Scheme that was introduced by the University in 1984 had ceased to be in operation after 17-6-1987. Before the High Court, reference was made to the report of the House Committee companystituted by the Deputy Speaker of the State Legislative Assembly which companysidered various questions relating to the working of the University, including the applicability of the Merit Promotion Scheme. The learned Single Judge, while allowing the writ petition, directed the appellant to pass an order giving effect to the recommendations of the House Committee within a period of two weeks. The letters patent appeal filed by the appellant against the said judgment of the learned Single Judge has been disposed of by the Division Bench of the High Court by the impugned judgment with the observation that the State Government is under an obligation to issue orders in companyformity with the said report of the House Committee and the appellant has to issue orders in companyformity with the House Committee report. Shri Ram Kumar, the learned companynsel for the appellant, has assailed the said direction given by the High Court. It has been urged that the State Government is number bound to accept the report of the House Committee and that the High Court was in error in issuing a writ directing the appellant to pass an order giving effect to the recommendations of the report of the House Committee. Shri L. Nageswara Rao, the learned companynsel for the respondents, has submitted that the State Government was in error in proceeding on the basis that the Merit Promotion Scheme that was introduced by the University has ceased to be in operation in 1987. The learned companynsel has invited our attention to the decision of this Court in Rashmi Srivastava Dr v. Vikram University, . Shri Nageswara Rao has also placed reliance on the resolution dated 20-11-1993 passed by the University. 6. We are unable to uphold the direction given by the High Court to the appellant to issue orders in companyformity with the report of the House Committee. Since the State Government is number bound to accept the recommendations of the House Committee, the High Court companyld number issue a writ or direction in exercise of its jurisdiction under Article 226 of the Constitution directing the appellant to pass an order giving effect to the recommendations of the House Committee. It is open to the State Government either to accept or number to accept the recommendations of the House Committee. But, at the same time, we are of the view that the respondents can make a representation to the State Government on the basis of the resolution dated 20-11-1993 passed by the University and point out that the Merit Promotion Scheme is still in operation and has number ceased to be in operation in sic after 1987. If such a representation is made by the respondents, the companypetent authority shall companysider the same and pass appropriate order on the said representation keeping in view the law laid down by this.

OPINION OF MR ADVOCATE GENERAL LENZ DELIVERED ON 25 OCTOBER 1984 ( ) Mr President, Members of the Court, In the case on which I shall give my views today, the facts are as follows: A — The plaintiff, a Netherlands national, was employed in the Netherlands as a road-worker from 1932 until May 1950 and from June 1933 onwards paid contributions in accordance with the Netherlands Invalidity-Law. From May 1950 until October 1972 he worked as a self-employed paving contractor in the Netherlands, and until January 1965 paid voluntary contributions under the Invalidity Law. In December 1972 he moved — apparently on account of his wife's state of health — to Germany, where, after a period of unemployment, he took up employment in May 1973 as a surveyor's assistant. In June 1974 he became incapacitated for work and thereafter drew sickness benefits. In September 1974 he returned to the Netherlands, where, from September 1975 (until which time payment of the German sickness benefits apparently continued) he carried out light part-time work for a Netherlands firm. In June 1975 he applied for disability benefit to the Bestuur van de Nieuwe Algemene Bedrijfsvereniging [Board of the New General Trade Association], the defendant in the main proceedings. The application was approved by a decision dated September 1977; as a result the plaintiff received benefits, backdated to September 1975, on account of the disability which had commenced in June 1974, its severity being initially assessed at 55 to 65 % but from April 1977 at 80 to 100 %. The parties are in dispute over the level of the so-called “daily wage”, which serves as a basis, under the Netherlands Law on Disability Insurance (Wet op de Arbeidsongeschiktheidsversekering, hereinafter referred to as “the WAO”), for calculating the benefit due to the plaintiff. In establishing that daily wage, the defendant proceeded on the basis of the remuneration which the plaintiff received as a surveyor's assistant in the Federal Republic of Germany during his one year or so of employment, before he became incapacitated for work on 11 June 1974. The plaintiff, on the other hand, takes the view that the daily wage should properly be calculated by reference to the income which he received over a period of 40 years as a road-worker and foreman in the Netherlands. The court before which the matter was brought now wishes to know how to resolve that issue in accordance with Community law. It referred to the Court of Justice several questions, the wording of which may be found in the request for a preliminary ruling. B — In order to be able to understand and answer the questions submitted, it must be appreciated that there are two distinct types of invalidity insurance in the Member States of the European Communities (see Article 40 (1) of Regulation No 1408/71, and Annex IV thereto). Under the first type the amount of benefit is independent of the length of the insurance periods completed. Invalidity insurance schemes belonging to that type are known as risk schemes. The Commission, in its observations, designates them by the letter A. Under the other type of scheme, the amount of the benefit depends on the length of the insurance periods completed; it is known as a cumulative or endowment system. The Commission designates it by the letter B. The Netherlands scheme belongs to type A, whilst the German scheme belongs to type B. The plaintiff has completed periods of insurance under both types of scheme; at the onset of his disability he belonged to a type B scheme. 1. The first question seeks to establish which provisions are relevant for the calculation of the “daily wage”. Article 46 (2) (a) of Regulation No 1408/71, about which the national court is inquiring, clearly applies to risk schemes (type A), for it lays down the method of calculation “if... the amount of the benefit does not depend on the length of the insurance periods”. Article 47, whose applicability in connection with the second sentence of Article 46 (2) (a) is now the subject of inquiry, governs the calculation of benefits by the competent institution of a Member State whose legislation on the calculation of benefits is of type B. The Netherlands Government and the defendant in the main proceedings contend that Article 47 relates only to schemes under which the amount of benefit depends either on the length of the insured period and the remuneration received during that time or on the contributions paid during that time. The Netherlands Government relies on certain passages in the preamble to the draft of Regulation No 1408/71. There, with regard to what later became Article 47, emphasis is placed on the insurance periods completed in accordance with the legislation of other Member States. The defendant points to the European Convention on Social Security of 14 December 1972, Article 30 of which is similar to Article 47 and applies only to cumulative schemes. That provision, it is contended, is appropriate for those schemes, on grounds of simplification, because in many cases remuneration, contributions and other criteria relating to the distant past come into account. In the case of risk schemes such as that of the WAO, which concentrates only on earnings in the recent past, those criteria are irrelevant. However, I agree with the Commission that it is hardly possible to justify such an extreme view. Under Article 40 (1), a worker who has been successively or alternately subject to the legislation of two or more Member States, of which at least one belongs to type B, is to receive benefits under the provisions of Chapter 3. The plaintiff in the main proceedings worked successively in the Netherlands, the Federal Republic of Germany and then again in the Netherlands. He thus falls unequivocally within the ambit of Article 40 (1). Accordingly, Chapter 3 of Regulation No 1408/71 becomes applicable to the calculation of his benefits. Chapter 3 comprises Articles 44 to 51. In a case such as this, therefore, Articles 45 and 46 inter alia are applicable; in principle, however, reference should also be made to Article 47 with its additional provisions for the calculation of benefits, relating as it docs to Article 46 (2) as a whole. Furthermore, the Commission has convincingly demonstrated that this can be wholly logical even in the case of risk schemes. Such would be the case if the claimant is, on becoming incapacitated for work, subject to the legislation of the country in which the claim is made and that legislation makes the claim dependent on the completion of certain periods of insurance or residence (as occurs in France and Belgium), and if, further, the stipulated requirements can be fulfilled only by aggregating, pursuant to Article 45 (1), the periods of insurance or residence completed in different Member States. The result may then be that the reference period governing the calculation of benefit includes insurance periods completed in other Member States. In such a case it seems quite defensible to make use of the simplifying arrangements under Article 47. In the present instance, however, it is not the aggregation of insurance periods which is in dispute but the establishment of the insurance periods which are to determine the calculation of the “daily wage”. If in such a case the provisions on the calculation of benefits under a cumulative system were to be applied to the calculation of benefits under a risk system the result might be that the requisite calculation would have to be performed by reference to wages earned in the distant past. In the present instance it would be necessary to return to the 1950s, that is to say, inquiries would have to be made into incomes for which, under Netherlands law, no records are kept by the local insurance institution. The incomes would therefore be difficult to ascertain and could, in any event, hardly afford evidence of the loss of earnings due to the disability, which must be compensated for under the Netherlands type A scheme. Such a procedure would, in addition, entail a considerable — perhaps unintended — change to substantive national law, because the determining factor would no longer be the income received in a reference period clearly limited to two years but would include the incomes of earlier periods. It cannot, indeed, be assumed that such is the purpose of Regulation No 1408/71, which does not seek to harmonize national law but only — as may be seen from its preamble, especially the second, fifth and seventh recitals — to coordinate the existing laws. In particular, no such harmonizing intent may be inferred from “additional” provisions of a technical nature, such as Article 47, the main function of which is to simplify administrative procedures, not to complicate them. The principle therefore remains that, in the unanimous opinion of all those involved in the proceedings, the fundamental rule contained in the second sentence of Article 46 (2) (a) must, in the circumstances of this case, take precedence. This means that, under a type A scheme, which is not concerned with the length of the insurance periods completed, the national rules for ascertaining the income attributable to a reference period remain decisive. The additional provisions of Article 47, on the other hand, are to be disregarded wherever they conflict with the national law applicable under Article 46, as is the case with the WAO. The national court points, in support of the view that Article 47 is applicable, to largely similar provisions of Regulation No 1408/71, namely Articles 23 and 58. As may clearly be deduced from their position in the general scheme of the regulation, however, those provisions relate to quite different forms of insurance, namely sickness insurance (Article 23) and insurance against accidents at work and occupational disease (Article 58). The present case deals with invalidity insurance, the structure of which is fundamentally different. Only here do types A and B exist. The first question submitted by the national court should therefore be answered as follows: In principle, Article 47 (1) continues to apply when the second sentence of Article 46 (2) (a) is applicable. The application of that provision may not, however, lead to a result which conflicts with the national legislation to which Article 46 principally refers. Should such a conflict arise, the calculation rules under Article 46 have primacy over the additional provisions of Article 47, which serve merely to simplify administrative procedures. 2. The second question asks whether, as the defendant in the main proceedings contends and as indeed the question's various components tend to suggest, Article 47 (1) (a) and (b) is also applicable to a scheme such as the WAO in circumstances such as those of the present case. In view of the foregoing, that question should be answered in the negative. The defendant in the main proceedings has rightly submitted that the Netherlands scheme proceeds on the basis of the daily remuneration received in the claimant's usual occupation. Article 47, however, is silent about occupation. It refers only to “earnings”. Furthermore, the Netherlands scheme, as the defendant has stated, does not provide for records of insurance periods, even though these might be essential for the application of Article 47. Lastly, there is a practical difficulty inasmuch as, even if such an approach were to be attempted in this case, reference back to 1952 would have to be made. Enough has already been said about the evidential value of the information thereby retrieved. 3. No answer to the third question is called for, because the latter is raised only in the eventuality of an affirmative answer to the second question. That eventuality, has not, however, materialized. In order to avoid any misunderstanding, I should simply like to clarify the following. The differing answers proposed by the defendant and the Commission do not really conflict. They are both of the opinion that paragraphs (a) and (b) of Article 47 (1) arc inapplicable in the present instance. If those provisions are incompatible with the structure of national legislation, then they must be subordinated to the principle laid down in Article 46 (2) (a) (calculation of benefits in accordance with the national legislation administered by the institution in question). If it is apparent that national legislation provides that only the remuneration received during a certain period may be taken into consideration, and if in that period income arose only in another Member State, then that legislation must prevail. In other words, no prohibition as contemplated by the third question may be inferred from Community law. C — Accordingly the answers to be given to the questions raised by the Centrale Raad van Beroep are as follows: Article 47 (1) of Regulation No 1408/71 continues, in principle, to apply even where the second sentence of Article 46 (2) (a) comes into operation; that is to say where an invalidity benefit is to be determined under a risk scheme winch is not concerned with the length of the insurance periods completed but in which the remuneration received by the insured during a period immediately preceding his incapacitation for work serves to determine the relevant loss of earnings. Where a claim to benefit under a risk scheme arises only if certain insurance periods are taken into consideration, a Member State operating such a scheme is not precluded, when calculating benefit under Article 46 (2) (a) trom proceeding on the basis of the last remuneration received by the claimant in another Member State immediately before he became incapacitated for work. ( ) Translated from the German.

Judgment of the Court of First Instance (First Chamber) of 7 February 2006 − Alecansan v OHIM (Case T-202/03) Community trade mark – Opposition proceedings – Application for the figurative Community trade mark COMP USA – Earlier national figurative mark COMP USA – Lack of similarity of the goods and services – Rejection of the opposition – Article 8(1)(b) of Regulation (EC) No 40/94 Community trade mark – Definition and acquisition of the Community trade mark – Relative grounds for refusal – Opposition by the proprietor of an earlier identical or similar mark registered for identical or similar goods or services (Council Regulation No 40/94, Art. 8(1)(b)) (see paras 49, 51) Re: ACTION brought against the decision of the First Board of Appeal of OHIM of 24 March 2003 (Case R 711/2002-1) relating to opposition proceedings between Alecansan, SL, and CompUSA Management Co. Information relating to the case: Applicant for the Community trade mark: CompUSA Management Co. Community trade mark sought: Figurative mark ‘COMP USA’ – Application No 2.133.202 for goods in Classes 9 and 37 (computer hardware and software) Proprietor of the mark or sign cited in the opposition proceedings: Alecansan, SL Mark or sign cited in the opposition proceedings: English figurative mark ‘COMP USA’, for goods in Class 39 (transport) Decision of the Opposition Division: Dismissal of the opposition Decision of the Board of Appeal: Dismissal of the appeal Operative part The Court: 1. Dismisses the action; 2. Orders the applicant to pay its own costs and those of the Office for Harmonisation in the Internal Market (Trade Marks and Designs); 3. Orders the intervener to pay its own costs.

Opinion of Mr Advocate General Mischo delivered on 22 February 1989. - Commission of the European Communities v Council of the European Communities. - European Community action scheme for the mobility of university students (Erasmus) - Action for annulment - Legal basis - Vocational training. - Case 242/87. European Court reports 1989 Page 01425 Swedish special edition Page 00041 Finnish special edition Page 00053 Opinion of the Advocate-General ++++ Mr President, Members of the Court, 1 . The Commission has requested the Court to annul the inclusion of Article 235 of the EEC Treaty as part of the legal basis of Council Decision 87/327/EEC of 15 June 1987 adopting the European Community Action Scheme for the Mobility of University Students ( Erasmus ) ( 1 ) and to annul the last recital in the preamble to that decision, which states the reasons for its inclusion . In the alternative, should a declaration by the Court of partial nullity not be possible, the Commission seeks a simple declaration that the decision is void in so far as it is based on Article 235 . 2 . The Commission considers that Article 128 of the Treaty, in combination with Council Decision 63/266/EEC of 2 April 1963 laying down general principles for implementing a common vocational training policy, ( 2 ) constitutes the sole correct legal basis for the Erasmus decision, so that recourse to Article 235 amounts to an infringement of the Treaty . It adds that recourse to that article is in any case based on an inadequate and imprecise statement of reasons . 3 . In its judgment concerning the system of generalized tariff preferences ( 3 ) the Court confirmed that "it follows from the very wording of Article 235 that its use as the legal basis for a measure is justified only where no other provision of the Treaty gives the Community institutions the necessary power to adopt the measure in question ". 4 . It should, moreover, be pointed out that in the present case the dispute over the proper legal basis is not a purely formal one, since Articles 128 and 235 contain different rules concerning the manner in which the Council may adopt a decision . The choice of the legal basis could thus affect the determination of the content of the decision challenged . 5 . As regards Decision 63/266/EEC I will not touch on the dispute, more apparent than real, which divided the parties on the importance to be attached to it either as a precedent or as the legal basis for the decision in question, since in any case it could not affect the scope and effect of Article 128 of the Treaty . ( 4 ) 6 . Article 128 provides that : "The Council shall, acting on a proposal from the Commission and after consulting the Economic and Social Committee, lay down general principles for implementing a common vocational training policy capable of contributing to the harmonious development both of the national economies and of the common market ". 7 . According to the Council and the interveners, that provision does not constitute a sufficient legal basis for the adoption of a decision such as the Erasmus decision . They claim that the Erasmus scheme includes measures which go beyond the powers granted to the Council by Article 128 and that the scheme covers areas which do not constitute vocational training . 1 . The scope of the Council' s powers 8 . In the event it is not disputed that the Erasmus scheme is, as the title of the contested decision indicates, a "Community action scheme" which must be put into effect by the Commission in accordance with the annex to the decision ( see Article 3 of the decision ). 9 . The actions defined in the annex involve direct contact between the institution responsible for administering the scheme and : universities ( Actions 1, 3 and 4 ), university associations ( Action 4 ), teaching staff and university administrators ( Action 1 ), national academic recognition information centres ( Action 3 ), persons promoting joint curriculum development between universities ( Action 3 ). 10 . All those bodies may receive Community aid granted by Commission decision . The Commission may also finance publications designed to enhance awareness of study and teaching opportunities in the other Member States ( Action 4 ) and Erasmus prizes to be awarded to students and staff members ( Action 4 ). 11 . It is only the grants awarded by the Community to university students carrying out a period of study in another Member State that are to be administered by the competent authorities in Member States ( Action 2 ). 12 . The question therefore is whether the Council' s power to lay down "general principles for implementing a common vocational training policy" entails the power to adopt a Community action scheme comprising concrete operations of this kind, to be implemented by the Commission cooperating directly with universities and teachers . 13 . The dispute arises from the fact that Article 128 employs concepts which are at first sight difficult to reconcile . On the one hand it is directed towards "a common vocational training policy", but on the other hand it makes reference to the competence of the Community institutions only in relation to laying down "general principles for implementing" that policy . 14 . The parties attach more or less importance to one or the other aspect of the article according to the argument they are defending . In my opinion, however, those aspects should not be set against each other . The text should be read as a whole . The laying down of "general principles" must lead to the implementation of "a common vocational training policy", which constitutes the objective to be attained . 15 . However, does it thus follow from Article 128 that that common policy may be implemented directly by the institutions of the Community and, what is more, in the form of concrete measures such as the grant of a subsidy to a particular university association or a particular individual teacher? 16 . In order to reply to that question we should first examine Article 128 in the context of the Treaty, concentrating our attention on provisions which concern the "implementation of a common policy ". 17 . Under Article 3 "the activities of the Community shall include, as provided in this Treaty and in accordance with the timetable set out therein ... ( b ) the establishment of a common customs tariff and of a common commercial policy towards third countries, ... ( d ) the adoption of a common policy in the sphere of agriculture, ( e ) the adoption of a common policy in the sphere of transport, ... ( i ) the creation of a European Social Fund in order to improve employment opportunities for workers and to contribute to the raising of their standard of living, ...". 18 . It seems to me difficult to deny that if the common policy in the sphere of vocational training had the same scope and the same degree of Community involvement as the common policies in the spheres of agriculture, transport or external trade it would have been mentioned in Article 3, which lists the major objectives of the Community . 19 . Indeed, the common agricultural policy and the common transport policy form part of the "foundations" of the Community ( title of Part Two of the Treaty ). Although it is true that the common commercial policy like the common vocational training policy, falls under Part Three of the Treaty, entitled simply "Policy of the Community", a whole separate chapter is allocated to the former, whereas the latter is referred to only in a single article in Title III - which deals with "Social policy" in general - and in a position which has raised many questions . It is to be found at the end of the chapter dealing with the European Social Fund, only the creation of which is mentioned in Article 3 . Stabenow considers, ( 5 ) rightly in my opinion, that the position of Article 128 indicates that when the Treaty was being drawn up the promotion of vocational training was regarded as the main task of the Social Fund and that the "general principles" were to provide a frame of reference (" Bezugsrahmen ") for that purpose . In fact vocational training has always been one of the priority activities of the Social Fund . 20 . In the second place it should be pointed out that unlike Article 128 Articles 43, 75 and 113 provide, in addition to the laying down of broad lines ( Article 43(1 ) ) or the development of uniform principles ( Article 113(1 ) ), for the submission by the Commission of proposals directly aimed at the implementation of the common policies in question . In the case of the common agricultural policy and the common transport policy those measures are to be adopted after consultation of the European Parliament . 21 . They are to be adopted unanimously during the first two stages of the transitional period and by a qualified majority thereafter ( Article 43(2 ), Article 75(1 ), Article 111(3 ), Article 113(4 ), Article 114 ). Finally, Article 116 too, which provides that in respect of all matters of particular interest to the common market, from the end of the transitional period onwards, Member States must proceed within the framework of international organizations of an economic character only by common action, states that the Commission is to submit to the Council, which is to act by a qualified majority, proposals concerning the scope and implementation of such common action . 22 . To that it may be added that Article 41(a ) provides for effective coordination of efforts in the spheres of vocational training, of research and of the dissemination of agricultural knowledge; this may include joint financing of projects or institutions . 23 . Even though it is clear that that article, which concerns agriculture, does not refer solely to vocational training, the fact remains that it would not have been necessary for it to provide for the possibility of joint financing of projects if that was already possible under Article 128, the general provision on vocational training . 24 . In light of the undeniable coherence of that overall picture, it cannot be supposed that the authors of the Treaty forgot or inadvertently omitted, in Article 128, to give the Council the task of adopting, upon a proposal from the Commission, the measures necessary for the implementation of a common vocational training policy . It is not possible to construe that article as conferring by implication a power on the Council to adopt such measures by a simple majority and without mandatory consultation of the Parliament . In the eyes of the authors of the Treaty that implementation was thus to be left to others, that is to say the Member States . 25 . As I pointed out above, however, the subject-matter of the Erasmus decision is just such concrete measures . The same is true of the Comett I programme, ( 6 ) which is also based on Articles 128 and 235, and of the Comett II programme, ( 7 ) which is based on Article 128 alone . The latter programme also permits the Commission to adopt measures "directed at trainees, including those who have completed their initial training, and at persons in active employment, including employers' and workers' representatives and the training officers concerned" ( second subparagraph of paragraph 1 of the Annex to the decision ). It allows the Commission to grant financial support of up to 50% of the expenditure eligible, and up to 100% for "university-industry training partnerships ( UITPs )". In contrast to the Erasmus scheme, the Commission may also award grants directly to students and other persons undergoing periods of from three to 12 months' training in industry in another Member State and to personnel from universities and industry; it may provide support for training courses in technology and for work on devising, developing and testing at European level joint training projects in technology, etc . The Comett II decision is thus of great interest as regards the case before the Court because it enables us to get a better idea of the whole range of powers which Article 128, according to the proponents of a broad interpretation of that provision, confers on the Council and permits it to delegate to the Commission . 26 . In support of that broad interpretation the Commission also relies on the principle of "effet utile" ( the need to give full effect to a legislative provision ). Even though Article 128 omits to indicate the concrete means whereby the common vocational training policy is to be implemented, says the Commission, it is not right to interpret that provision in such a way that the Community is denied the practical means necessary to conduct the policy effectively . 27 . Here the Commission is no doubt referring to the Court' s "migration policy" judgment of 9 July 1987 ( 8 ) in which it stated that "where an article of the EEC Treaty - in this case Article 118 - confers a specific task on the Commission, it must be accepted, if that provision is not to be rendered wholly ineffective, that it confers on the Commission necessarily and per se the powers which are indispensable in order to carry out that task" ( paragraph 28 ). 28 . I freely accept that that which is valid for the Commission, in the context of Article 118, is valid generally for the Community institutions . In that respect the Commission is right to say that in Article 128 the Treaty could not set an objective ( a common policy ) without providing for the practical means necessary to attain that objective . 29 . It follows without a doubt that the general principles that the Council may lay down are not simple guidelines but mandatory legal rules . 30 . The appeal to the need to give full effect to Article 128 ( its "effet utile ") should not, however, result in the practical means of taking action for which it makes express provision being replaced or added to by other means of a different kind, even if the latter would enable the objectives pursued to be attained more easily and more effectively . It is precisely in order to remedy such lacunae and to enable the Community to achieve fully its objectives, even where the Treaty has not invested it with the necessary powers of action, that Article 235 was formulated . 31 . That distinction is equally inherent in the "migration policy" judgment cited above . The need to give full effect to Article 118 led the Court to accept that the Commission had the power to oblige Member States to take part in consultations which it had decided to arrange ( paragraph 28 ), although it could not determine in advance the result to be achieved in those consultations or prevent the Member States from implementing drafts, agreements or measures which it might consider not to be in conformity with Community policies and actions ( paragraph 34 ). 32 . It is true that Article 118 simply gives the Commission the task of promoting close cooperation between Member States in the social field . Article 128 takes, so to speak, a further step and lays down as its objective "(( implementation of )) a common ... policy capable of contributing to the harmonious development both of the national economies and of the common market ." The principle of "effet utile" therefore means that a result corresponding to that definition must be achieved, but in providing solely for the laying down of general principles Article 128 does not require that the common policy should result in actual harmonization of national provisions concerning vocational training ( 9 ) and it does not make the institutions of the Community responsible for implementation of the common policy . 33 . That is to say, the objective pursued may be attained by setting out the general principles as precisely as possible, adapting them periodically to new problems which may arise, making comparative studies and organizing regular mandatory consultations during which the experiences of the different Member States are discussed and common conclusions drawn . 34 . Moreover, it is the Commission' s task to follow attentively the implementation of the general principles by the Member States, to draw their attention to any possible discrepancies and, if necessary, to commence proceedings under Article 169, since the general principles are binding on the Member States . Article 128, together with Article 155, also enables the Commission to recommend action to be taken by the Member States in a coordinated manner . If the recommended action is chosen carefully the Member States will certainly do all that is necessary . 35 . This way of looking at the matter corresponds to the definition which the Council gave to the common vocational training policy in Decision 63/266/EEC . According to the first principle set out in that decision "a common vocational training policy means a coherent and progressive common action which entails that each Member State shall draw up programmes and shall ensure that these are put into effect in accordance with the general principles ... and with the resulting measures taken to apply them ". 36 . Does the reference to measures taken to apply the principles indicate that in 1963 at least the Council was of the opinion that the general principles could also be implemented by Community action? I do not believe so . The text I have just quoted clearly reflects the view that not only the "putting into effect" but also the programmes are the responsibility of the Member States alone . I think I may therefore conclude that in the eyes of the Council the "resulting measures taken to apply" the general principles were to consist solely in the definition of the scope of the general principles in relation to any particular aspect of the vocational training policy . 37 . It is true that the last paragraph of the first principle laid down in the 1963 decision states also that "it shall be the responsibility of the Member States and the competent institutions of the Community to apply such general principles within the framework of the Treaty ". But the addition of the words "within the framework of the Treaty" would not have been necessary if the Council had been of the opinion that Article 128 itself already permitted the institutions to take all the implementing measures considered necessary . Those words must be interpreted as meaning that the institutions may apply the general principles in so far as other provisions of the Treaty confer the necessary powers on them . 38 . The only provisions of any possible assistance in that connection are those concerning the European Social Fund and Article 235 . ( Possibly Article 100 as well if the differences between national policies were capable of directly affecting the establishment or functioning of the common market .) 39 . In the context of this case the Council' s agent considered that the Council was also entitled, on the basis of Article 128 alone, to take action designed to guide and encourage the activities of the Member States, at a lower level than Community action the objectives and mechanism of which are determined by a Community legal measure and implemented by the Commission . In my opinion that represents a fairly robust interpretation of Article 128 and very careful case-by-case scrutiny would be necessary in order to determine what such "action" could consist of . That problem is not, however, one that must be resolved today . Here it is the measures provided for in the Erasmus scheme that call for examination . 40 . I cannot agree with the Commission when it maintains that the Community action provided for in the Erasmus scheme constitutes nothing but "promotional action" providing an incentive to the Member States rather than directly imposing on them new legal constraints, since the proposed measures presuppose the voluntary participation of potential beneficiaries . 41 . We are in fact faced with concrete measures which are to be put into effect directly "on the ground ". The programme is in no way confined to providing incentives for the Member States, but imposes on them direct obligations in relation to those concrete measures . Thus the competent authorities of the Member States are expressly made responsible for administering the grants awarded to students under Action 2 and for cooperating closely in implementing the measures provided for in Action 3 to promote mobility through the academic recognition of diplomas and periods of study . 42 . Moreover, even though the Council resorted to a measure of a special kind, namely a decision sui generis (" Beschluss "), which does not appear among those expressly listed in Article 189 of the Treaty, the real nature of the measure strongly resembles that of a regulation, since it confers a direct right on individuals, for example universities, teachers or university students, to apply for certain benefits . The fact that potential beneficiaries do not become actual beneficiaries unless they themselves so wish and their application is then granted is not a characteristic peculiar to action schemes such as Erasmus; it is true of a whole series of aid measures and premiums which are granted in particular within the framework of the common agricultural policy, usually on the basis of regulations . 43 . Finally, an additional point which shows that the Erasmus scheme is not confined to "promotional actions" designed to encourage action on the part of the Member States may be drawn from the fact that the direct administration of the scheme and the award of grants to beneficiaries ( except as regards grants for students ) are carried out by the Commission . 44 . It follows from the foregoing that a "Community action scheme" such as Erasmus could not be adopted on the sole basis of Article 128 and that the Council was obliged to cite Article 235 as a basis as well . 45 . Something remains to be said on the subject of the budgetary expenditure which the scheme involves . In that connection it suffices to state that since Article 128 alone does not permit the institutions of the Community to undertake themselves or to instigate and finance concrete measures with a view to implementing the common vocational training policy "on the ground", it cannot serve as a justification for the expenditure which those actions entail for the budget . 46 . Let us turn now to the second argument relied upon by the Council to justify recourse to Article 235, namely the assertion that not all the measures provided for in the Erasmus scheme fall within the sphere of vocational training . 2 . The concept of "vocational training" 47 . According to the Council and the interveners the contested decision covers areas other than that of vocational training, first because not all forms of university teaching necessarily constitute vocational training and secondly because certain objectives pursued by the Erasmus scheme fall outside that area . 48 . In that regard it should first be emphasized that it follows from the judgment of 22 February 1988 in Blaizot ( 10 ) that although in general university studies constitute vocational training, there are certain courses of study which, because of their particular nature, are intended for persons wishing to improve their general knowledge rather than prepare themselves for an occupation . 49 . It should next be pointed out that although in its judgment of 13 February 1985 in Gravier ( 11 ) the Court concluded that "the conditions of access to vocational training fall within the scope of the Treaty" ( paragraph 25 ), it had earlier been careful to state that "educational organization and policy are not as such included in the spheres which the Treaty has entrusted to the Community institutions" ( paragraph 19 ). ( 12 ) 50 . In that judgment the Court referred expressly only to "access to and participation in courses of instruction and apprenticeship" ( paragraph 35 ) and not to the organization of the courses as such, which falls within the scope of education and training policy . 51 . Finally, in its judgment of 3 July 1974 ( 13 ) in Casagrande, the Court declared that "Although educational and training policy is not as such included in the spheres which the Treaty has entrusted to the Community institutions, it does not follow that the exercise of powers transferred to the Community is in some way limited if it is of such a nature as to affect the measures taken in the execution of a policy such as that of education and training" ( paragraph 6 ). 52 . It can be concluded from all those judgments that the determination of education policy, including the organization of education, remains within the powers of the Member States, even if Community law may affect certain "measures taken in (( its )) execution ". 53 . However, the Erasmus decision makes no distinction between university education according to whether it can be classified as vocational training or general education and lays down measures which directly affect the actual organization of such education in the different Member States . 54 . In Article 1(1 ) the decision refers not only to increasing significantly the mobility of university students but also to promoting greater cooperation between universities . 55 . Article 1(2 ) gives a very wide definition of the term "university" under the scheme, and thus of the notion of university education . That term "shall be used to cover all types of post-secondary education and training establishments which offer, where appropriate within the framework of advanced training, qualifications or diplomas of that level, whatever such establishments may be called in the Member States ". 56 . That definition therefore encompasses those university studies which, according to the Blaizot judgment, do not constitute vocational training . 57 . That finding cannot be called in question on the ground, put forward by the Commission, that "the Erasmus scheme was conceived as a vocational training scheme" and that "the mobility of students (( is )) envisaged in the Erasmus scheme in relation to vocational training" ( paragraph 37 of the reply ). It follows from paragraphs 16 and 20 of the judgment in Blaizot that if university studies in general fulfil the criteria of vocational training, they do so "by their nature" and if certain courses of study fall outside the scope of vocational training they do so "because of their particular nature ". 58 . In order to ascertain whether specific studies constitute vocational training, it is certainly not necessary to take into account whether or not those undertaking such studies do so with a view to entering a specific occupation, or whether measures taken in the area of university education are taken with the future entry of students to occupations in mind, in so far as all courses of study, even those which do not objectively prepare for entry into working life, are likely to be affected thereby . 59 . Finally, the interuniversity cooperation which the Erasmus scheme thus seeks to promote, which appears among the objectives listed in Article 2 of the contested decision, is to be achieved under the terms of Action 1 described in the annex by the setting up of a "European network" composed of universities which have concluded agreements for exchanges of students and teachers with universities of other Member States . Those agreements are to aim "to give the students of one university the opportunity to undertake a fully recognized period of study in at least one other Member State, as an integral part of their diploma or academic qualification ". In that context priority is to be given to the development of programmes involving an integrated and fully recognized period of study in the universities concerned . 60 . Interuniversity cooperation as thus conceived will incontestably lead to changes in the organization of education inasmuch as it is intended to establish special courses of study involving two or more universities belonging to different Member States and to draw up special education programmes for that purpose . 61 . From the foregoing it may be concluded that the Council was right to consider, in the last recital in the preamble to the contested decision, that "this action programme includes aspects relating to education which, at the present stage of development of Community law, may be regarded as falling outside the scope of the common vocational training policy as provided for in Article 128 of the Treaty ". 62 . In addition there are other objectives and aspects of the Erasmus scheme which can be considered not to fall exclusively within the scope of Article 128 . In any case the wording of the Erasmus decision is not calculated to dispel any doubts in that respect . 63 . It is not disputed that the political origins of the Erasmus scheme lie in the work of the ad hoc Committee on a people' s Europe, especially the report it submitted to the European Council in Milan on 28 and 29 June 1985 . ( 14 ) The eighth and ninth recitals in the preamble to the contested decision refer expressly to the people' s Europe initiative and one of the objectives listed in Article 2 is precisely that of "(( strengthening )) the interaction between citizens in different Member States with a view to consolidating the concept of a people' s Europe ". 64 . Chapter 5 of the report in question, entitled "Youth, education, exchanges and sport" devotes a very succinct paragraph to vocational training ( 5.7 ) and contains as its sole proposal that : "the Member States do their utmost, within national policies, whenever possible in association with enterprises and social partners, to ensure that all young people wishing to do so receive one year' s, or if possible two years' , vocational training in addition to their compulsory education ". 65 . It is precisely those measures on the part of the Member States that Council Decision 87/569/EEC of 1 December 1987, ( 15 ) which has been challenged in Case 56/88, was intended to support and supplement . 66 . For the rest, the bulk of Chapter 5 of the report in question deals with youth exchanges in respect of schoolchildren ( 5.2 and 5.3 ), university students ( 5.6 ) and workers ( 5.8 ). The proposed interuniversity cooperation ( 5.6 ) was itself to revolve around such exchanges . 67 . The least that can be said is that the importance thus accorded to exchanges is echoed in the wording of the Erasmus decision, which is defined in its title as a Community action scheme for the mobility of university students, which it is intended to "increase significantly" ( Article 1(1 ) ). In Communication 88/C240/03, published in Official Journal C 240, 15.9.1988, p . 3, ( 16 ) the encouragement of such mobility is presented as the "principal objective" of the Erasmus scheme . 68 . Similarly, most of the actions described in the annex to the Erasmus decision are intended to "stimulate Community-wide exchange of students" ( Action 1, paragraph 1 ). 69 . Leaving aside the contacts that the decision aims to establish between university administrators and teachers, so that they may compare their respective methods, it does not seem to me to be an exaggeration to say that the primary and fundamental aim of the Erasmus scheme is not directly to increase the vocational training of university students who might benefit from it but to develop contacts between university students from different Member States and to enlarge their personal rather than vocational knowledge . The Erasmus scheme does not in any case ensure that the acquisition of "first-hand experience of economic and social aspects of other Member States" ( Article 2(i ) ) should always go hand in hand with improvement in vocational training . It thus does not preclude the possibility that a stay abroad may constitute an end in itself, independent of any consideration of vocational training . 70 . Exchanges of persons as such certainly do not fall within the purview of Article 128 and, it would seem, can be promoted only on the basis of Article 235, as is shown by Council Decision 88/348/EEC of 16 June 1988 adopting an action programme for the promotion of youth exchanges in the Community - "Youth for Europe" programme ( Official Journal L 158, 25.6.1988, p . 42 ). 71 . In view of that context, I find it difficult to accept that the direct and immediate objective of the Erasmus scheme is improvement of vocational training at university level and that the encouragement of greater mobility for university students is simply a means of achieving that aim . Without necessarily wishing to go so far as to suggest that the Commission deliberately "dressed up" the objective of encouraging such mobility as vocational training in order to fit the contested decision into the scope of application of Article 128, I am convinced that the decision pursues an objective of encouraging the mobility of persons quite as much as vocational training of university students . For that reason also I consider that recourse to the dual basis of Articles 128 and 235 was necessary . ( 17 ) 3 . The statement of reasons in respect of recourse toArticle 235 72 . In order for the Council to be obliged to have recourse to Article 235 it is sufficient that the act in question should include a single aspect which cannot be based on another provision of the Treaty . 73 . As we have seen, the reasons indicated in the final recital ( inclusion of matters relating to education which may be regarded as falling outside the scope of the common vocational training policy ) relate to such an aspect . 74 . The decision must therefore be considered to contain a sufficient statement of reasons, even though reference could also have been made to other aspects of the decision in order to justify recourse to that article . The claim that there is an insufficient statement of reasons cannot therefore be accepted . 75 . As a very subsidiary point, that is to say in the event that the Court should not share my view and should decide that the Council could derive the necessary powers to adopt the Erasmus scheme from Article 128, it remains for me to take a position on the question whether it is possible, in accordance with the Commission' s principal claim, to "declare null and void the inclusion of Article 235 as part of the legal basis for Council Decision 87/327/EEC and the last recital in the preamble to that decision stating the reasons for the said legal basis ". 76 . Such a solution is not possible in my view, since the inclusion of Article 235, by making the adoption of the decision dependent on the unanimous agreement of all the Member States, could have had an influence on the actual content of the decision . If recourse to Article 235 was not justified, the entire decision must be declared null and void . Conclusion 77 . It follows, however, from the foregoing discussion that in my opinion the Council could not derive from Article 128 all the powers necessary for the adoption of Decision 87/327/EEC and that it was right to base the decision on Article 235 as well . Moreover, the statement of reasons for the inclusion of that article contained in the last recital in the preamble to the decision is sufficient . Consequently, I propose that the Court dismiss the application and order the Commission to pay the costs, including those of the interveners . (*) Original language : French . ( 1 ) OJ L 166, 25.6.1987, p . 20 . ( 2 ) OJ, English Special Edition 1963-64, p . 25 . ( 3 ) Judgment of 26 March 1987 in Case 45/86 Commission v Council (( 1987 )) ECR 1493, paragraph 13 . ( 4 ) In its "hormones" judgment of 23 February 1988 in Case 68/86 United Kingdom v Council (( 1988 )) ECR 855, the Court declared that a mere practice on the part of the Council cannot derogate from the rules laid down in the Treaty and create a precedent binding on Community institutions with regard to the correct legal basis ( paragraph 24 ) and that the rules regarding the manner in which the Community institutions arrive at their decisions are laid down in the Treaty and are not at the disposal of the Member States or of the institutions themselves ( paragraph 38 ). ( 5 ) Wolfgang Stabenow in Groeben, Boeck, Thiesing, Ehlermann, Kommentar zum EWG-Vertrag, 3rd edition, 1983, Vol . 1, commentary on Article 128, p . 2087, No 2 . ( 6 ) Council Decision 86/365/EEC of 24 July 1986 adopting the programme on cooperation between universities and enterprises regarding training in the field of technology ( Comett ), OJ L 222, 8.8.1986, p . 17 . ( 7 ) Council Decision 89/27/EEC of 16 December 1988 adopting the second phase of the programme on cooperation between universities and industry regarding training in the field of technology ( Comett II ) ( 1990-94 ), OJ L 13, 17.1.1989, p . 28 . ( 8 ) Joined Cases 281, 283, 284, 285 and 287/85 Federal Republic of Germany, French Republic, Kingdom of the Netherlands, Kingdom of Denmark and United Kingdom of Great Britain and Northern Ireland v Commission (( 1987 )) ECR 3203 . ( 9 ) In this connection see Stabenow in the commentary cited above, at p . 2088 . ( 10 ) Case 24/86 Blaizot v Université de Liège and Others, especially at paragraph 20 . ( 11 ) Case 293/83 Gravier v City of Liège (( 1985 )) ECR 593 . ( 12 ) See also the judgment of 13 July 1983 in Case 152/82 Forcheri v Belgium (( 1983 )) ECR 2323 . ( 13 ) Case 9/74 Casagrande v Landeshauptstadt Muenchen (( 1974 )) ECR 773 . ( 14 ) See Bulletin of the European Communities, Supplement 7/85, p . 19 et seq . ( 15 ) Decision concerning an action programme for the vocational training of young people and their preparation for adult and working life, OJ L 346, 10.12.1987, p . 31 . ( 16 ) Erasmus, financial support for cooperation and mobility in higher education in the European Community ( Academic year 1989/90 ). ( 17 ) In its judgment of 27 September 1988 in Case 165/87 Commission v Council (( 1988 )) ECR 5545, the Court expressly declared that "in so far as the competence of an institution is derived from two provisions of the Treaty, that institution is bound to adopt the relevant measures on the basis of both provisions ". ( paragraph 11 )

Judgment of the Court (Sixth Chamber) of 17 September 1996. - Cooperativa Agricola Zootecnica S. Antonio and Others v Amministrazione delle finanze dello Stato. - Reference for a preliminary ruling: Corte suprema di Cassazione - Italy. - Commission Regulations (EEC) Nos 612/77 and 1384/77 - Special import arrangements in respect of certain young male bovine animals for fattening - Council Directive 79/623/EEC. - Joined cases C-246/94, C-247/94, C-248/94 and C-249/94. European Court reports 1996 Page I-04373 Summary Parties Grounds Decision on costs Operative part Keywords ++++ Own resources of the European Communities ° Customs duties ° Customs debt ° Directive 79/623 ° Article 2(d) ° Direct effect ° Applicability in the event of infringement of Regulation No 612/77 (Commission Regulation No 612/77; Council Directive 79/623, Article 2(d)) Summary Article 2(d) of Directive 79/623, under which a customs debt on importation is incurred in the event of the non-fulfilment of one of the obligations arising, in respect of goods, from the use of the customs regime under which they are placed or non-compliance with a condition to which the grant of the regime is subject, unless it is proved that these failures have no significant effect on the correct operation of the customs regime in question, has direct effect and confers on individuals rights which they may assert against a Member State which has failed to transpose the directive into national law, and which the national courts must safeguard. Indeed, that provision is unconditional and sufficiently precise to be relied upon before national courts, since it clearly provides for the possibility for the person concerned to prove that the failures to fulfil obligations which he committed had no significant effect on the correct operation of the customs regime in question, which means that the competent national authorities are under an unconditional, unequivocal obligation to examine offers of proof put forward in that respect. That provision is also applicable in the event that Regulation No 612/77 laying down rules for the application of the special import arrangements in respect of certain young male bovine animals for fattening, as amended by Regulation No 1384/77, is infringed. The provisions of that regulation, which were adopted by the Commission on the basis of a delegated legislative power in a specific field, cannot render inoperative the rules of general application of Directive 79/623, in particular those of the aforesaid Article 2(d). Parties In Joined Cases C-246/94, C-247/94, C-248/94 and C-249/94, REFERENCE to the Court under Article 177 of the EC Treaty by the Corte Suprema di Cassazione for a preliminary ruling in the proceedings pending before that court between Cooperativa Agricola Zootecnica S. Antonio and Others and Amministrazione delle Finanze dello Stato on the interpretation of Council Directive 79/623/EEC of 25 June 1979 on the harmonization of provisions laid down by law, regulation or administrative action relating to customs debt (OJ 1979 L 179, p. 31) and Commission Regulation (EEC) No 612/77 of 24 March 1977 laying down rules for the application of the special import arrangements in respect of certain young male bovine animals for fattening (OJ 1977 L 77, p. 18), as amended by Commission Regulation (EEC) No 1384/77 of 27 June 1977 (OJ 1977 L 157, p. 16), and on the validity of Commission Regulation (EEC) No 1121/87 of 23 April 1987 amending Regulations (EEC) No 612/77 and No 1136/79 as regards the release of the security for certain special import arrangements in the beef and veal sector (OJ 1987 L 109, p. 12), THE COURT (Sixth Chamber), composed of: C.N. Kakouris (Rapporteur), President of the Chamber, G. Hirsch and G.F. Mancini, Judges, Advocate General: P. Léger, Registrar: H. von Holstein, Deputy Registrar, after considering the written observations submitted on behalf of: ° Cooperativa Agricola Zootecnica S. Antonio and Cooperativa Lomellina di Cerealicoltori Srl, by Nicola Muscolo, of the Trieste Bar, ° the Italian Government, by Professor Umberto Leanza, Head of the Department for Diplomatic Legal Affairs of the Ministry of Foreign Affairs, acting as Agent, assisted by Ivo Maria Braguglia, Avvocato dello Stato, ° the Commission of the European Communities, by Eugenio de March, Legal Adviser, and Antonio Aresu, of the Legal Service, acting as Agents, having regard to the Report for the Hearing, after hearing the oral observations of Bruno Cavicchi, the defendant in Case C-249/94, represented by Giampaolo Gei, of the Trieste Bar, the Italian Government, represented by Danilo del Gaizo, Avvocato dello Stato, and the Commission, represented by Antonio Aresu, at the hearing on 14 December 1995, after hearing the Opinion of the Advocate General at the sitting on 7 March 1996, gives the following Judgment Grounds 1 By four orders of 2 May 1994, received at the Court on 12 September 1994, the Corte Suprema di Cassazione (Court of Cassation) referred to the Court for a preliminary ruling under Article 177 of the EC Treaty three questions on the interpretation of Council Directive 79/623/EEC of 25 June 1979 on the harmonization of provisions laid down by law, regulation or administrative action relating to customs debt (OJ 1979 L 179, p. 31) and Commission Regulation (EEC) No 612/77 of 24 March 1977 laying down rules for the application of the special import arrangements in respect of certain young male bovine animals for fattening (OJ 1977 L 77, p. 18), as amended by Commission Regulation (EEC) No 1384/77 of 27 June 1977 (OJ 1977 L 157, p. 16), and on the validity of Commission Regulation (EEC) No 1121/87 of 23 April 1987 amending Regulations (EEC) No 612/77 and No 1136/79 as regards the release of the security for certain special import arrangements in the beef and veal sector (OJ 1987 L 109, p. 12). 2 The questions were raised in proceedings between three Italian agricultural undertakings and the Italian customs authorities with regard to forfeiture of entitlement to suspension of the import levy on young male bovine animals for fattening. 3 Article 13 of Regulation (EEC) No 805/68 of the Council of 27 June 1968 on the common organization of the market in beef and veal (OJ, English Special Edition 1968(I), p. 187), as amended by Article 3 of Council Regulation (EEC) No 425/77 of 14 February 1977 (OJ 1977 L 61, p. 1), introduced, as special arrangements, the possibility of total or partial suspension of the import levy normally applicable to young male bovine animals for fattening. 4 The rules for the application of these arrangements were laid down in Regulation No 612/77, Article 1 of which provides as follows: "1. No importer shall be entitled to total or partial suspension of the import levy under Article 13(1) of Regulation (EEC) No 805/68 unless he produces: (a) a written declaration, at the time of importation, that the young bovine animals are intended for fattening in the importing Member State for a period of 120 days from the day on which they were put into free circulation; (b) a security in the sum of the amount suspended of the levy applicable on the day of importation; (c) ... 2. ... 3. Except in the case of force majeure, the security shall not be released in whole or in part unless proof is furnished to the competent authorities of the importing Member State that the young bovine animal: (a) has not been slaughtered before the expiry of the period specified in Article 1(a), or (b) ... The security shall be released immediately after such proof has been furnished. 4. If the proof referred to in paragraph 3 is not furnished within 180 days from the day on which the animal is put into free circulation, the security shall be forfeit and retained as a levy. 5. ...". 5 That provision was amended by Article 7 of Regulation No 1384/77 in order to avert the risk of certain abuses. 6 Article 7 of Regulation No 1384/77 accordingly added a supplementary condition to those listed in Article 1(1) of Regulation No 612/77. It provides that entitlement to total or partial suspension of the levy is conditional upon "... (d) a written undertaking, given at the time of importation, to inform the competent authority in the importing Member State within one month following the date of importation, of the production unit or units where the young bovine animals are intended to be fattened". 7 In addition, Article 7 of Regulation No 1384/77 added a new condition to Article 1(3) of Regulation No 612/77 to the effect that the security is not to be released unless proof is furnished that the young bovine animal "has been fattened in the production unit or units indicated pursuant to paragraph 1(d)". 8 Regulation No 1121/87, which introduced a measure of proportionality with regard to the release of the security lodged, provides in Article 1, that the following subparagraph is to be added to Article 1(3) of Regulation No 612/77: "However, where the time limit referred to in paragraph 1(d) has not been observed, the amount of the guarantee to be released shall be reduced by ° 15% and by ° 2% of the remaining amount for each day by which it has been exceeded. The amounts not released shall be forfeit and retained as a levy." 9 Article 2 of Directive 79/623 provides as follows: "A customs debt on importation shall be incurred by: ... (d) the non-fulfilment of one of the obligations arising, in respect of goods liable to import duties, from their temporary storage or from the use of the customs regime under which they are placed, or non-compliance with a condition to which the grant of the regime is subject, unless the competent authorities are satisfied that these failures have no significant effect on the correct operation of the temporary storage procedure or customs regime in question; ...". 10 That directive was repealed, after the time to which the facts of the main proceedings relate, by Council Regulation (EEC) No 2144/87 of 13 July 1987 on customs debt (OJ 1987 L 201, p. 15), which took over and supplemented its provisions. 11 Three Italian agricultural undertakings, Cooperativa Agricola Zootecnica S. Antonio, Cooperativa Lomellina di Cerealicoltori Srl and Azienda agricola Cavicchi Bruno e Fratelli imported consignments of bovine animals for fattening into Italy between 1982 and 1985. 12 It appears from the case-file that the special Community arrangements regarding suspension of the levy were complied with, except for one of the conditions laid down therein, namely the obligation set out in Article 1 of Regulation No 612/77, as amended, to notify to the Italian authorities, within one month of the date of importation, the location of the fattening unit. Cooperativa Agricola Zootecnica S. Antonio forwarded that information to the competent customs office a few days late, whilst Cooperativa Lomellina di Cerealicoltori Srl notified it on time, but, by mistake, to the municipalities in whose area the fattening units were located, rather than to the competent customs office, and Azienda agricola Cavicchi Bruno e Fratelli forgot to inform the competent customs office of the location of the fattening unit. It may also be inferred from the case-file that Cooperativa Lomellina di Cerealicoltori Srl also omitted to furnish, within the time-limit laid down by Article 1(4) of Regulation No 612/77, proof that the imported young bovine animals had not been slaughtered less than 120 days after importation. 13 The Italian customs authorities considered that, in view of those infringements, the agricultural undertakings in question had forfeited entitlement to suspension of the import levy, with the result that they demanded payment of the customs duties due and considered that the security lodged at the time of import had to be entirely forfeit. 14 The three undertakings concerned then brought proceedings against the Amministrazione delle Finanze dello Stato in the Tribunale di Trieste (District Court, Trieste) on the ground that the customs authorities' claim, being based on failure to comply with a secondary, formal obligation, was contrary to Community law, since the primary obligation, consisting of fattening the imported bovine animals for 120 days in a fattening unit, had been complied with. 15 The Corte Suprema di Cassazione, which the proceedings ultimately reached, decided to suspend the proceedings and refer the following questions to the Court for a preliminary ruling: "Does Article 2(d) of Council Directive 79/623/EEC of 25 June 1979 (not transposed into Italian law) meet the necessary criteria for direct applicability and for conferring rights on individuals which they can rely upon against the Italian State? If the first question is answered in the affirmative, is the provision in question also applicable where there has been a delay in communicating the location of the production unit in which the bovine animals are intended to be fattened, that is to say, where Commission Regulation (EEC) No 612/77, as amended by Article 7 of Commission Regulation (EEC) No 1348/77, has been infringed? It is necessary, therefore to interpret the provisions of Regulation (EEC) No 612/77 establishing special import arrangements in order to establish whether or not the delay in question had a significant effect on the correct application of that regime. If the preceding question is answered in the negative and hence it is considered that the provision of the directive is not applicable (in this case), a third question will have to be examined concerning the validity of Regulation (EEC) No 1121/87: does the magnitude of the penalty fixed by Article 1(2) of that regulation (by which the whole of the security is to be forfeit following a delay of 50 days in communicating the required information) conflict with the principle of proportionality ° upheld by the Court of Justice in the past ° with respect to the objective pursued?" The first question 16 By its first question the national court is essentially asking whether Article 2(d) of Directive 79/623 has direct effect and confers on individuals rights which they may assert against a Member State which has failed to transpose the directive into national law, and which the national courts must safeguard. 17 The Court has consistently held (see, in particular Case 8/81 Becker v Finanzamt Muenster-Innenstadt [1982] ECR 53, paragraph 25, and Case 103/88 Fratelli Costanzo v Comune di Milano [1989] ECR 1839, paragraph 29) that, whenever the provisions of a directive appear, as far as their subject-matter is concerned, to be unconditional and sufficiently precise, those provisions may be relied upon before the national courts by an individual against the State where that State has failed to implement the directive in national law by the end of the period prescribed or where it has failed to implement the directive correctly. 18 A Community provision is unconditional where it sets forth an obligation which is not qualified by any condition, or subject, in its implementation or effects, to the taking of any measure either by the Community institutions or by the Member States (see, in particular, Case 28/67 Molkerei-Zentrale Westfalen Lippe v Hauptzollamt Paderborn [1968] ECR 143, at 153). 19 Moreover, a provision is sufficiently precise to be relied on by an individual and applied by a national court where it sets out an obligation in unequivocal terms (Case 152/84 Marshall [1986] ECR 723 and Case 71/85 Netherlands v Federatie Nederlandse Vakbeweging [1986] ECR 3855). 20 Article 2(d) of Directive 76/623 has precisely those characteristics. 21 It should be noted in that regard that, according to the fourth recital in its preamble, the aim of Directive 79/623 is to establish common rules for determining the moment when the customs debt is incurred, in order to ensure uniform application of the Community provisions in force on imports and exports. 22 That aim of uniform application as regards both the moment when the customs debt is incurred and the application, as in this case, of a possible customs advantage would be jeopardized if the competent national authorities were to be given a margin of discretion allowing the choice of conditions or formalities other than those laid by Directive 79/623. 23 In this case, Article 2(d) of Directive 79/623 clearly provides for the possibility of the person concerned to prove that the failures to fulfil obligations which he committed had no significant effect on the correct operation of the customs regime in question, which means that the competent national authorities are under an unconditional, unequivocal obligation to examine offers of proof put forward in that respect. 24 So the phrase "... the competent authorities are satisfied" in Article 2(d) of Directive 79/623, which is in itself superfluous, merely stresses the task of verification which the competent national authorities must carry out in any event, subject to review by the national courts. It is moreover significant in this regard that Article 2(d) of Regulation No 2144/87, which replaced Article 2(d) of Directive 79/623, did not reproduce that phrase. 25 Lastly, it should be recalled that in Joined Cases 186/82 and 187/82 Esercizio Magazzini Generali and Mellina Agosta [1983] ECR 2951, the Court held, albeit implicitly, that Article 4 of the directive, a similar provision to the one under consideration, had direct effect. 26 The reply to the first question should therefore be that Article 2(d) of Directive 79/623 has direct effect and confers on individuals rights which they may assert against a Member State which has failed to transpose the directive into national law, and which the national courts must safeguard. The second question 27 By this question, the national court is essentially asking whether Article 2(d) of Directive 79/623 is also applicable in the event of an infringement of Regulation No 612/77, as amended. 28 The Italian Government submits that failure to comply with the obligations set forth in Regulation No 612/77 is already regarded by the Community legislature itself as an important infringement disturbing the proper operation of the special arrangements in question. Accordingly, in such a case, the customs debt on import arises, without other conditions having to be considered. 29 That reasoning cannot be followed. 30 Directive 79/623, which was later replaced by Regulation No 2144/87 and subsequently by Council Regulation (EEC) No 2913/92 of 12 October 1992 establishing the Community Customs Code (OJ 1992 L 302, p. 1), is a text of general application whose aim is to harmonize the rules governing customs debt. 31 Regulation No 62/77, as amended, was adopted by the Commission pursuant to the power conferred on it by the Council with a view to laying down rules for the application of the special arrangements provided for by Article 13 of Regulation No 805/68. Consequently, the provisions of Regulation No 612/77, which were adopted on the basis of a delegated legislative power in a specific field, cannot render inoperative the rules of general application of Directive 79/623, in particular those of Article 2(d), which provide for the right, on the part of the individual concerned, to prove that the infringement of which he is accused had no significant effect on the operation of the customs regime in question. 32 In this case, the seriousness of the irregularities of which the persons concerned are accused differs considerably. It is for the competent national authorities to determine, on a case-by-case basis, subject to review by the national courts, whether the agricultural undertakings in question could have proved that the irregularities in question had no significant effect on the operation of the customs arrangements in question. 33 The reply to the national court' s question should therefore be that Article 2(d) of Directive 79/623 is also applicable where Regulation No 612/77, as amended, is infringed. The third question 34 In view of the reply given to the second question, there is no need to reply to the third. Decision on costs Costs 35 The costs incurred by the Italian Government and the Commission of the European Communities, which have submitted observations to the Court, are not recoverable. Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court. Operative part On those grounds, THE COURT (Sixth Chamber) in answer to the question referred to it by the Corte Suprema di Cassazione, by orders of 2 May 1994, hereby rules: 1. Article 2(d) of Council Directive 79/623/EEC of 25 June 1979 on the harmonization of provisions laid down by law, regulation or administrative action relating to customs debt has direct effect and confers on individuals rights which they may assert against a Member State which has failed to transpose the directive into national law, and which the national courts must safeguard. 2. Article 2(d) of Directive 79/623 is also applicable where Commission Regulation (EEC) No 612/77 of 24 March 1977 laying down rules for the application of the special import arrangements in respect of certain young male bovine animals for fattening, as amended by Commission Regulation (EEC) No 1384/77 of 27 June 1977, is infringed.

Lady Justice Arden : The Principal Issue The Landlord and Tenant Act 1954 ("the 1954 Act") confers a number of important rights on business tenants, including the right to apply for a renewal of their tenancy. The landlord can object to renewal in certain circumstances, for example, where he intends to occupy the premises in order to carry on his own business (s 30(1)(g) of the 1954 Act). Suppose, however, that the landlord claims that he intends to occupy the premises for his own business but the court finds that the landlord is likely to sell the premises in due course although no purchaser has been identified and the premises are not on the market. Can the court properly conclude that the landlord has not shown the requisite intention to occupy the premises and, if so, was the court entitled so to conclude in the circumstances of this case? Those were the principal questions which faced HHJ Cowell, sitting in the Central London County Court, at the trial of a preliminary issue in these proceedings. He implicitly answered both questions in the affirmative, and dismissed the landlord's objection to the grant of a new tenancy. Section 30 of the 1954 Act provides, so far as material, as follows: "30. Opposition by landlord to application for a new tenancy (1) The grounds on which a landlord may oppose an application under [section 24(1) of this Act, or make an application under section 29(2) of this Act,] are such of the following grounds as may be stated in the landlord's notice under section twenty-five of this Act or, as the case may be, under subsection (6) of section twenty-six thereof, that is to say:— …. (g) subject as hereinafter provided, that on the termination of the current tenancy the landlord intends to occupy the holding for the purposes, or partly for the purposes, of a business to be carried on by him therein, or as his residence. …. (2) The landlord shall not be entitled to oppose an application [under section 24(1) of this Act, or make an application under section 29(2) of this Act,] on the ground specified in paragraph (g) of the last foregoing subsection if the interest of the landlord, or an interest which has merged in that interest and but for the merger would be the interest of the landlord, was purchased or created after the beginning of the period of five years which ends with the termination of the current tenancy, and at all times since the purchase or creation thereof the holding has been comprised in a tenancy or successive tenancies of the description specified in subsection (1) of section 23 of this Act." I have set out s 30(2) because, although it does not directly apply in this case, the courts have had regard to it for the purpose of interpreting s 30(1)(g). I explain this further below. Background The landlords are the appellants, Mr and Mrs Keles. They purchased their leasehold interest in the premises, 24 Tudor Street, London EC2, in 1997 and hold it pursuant to a lease dated 20 March 1997 for a period of 995 years from 25 December 1996. The respondents are Mr and Mrs Patel. Mr and Mrs Patel occupied the ground floor and basement of 24 Tudor Street, London EC2 pursuant to a sublease for five years from 25 March 2002 at an initial rent of £17,000. They carried on there a small business of selling principally newspapers and confectionary under the name of City Confection. In his judgment, the judge described the premises and the business which the Patels carried on there as follows: "2. This is an application made by the claimants, who are the tenants of the defendants, who have been running a business in a small shop which sells newspapers, confectionary, tobacco and the like, known as the "City Confection", and the claimants have been doing that since about 1991 or 1992. The most recent lease being a five year term which expired on 25 March 2007 but which has been continued by Part II of the Landlord and Tenant Act 1954. The landlords oppose the granting of a new lease by virtue of paragraph (g) of section 30(1) of the 1954 Act. … 3. …Most lawyers and judges are very familiar with Tudor Street because at the end of Tudor Street there is one of the main entrances through to the Inner and Middle Temples, and the premises in this case are in Tudor Street. 4. The reversion is clearly held by the two defendants in this case. They acquired the property at some stage in about 1997. It consists of a number of different businesses. There is this business, known as "City Confection", which is on the ground floor and in some part of the basement. It used to be what is called a "kiosk", but about eight or ten years ago the claimants in this case did some work, some reconstruction, as a result of which customers can actually come into the premises and choose things to buy, whereas when it was a kiosk the customers would be outside." The judge noted that Mr Keles had been involved in businesses on two other parts of the premises covered by his leasehold interest. But that he had ceased to carry them on at the age of 60 in 2007. "5. On another part of this property, 24 Tudor Street, there was a property run in a similar way which became some years ago a barber's shop. The first defendant was some kind of partner of the barber, but when he left there was no way in which the defendant could carry on that particular business and so he let it on a 20 year lease in 2007, that being the year in which the first defendant attained the age of 60. 6. The third business carried on at 24 Tudor Street was a coffee shop which had a slightly more complicated business than the "City Confection" because coffees were served, and I think at some stage food of some kind was served so it needed slightly more skilled staff. But, similarly, in 2007 that property was let for 20 years." At the trial, it was common ground between the parties that under s 30(1)(g) of the 1954 Act the landlords had to show: firstly, that there was a realistic prospect, as objectively judged, that Mr Keles would be able to give practical effect to his intention to occupy the business for the purpose of carrying on his business, and, secondly, that Mr Keles had a subjective intention to use the premises for the purposes of running his business. In his evidence, Mr Keles stated that he proposed to carry on a newsagent's business at the premises. Mrs Keles did not give evidence. Mr Keles' case was that she would not be involved in the business, although she might help out. THE JUDGMENT OF HHJ COWELL QC The judge held that the first requirement was satisfied. However, turning to the second requirement, he stated that he was "worried" about the intention of the defendants. He noted that Mr Keles had first suggested the idea of an undertaking to the court in his witness statement. In his witness statement, Mr Keles said this: "… I am prepared to offer to the court an undertaking that the defendants will indeed take possession of the premises and run their business from it. This undertaking cannot of course, be open ended, as it will be dependent, amongst other things, upon my health, economic conditions and ultimately my wish to retire from business in four years time. However, I can confirm and undertake that my present intention is to occupy the premises for my own business for the foreseeable future, however, I must of course reserve my right to sell the business at some stage in the future if personal and economic conditions dictate. I am aware of the importance of an undertaking given to the court .." In the course of submissions at the trial, counsel for Mr Keles informed the court that Mr Keles would give an undertaking as follows: "not to use the premises for two years for any purpose other than as a newsagents' business carried on by [Mr and Mrs Keles]". Mr Keles was 61 at the time of the trial. He intended to work until normal retirement age. In his oral evidence, he did not refer to the undertaking. It is well established that the court may give such weight to an undertaking in these circumstances as is appropriate. (see, for example, Lennox v Bell (1957) EG 753). The court is not bound in any way by such an undertaking. The judge was not impressed by the undertaking. He held that the undertaking in the witness statement of Mr Keles "did not mean very much". He held: "34. The undertaking which is offered and was mentioned for the first time today stems from a recommendation in the leading work on this subject, Reynolds and Clark, and that is how it comes to be made rather late in the day. It is in a negative form, not to use the premises for two years from 1 June 2009 or such later date being the date on which the period of one month shall have expired following recovery of possession of the premises by the defendants other than as a news agency business carried on by the defendants. It is said that that is a very strong indication of a positive intention and is enforceable by the court, though nobody at this court would in practice do so without prompting from the claimants. Then it is said that it could even be enforced by specific performance or more accurately a prohibitory injunction by the claimants, though they would gain absolutely no practical advantage of returning to the premises from such an expensive litigation exercise. It is said that it is put forward in response to the points made by Mr Demachkie in his skeleton argument about the unsatisfactory nature of undertakings. 36. [sic] I have to say that I am very disturbed about what I can only say is the temporary nature of the undertaking for a two year period. It does indicate to me that the intention is a temporary one, to run for two years and no more. It reflects in turn on the real nature of the intention for effectively there is an end date. It is not the foreseeable future, it has an end date to it; an end date which is clearly in contemplation. It does not stem from a positive need for the premises, or a positive requirement, which one might ordinarily expect there to be in the case, for example, of a landlord who was out of work but who owned premises which he could use for his own livelihood, perhaps his only premises. It is the limited nature of that undertaking which I find really very unsatisfactory. 37. There is no real need that this landlord has for business premises as his only way of making ends meet, or the only way of achieving some kind of income. One can readily see that it is highly likely that at the expiry of the two year period there will be either a sale or the grant of a lease of some kind." The judge, having cited the case of Willis, referred to below, continued as follows: "40. So one has in the background of this case the fact that all the other businesses, even if they were more difficult to run than this one, have been sold (and clearly there was a problem about carrying on the barber's shop in the absence of a barber); that the two sales of the properties in 24 Tudor Street in 2007 occurred when the first defendant was 60 years old or so. To some extent staffing problems contributed to the reasons for sale and it is undoubted that the first defendant himself does not intend to work in the property but to put managers and staff there, his sons being of no substantial practical help. He is at any rate a reasonably wealthy man living on the rents at the moment of six properties. 41. As against that background it seems to me that the limited undertaking throws real doubt upon his substantial intention, which ought to be a substantial and genuine intention of running a business for the foreseeable future at the premises. It is very likely not to survive the two years offered in the undertaking. It is even less likely to survive the defendant attaining the age of 65. By the undertaking business could cease altogether even within the two year period, the premises being left empty. It seems to me that the sort of intention in this case is not the kind that the Act is concerned with, which is a genuine intention to run a business for the foreseeable future, there ordinarily being no short-term limit or other of this event obstacle likely to end it in the short term. This undertaking really gives the lie to such an intention." Thus the judge held that the undertaking threw doubt on Mr Keles' intention, "which ought to be a substantial and genuine intention of running the business for the foreseeable future". He referred a second time to "for the foreseeable future" in the penultimate sentence of paragraph 41. At the end of his judgment, the judge concluded that he was far from being satisfied that there was a real intention such as the 1954 Act required. FOR HOW LONG MUST THE LANDLORD INTEND TO OCCUPY THE PREMISES? If the landlord succeeds in showing that the requirements of s 30(1)(g) are satisfied, the tenant will have no right to renew his tenancy and will have to vacate the premises. Any goodwill attaching to his business at those premises will then either be lost or be acquired by the landlord when he starts to trade from the premises. In those circumstances, the courts have set a high hurdle for establishing the necessary subjective intention. As was common ground before the judge, the landlord's intention has to satisfy the test of intention laid down in Cunliffe v Goodman [1950] 2 KB 237 with respect of a statutory predecessor of s 30(1)(f) of the 1954 Act, which provides the landlord may oppose the grant of a new tenancy if he intends to demolish or reconstruct the premises. In that case, Asquith LJ explored the requirement for an intention to be shown and, relevantly for the purpose of this appeal, held: "An "intention" to my mind connotes a state of affairs which the party "intending" - I will call him X - does more than merely contemplate: it connotes a state of affairs which, on the contrary, he decides, so far as in him lies, to bring about, and which, in point of possibility, he has a reasonable prospect of being able to bring about, by his own act of volition…Not merely is the term "intention" unsatisfied if the person professing it has too many hurdles to overcome, or too little control of events: it is equally inappropriate if at the material date that person is in effect not deciding to proceed but feeling his way and reserving his decision until he shall be in possession of financial data sufficient to enable him to determine whether the project will be commercially worth while." Asquith LJ went on to hold that there must be a "settled intention to proceed". A landlord would not have a settled intention if the project did not move "out of the zone of contemplation - out of the sphere of the tentative, the provisional and the exploratory - into the valley of decision" (page 254). The other members of this court made observations to similar effect (per Cohen LJ at 249 and 252, and per Singleton LJ 255 to 256). It is trite law that the courts must not fill in gaps in legislation, but that is not the case where Parliament has made it clear that a particular matter is to be determined by the courts. In that case, the courts must determine that matter, but taking into account any indications in the statute as to the way in which the gap is to be filled. There are a number of gaps in s 30(1)(g). In particular, Parliament has not laid down any rule as to how long the landlord must intend to occupy the premises for the purposes of his business. In addition, s 30(2) appears to give the tenant retrospective protection, that is, protection against the landlord selling the reversion shortly before the business tenancy expires to a purchaser who wishes to occupy the premises for the purposes of his business, but not prospectively, so that the tenant is protected against the risk that the landlord takes possession of the premises for the purposes of his own business but then quickly sells them. There is no doubt that the 1954 Act was enacted in the knowledge that Cunliffe had established the law in relation to what had to be shown to prove an intention. The problem in this case is at one and the same time made better and worse by the holding in Cunliffe that intention requires a decision to do something. That means that for the purposes of successful opposition under s 30(1)(g) the landlord's intention to occupy the premises must be a fixed and settled one. But does it also mean that, unless his intention to sell the premises is also a fixed and settled intention, the prospect of a later sale is to be disregarded? If so then provided, as regards any sale, that the landlord remains in "the zone of contemplation" and does not move into "the valley of decision", he will still be able to bring himself within s 30(1)(g). This dilemma was addressed by this court in Willis v Association of Universities of the British Commonwealth [1965] 1 QB 140, and that is no doubt why the judge referred to it. The circumstances of that case were very different from these. The question which arose was whether the landlord could show the necessary intention under section 30(1)(g) where it intended to occupy the premises for the purposes of its business, but had passed a resolution to enter liquidation for the purposes of reconstruction and to transfer its assets to a successor company in order to convert from a limited company into a chartered company. The landlord would, therefore, only be in occupation for a short period. The critical passage from Lord Denning's judgment is as follows: "The answer to [the point that the landlord did not intend to occupy the premises itself] is, I think, that the landlords did in fact intend to occupy the premises themselves even if only for the short time that should ensue before the transfer. Section 30 (1) (g) of the Act of 1954 does not say for how long the landlord must intend to occupy himself, and the courts must fill the gap. It seems to me that in some cases even a short time may suffice. Take the case where the landlord intends to occupy the premises and to carry on business himself there for six months, and then transfer the business to his son as a family arrangement. I should have thought that the father would have sufficient intention to satisfy section 30 (1) (g). But suppose the intention was after six months to transfer to a purchaser for cash, I should not expect that intention to suffice. Just as a purchaser within the previous five years cannot defeat the tenant (see section 30 (2)), so also a purchaser shortly afterwards should not be able to defeat him. The matters that influence me are these. It is open to the landlord to complete the transfer before the day of hearing, in which case it is the successor's intention which counts - see section 30 (1) (g) - save only that if that successor falls foul of section 30 (2) his intention does not count. Hence I would say that if the landlord intends to occupy the premises and carry on business himself there for a time, and then to transfer to a successor, his intention is sufficient to satisfy section 30 (1) (g), unless the intended transfer is one which, if it had been made before the hearing, would have fallen within section 30 (2) so as to render section 30 (1) (g) unavailable. Applying those principles to this case it seems to me that the intent of the landlords is sufficient to satisfy section 30 (1) (g). They intend to occupy the premises and to carry on their activities therein (by providing the detailed administration for the Universities Central Council on Admissions) and then to transfer their activities to their successors, the chartered company, without any payment in money or anything in the nature of sale or purchase. The landlords have established, therefore, the statutory ground of opposition. The tenants are not entitled to a new lease." Pearson LJ agreed. He thought that the landlord and the successor company were in substance one and the same. He too held that an intention to carry out a sale after taking possession would mean that the landlord had not shown the necessary intention: "This case falls within the literal meaning of section 30 (1) (g) as the landlords do intend to occupy the premises for the purposes of a business to be carried on by them therein, though only for a short time until transfer of the occupation and the business to the chartered corporation. The transfer will not be by way of sale. and there will be only a formal change of identity. In form the landlords are a limited company which is being wound up, and a new chartered corporation has been created. In substance, however, there is continuity. The phrase alter ego undoubtedly lacks precision for most purposes, but for the present purpose it is a fair description of the landlords in their new guise of the chartered corporation as successors of the landlords in their old guise of the limited company. There must, however, be some qualification of the literal meaning of section 30 (1) (g) of the Act of 1954. A landlord should not be allowed to succeed under section 30 (1) (g) in a case where his intention is only to start a business at the premises and carry it on for a few weeks and then sell his interest in the premises and the business. If the sale took place before the hearing the purchaser would be precluded by section 30 (2) from relying on section 30 (1) (g). It should not be possible to evade section 30 (2) by postponing the intended sale until after the hearing. There is, therefore, an implied limitation on the operation of section 30 (1) (g); it is not applicable if the landlord's intention is to occupy for only a short time and then make a sale. The implied limitation should not be any greater than is necessary to secure consistency between section 30 (1) (g) and section 30 (2). Probably section 30 (1) (g) can be allowed to apply according to its terms without implied limitation in any case where no sale is intended. Certainly it should be allowed to apply according to its terms in a case such as the present where there is no intended transaction even resembling a sale and there is to be complete continuity of operation, and the only transfer is to be a formal transfer to an alter ego of the transferor." Salmon LJ held: "The argument runs that, at best, the period during which the landlords will carry on business there before the transfer is so short that the landlords' real purpose in occupying the premises is to effect the transfer. It is pointed out that in the ordinary case a landlord could not defeat the tenant's right to a new lease if he intended to occupy the premises and carry on business there for only a few days or weeks before selling them. In such circumstances his real purpose would be to sell the premises, not to carry on business there. No doubt that is so. If, however, a landlord not being a company, intended to occupy the premises and carry on business there as long as he lived or was physically capable of doing so, his rights under the Act of 1954 could not, in my judgment, be defeated by showing that his expectation of life or of retaining his strength happened to be very short. The tenant could not successfully argue that the landlord's real intention was merely to transfer the premises to his heirs. If the landlord died before the termination of the tenancy, or indeed at any time before the hearing, his heirs would stand in his shoes and succeed to his rights. They could not be defeated because they had inherited only recently; Landlord and Tenant Act, 1954, ss. 30 (2) and 41 (2). So, too, if a landlord transferred otherwise than for money or money's worth at any time, his transferee would succeed to his rights against the tenant; H. L. Bolton Engineering Co. Ltd. v. T. J. Graham & Co. Ltd. Here the circumstances are somewhat analogous. The landlord association will be dissolved, for all practical purposes, as soon as the transfer to the new chartered association is complete. It intends to carry on its activities, inter alia, in the three rooms on the top floor of No. 29, Tavistock Square, virtually for the rest of its life, short as that may be. Moreover (and this is of crucial importance), it is quite plain that the transfer to the new chartered association will be by way of gift, and not for any financial consideration. In these circumstances there seems to me to be no reason on principle or authority why the probable brevity of the landlords' occupation of the three top rooms should confer any benefit upon the tenants, and in my view it does not do so. If the transfer to the chartered association had been completed before the county court hearing, the tenants would clearly have had no right to a new lease. I am glad to think that the law does not make the rights of the parties depend upon the fortuitous circumstance as to whether the transfer is executed sooner rather than later."(page 154-5) In drawing a distinction between a transfer between a person and his successors and a transfer by way of a sale, this court was following the policy in s. 30(2), which does not extend to the former transactions. The landlord did not have to show that his occupation would be for any particular period (indeed that would be to write words into the statute) unless he intended to sell the premises. In that event, the court took its cue from s 30(2) and held that an intention to sell the premises would mean that an intention for the purposes of s 30(1)(g) had not been established. Thus, to take Lord Denning's example, the intention to transfer the premises by way of gift to the son would not have prevented the landlord from showing that he had an intention to occupy the premises for the purpose of carrying on his own business even if the landlord intended to transfer the business to the son within a shorter period than six months. But, if he had intended to sell it to his son, s 30(2) would apply by analogy. I do not read the judgments of this court in Willis as meaning that there must be no intention to sell at any time in the five years following the taking of possession by the landlord. Rather this court uses s 30(2) as an indication that Parliament cannot have intended s 30(1)(g) to be available to a landlord if he had already formed the intention to sell at the date of the application or hearing because that would be a way of driving a coach and horses through the protection given by s 30(2). Suppose that the evidence on intention is sketchy and the court is not satisfied that the landlord has an intention to sell the premises within five years after retaking possession. However, the tenant has raised issues which make it probable that there will be such a sale. What then is the position? Mr Jamal Demachkie, for Mr and Mrs Keles, submits that one possible interpretation of s 30(1)(g) is that the landlord must show that he does not intend to sell within five years. He submits that is the effect of s 30(2) and the decision of this court in Willis. In my judgment, this is not correct. The central idea of s 30(1)(g) is that there must be an intention on the part of the landlord to occupy the premises for the purposes of carrying on his business: the landlord bears the onus of proof on this issue but that is all that he must prove. The intention must, of course, be genuine. Whether the landlord has this intention is a question of fact to be decided upon consideration of all the circumstances. There is no separate and additional and independent requirement to show that the premises will not be sold within five years. However, as with any factual question, if there is other evidence which throws doubt on his case, then unless he rebuts that evidence with further evidence of his own, then he may fail to prove his case. It is not necessary to analyse this process in terms of the evidential burden on any issue passing to him because he has the burden of proof throughout. But he does need to rebut or provide an explanation for any matter which the tenant raises and which throws doubt on his case. CRITICISMS OF THE JUDGE'S JUDGMENT AND MY CONCLUSIONS ON THIS APPEAL Miss Tamsin Cox, for Mr and Mrs Keles, makes two fundamental criticisms of the judgment. Firstly, she submits that that the judge held that there had to be an intention to occupy the premises "for the foreseeable future" and that he was wrong in law to do so. She submits that there is no requirement in the 1954 Act to carry on business at the premises for the foreseeable future. Miss Cox submits that the necessary intention is sufficiently shown if the landlord shows that he intends to occupy the premises for the purposes of his business for a reasonable period.  She also submits that, determining that period, the court can take into account the personal circumstances of the landlord, such as his age and state of health.  She submits that the passage from the speech of Asquith LJ already cited supports this submission. If there were evidence that the landlord had made a decision to sell within five years, then he would not show that he had the necessary intention: see Willis, considered above. However, for that purpose there has to be a decision by the landlord to sell, which was not shown in this case. She submits that in this case a reasonable period would be two years – the period covered by the undertaking. Miss Cox's second criticism of the judge's judgment is that there was no evidential basis for his finding that it was "highly likely" that the premises would be sold or leased at the end of two years. Mr Keles' witness statement stated that it was his present intention to occupy the premises for his own business for the foreseeable future. Miss Cox couples this submission with a further submission that if the judge rejected Mr Keles' evidence he gave no reasons for doing so. His duty was to make it plain if he was rejecting the landlord's evidence: Zarvos v Pradhan [2003] 2 R & CR 122, CA at [45]. He did not expressly conclude that Mr Keles was not a credible witness. There was no evidence of an intention to sell. He denied any intention to sell it when he came to give evidence. There was, moreover, evidence to support this from Mr Patel as he gave evidence that Mr Keles intended to give the premises to his son. The judge drew the wrong inferences from the fact that two businesses at 24 Tudor Street had been closed down. There were good explanations as to why they could not be carried on. Miss Cox contends that the judge effectively turned the undertaking round against Mr Keles. Mr Keles candidly accepted that he could not give an undertaking to use the premises indefinitely because, among other things, of his ultimate wish to retire. On Miss Cox's submission, the undertaking provided compelling evidence that Mr Keles did intend to use the premises for the purposes of a business run by him, as stated in his witness statement. He could not give an undertaking for the foreseeable future. The judge could not infer from the offering of the undertaking that Mr Keles' evidence was not believable. Mr Demachkie submits that for the purpose of s 30(1)(g) the intention must be more than fleeting or transitory, and that the court should be wary of finding intention where it believes the landlord intends to sell his interest. Mr Demachkie submits that the judge's formulation of the test is no more than to apply the law as laid down in Willis. In any event, the effect of any misdirection is negligible. It is apparent that the judge had come to the view that Mr Keles did not intend to occupy for any meaningful length of time. The judge was entitled to reject the undertaking and to disbelieve Mr Keles. He also found that it was highly likely that there would be a sale of the premises at the end of two years. If the sole issue were whether in law the landlord must show that he has an intention to occupy the premises for the foreseeable future, objectively ascertained, I would have agreed with Miss Cox. S 30(1)(g) does not so provide, and the qualification added in Willis is that that the necessary intention is not shown if it is shown that the landlord intends to sell within five years. However, even if there is no intention to sell, the landlord must still show that he genuinely intends to occupy the premises for the purposes of his business. To this end, Mr Keles offered an undertaking limited to two years that did not impose on him any positive obligation to occupy the premises at all; he merely undertook not to use the premises save for the purpose of his newsagents' business. The judge observed in paragraph 36 of his judgment (set out above) that he was "very disturbed" by "the temporary nature" of the undertaking. Mr Keles' oral evidence about his intended occupation was imprecise and unsatisfactory. There is no rule of law that requires the judge to accept an undertaking, still less to prevent him from examining it critically.  If the judge was of the view that the undertaking was plainly defective and that Mr Keles' explanations did not provide a sufficient answer for the defects, there was no reason in logic or law why he should not treat the undertaking as undermining rather than strengthening the evidence of the intention expressed by Mr Keles in his evidence. There was thus no reason why the undertaking should not in the event work against Mr Keles. The reasons he gave for the weak form of undertaking were not, in reality, of substance. If he was worried that his health might not permit him to carry on in business, why was he prepared to give an unqualified undertaking for two years? Moreover, some of the objections could have been addressed in the drafting, for example, by providing for the undertaking to come to an end in certain events. The form of the undertaking did not stand on its own. It is apparent from paragraphs 36 and 40 of the judge's judgment set out above that the judge considered that there were several strands of evidence which were adverse to Mr Keles.  He did not need to carry on business as he had other sources of income. There was the fact that the undertaking was only given for two years when Mr Keles expected to have a further working life of three to four years and there was no evidence of any ill-health.  In addition, Mr Keles never himself said in his evidence to the court that he would pass on the premises to his son even though Mr Patel had given evidence recalling him as having said that. There was evidence that the businesses on the other parts of the premises had closed down and new tenants found. It was open to Mr Keles to lay these matters to rest. He provided some explanations but it is apparent that the judge was not satisfied that the explanations were sufficient. He thought that Mr Keles would dispose of the premises when his two-year undertaking expired. In the judge's view, that threw doubt on the genuineness of his intention to occupy the premises for the purpose of carrying on a business. Did the judge misdirect himself with respect to intention?  He used the expression "for the foreseeable future" twice in paragraph 41 of his judgment. On the first occasion, he said that the limited undertaking "threw doubt upon [Mr Keles'] intention, which ought to be a substantial and genuine intention of running a business for the foreseeable future at the premises". In my judgment, when the judge uses the phrase "for the foreseeable future" he is in my judgment simply using the words that Mr Keles had used in his witness statement to describe his intention and that the sentence should be read as if a comma appeared after the second "intention". Moreover, it should be noted that what the judge is saying in the first sentence is that he was not satisfied that such intention had been shown: he was not persuaded by Mr Keles' evidence on that point, and Mr Keles had the onus of proof. On the second occasion when the judge uses the words "for the foreseeable future" he refined what he was saying to limit his observations to the short term. His point was that he was not persuaded that Mr Keles would carry on a business for any significant period of time. He is not there talking about the indefinite future and so that sentence contains no misdirection.  The reasons why Mr Keles did not persuade the judge are thus contained in the judgment. The judge did not say in terms that these were the reasons why the objection failed, but that is implicit in the judgment read as a whole. I also bear in mind that the judge had not reserved his judgment. He gave it immediately and in those circumstances not every "i" is necessarily dotted nor every "t" crossed. This court allows greater leeway in those circumstances; otherwise many more judgments would have to be reserved and the best -a judgment with reasons fully articulated - would become the enemy of the good – a judgment that is available to the parties without the delay and extra costs involved when judgment is reserved. In a case such as this, where some or all of the parties were present in court, and the case clearly meant a great deal to all the parties personally, as they were all involved in the premises, and case management directions are likely to be needed, it is clearly preferable for the court, if it is able to do so, to give judgment immediately. At the end of paragraph 1 of this judgment I posed two questions: can the court properly conclude that the landlord has not shown the requisite intention to occupy premises where it has found that a sale is merely likely as opposed to intended, and was the court entitled so to conclude in the circumstances of this case? I would answer the first question: in an appropriate case, yes. Section 30(1)(g) does not require that the landlord should intend to occupy the premises for any particular length of time. Clearly, as Mr Demachkie submits, his intended occupation must not be fleeting or illusory, but this is a minimum requirement which might be an appropriate test to apply where the business is to be continued through successors in title. In other circumstances, in my judgment there must be some substance in the intended occupation for the purpose of carrying on the landlord's business and thus I agree with the judge that the occupation must be more than short-term. Parliament could hardly have intended that the landlord should be able to prevent the renewal of business tenancy if that were not so. What is short-term must depend on the facts of the particular case. In any event, if the landlord has a sufficient intention for the purposes of Cunliffe to sell the premises within five years, he will be treated as not having the requisite intention to occupy: see Willis. However, if the judge, as here, finds that he is likely (indeed "highly likely") to sell, that likelihood is a factor which the court must take into account in deciding whether the landlord has discharged the burden of proving that he has a genuine intention to occupy premises for the relevant purpose at all. This is a multifactorial question to be decided on all the relevant evidence. I turn to the second question posed in paragraph 1 above. Was the judge entitled to conclude that the landlord had not shown the requisite intention to occupy the premises in the circumstances of this case? One of the functions of this court on an appeal on a question of fact is to see whether the trial judge drew the wrong inferences from the facts but in doing so this court will make due allowance for the fact that the judge heard oral evidence. Applying that test, I consider that the judge was entitled to conclude that Mr Keles had not shown the necessary intention to occupy the premises for the purposes of his business. He had heard the witnesses and the evidence had covered many issues of fact. This is not one of those cases when this court can interfere with the trial judge's inferences from the evidence. For these reasons, I would dismiss this appeal. Lord Justice Thomas: I agree. Lord Justice Waller: I also agree.

OPINION OF ADVOCATE GENERAL GULMANN delivered on 8 October 1992 ( *1 ) Mr President, Members of the Court, In the context of proceedings brought by the Belgium State against NV Suiker Export, the Rechtbank van Eerste Aanleg te Antwerpen seeks a preliminary ruling by the Court on the following question: ‘Is Article 15 of Regulation No 3330/74 of the Council of 19 December 1974 to be interpreted to the effect that an import levy is payable, even if it is not contested that the relevant goods were of domestic origin and were stolen when they were given the status of T 1 goods export to third countries with a view to the receipt of refunds, if those required to pay the import levies have already repaid the export refunds previously obtained?’ ( ) For a statement of the facts of the case and the legal arguments put forward in the written observations submitted to the Court, reference is made to the report for the hearing. It seems clear to me that an import levy is not payable for goods originating in a Member State which have not been exported. To support that conclusion it is sufficient, as claimed by the defendant in the main proceedings, to point out that the system of import levies applies to importation of goods from third countries and that its purpose is to offset the difference between the lower world market price and Community prices. ( ) That obviously correct interpretation cannot be affected, as the Commission states, by the fact that movement of ‘goods which ... have been subject to customs export formalities for the grant of refunds for export to third countries’ under Council Regulation (EEC) No 222/77 of 13 December 1976 on Community transit ( ) must take place under the procedure for external Community transit, that is, be covered by a T 1 declaration in the same way as goods not originating in the Member States and not released for free circulation. ( ) No significance can be attached to the fact that as part of the customs procedure to rectify the position the national customs authorities for purely technical reasons required the goods to be declared for importation and consumption. Conclusion I accordingly propose that the Court should answer the question referred to it as follows: Article 15 of Regulation (EEC) No 3330/74 of the Council of 19 December 1974 must be interpreted as meaning that no import levy is payable on goods of domestic origin which were stolen whilst placed under the T 1 regime for export to third countries, with a view to obtaining export refunds, where the export refunds previously obtained have already been repaid. ( *1 ) Original language: Danish. ( ) The Commission has stated in its observations that Article 15 of Regulation (EEC) No 3330/74 of the Council was replaced by an identical provision in Article 16 of Council Regulation (EEC) No 1785/81 of 30 June 1981 (OJ 1981 L 177, p. 4) and that the question from the court of reference must relate to an interpretation of that provision, since it appears from the case that by a letter of 19 June 1986 an important levy was demanded of the defendant in the main proceedings. However, it appears from the observations of the plaintiff in the main proceedings that the goods in question were declared stolen on 7 November 1978 and that the impon declaration subsequently drawn up is dated 9 January 1979. That date must be decisive and there Ís consequently no ground for reformulating the question from the court of reference. ( ) See in this connection the fifth recital in the preamble to Regulation No 3330/74, which is as follows: ‘Whereas the creation of a single Community market for sugar always involves, apart from a single price system, the introduction of a common trading system at the external frontiers of the Community; whereas a trading system including import levies and export refunds, combined with intervention measures abo serves to stabilize the Community market by preventing, in particular, price fluctuations on the world market from affecting prices ruling within the Community; whereas, therefore, provision should be made for the charging of a levy on imports from third countries and the payment of a refund on exports to such countries which would, in either case, cover the difference between prices ruling inside and outside the Community when world market prices are lower than the Community prices;’. ( ) OJ 1977 L 38, p. 1. ( ) Article 1(2) of Regulation No 222/77 provides inter alia: ‘2. The procedure for external Community transit shall apply to movement of the following goods: (a) ... (b) goods which, though satisfying the conditions laid down in Articles 9 and 10 of the Treaty establishing the European Economic Community, have been subject to customs export formalities for the grant of refunds for export to third countries pursuant to the common agricultural policy; (c) ... ’. The provision referred to in Article l(2)(b) was introduced by Regulation (EEC) No 2719/72 of the Council of 19 December 1972 amending Article 1 of Regulation (EEC) No 542/69 on Community transit (OJ, English Special Edition 1972 (28-30 December), p. 24). Regulation No 542/69 was subsequently replaced by Regulation No 222/77. The goods in question previously came under the provisions on internal Community transit. It may be seen from the recitals to Régulation No 2719/72 that that provision was introduced ‘for administrative reasons and in order to avoid fraudulent practices’.

OPINION OF ADVOCATE GENERAL Sharpston delivered on 6 June 2013 (1) Case C‑189/11 European Commission v Kingdom of Spain Case C‑193/11 European Commission v Republic of Poland Case C‑236/11 European Commission v Italian Republic Case C‑269/11 European Commission v Czech Republic Case C‑293/11 European Commission v Hellenic Republic Case C‑296/11 European Commission v French Republic Case C‑309/11 European Commission v Republic of Finland Case C‑450/11 European Commission v Portuguese Republic (VAT – Special scheme for travel agents)1. In this series of infringement actions, the Commission takes issue with an interpretation of Directive 2006/112 (2) under which eight Member States consider that the special VAT margin scheme for travel agents (‘the margin scheme’) set out in Articles 306 to 310 of that directive (Annex I to this Opinion) applies regardless of whether the customer is actually the traveller or not. On the basis of the terminology used in some language versions of the provisions in question, that is referred to as ‘the customer approach’. The Commission asserts that, under the legislation as it stands (and in accordance with the practice in the remaining Member States), the margin scheme applies only where the customer is the traveller. Its interpretation is referred to, on the basis of the terminology in other language versions, as ‘the traveller approach’. That is the essence of the principal issue in all these cases, and of the sole issue in seven of them. I shall address only that issue in the present Opinion. 2. With regard to the Kingdom of Spain alone, the Commission objects also to three further aspects of the national rules relating to the margin scheme, concerning, respectively, the exclusion from the margin scheme of situations in which retail travel agents sell travel packages organised by wholesale agents, the statement of the amount of VAT included in the price and the determination of the taxable amount over a tax period. I address those issues in a separate Opinion, also delivered today. The Package Travel Directive 3. The definitions included in Article 2 of the Package Travel Directive (3) are not directly relevant here. However, they may provide useful background for understanding the margin scheme. For the purposes of the Package Travel Directive: ‘1. “package” means the pre-arranged combination of not fewer than two of the following when sold or offered for sale at an inclusive price and when the service covers a period of more than 24 hours or includes overnight accommodation: (a) transport; (b) accommodation; (c) other tourist services not ancillary to transport or accommodation and accounting for a significant proportion of the package. …; 2. “organiser” means the person who … organises packages and sells or offers them for sale, whether directly or through a retailer; 3. “retailer” means the person who sells or offers for sale the package put together by the organiser; 4. “consumer” means the person who takes or agrees to take the package …, or any person on whose behalf the principal contractor agrees to purchase the package … or any person to whom the principal contractor or any of the other beneficiaries transfers the package …; 5. “contract” means the agreement linking the consumer to the organiser and/or the retailer.’ The margin scheme 4. The margin scheme has its genesis in Article 26 of the Sixth VAT Directive (Annex II to this Opinion). (4) Its essence is simple. Where a travel agent, acting in his own name, uses the supplies and services of other taxable persons in the provision of travel facilities, all the transactions are to be treated as a single supply, subject to VAT in the travel agent’s Member State. The taxable amount is deemed to be the travel agent’s margin – the difference between the VAT-inclusive cost to him of the supplies and services which he includes in the package which he sells and the price, exclusive of VAT, which he charges for that package. 5. The margin scheme was not included in the Commission’s initial or revised proposals for the legislation, so there is no written legislative history from which any indication as to its purpose may be directly gleaned. However, it is common ground in the present proceedings that the aim was twofold: to simplify matters for travel agents who would otherwise have to deduct or reclaim input VAT in different Member States and to ensure that each service is taxed where it is provided. 6. Without an arrangement such as the margin scheme, a travel agent or tour operator putting together a holiday or travel package within the European Union would be liable for output VAT on the whole price of the package in his own Member State. He would have to recover the VAT charged to him, often in other Member States, for supplies such as transport, accommodation, meals, guided tours, cruises or organised leisure activities to be provided in those Member States. Not only would that involve significant administrative complexity but, as a result, such services would be subject to VAT not in the Member State in which they were in fact provided and consumed but in the Member State in which the package was purchased. Significant VAT revenue might thus be diverted from Member States providing tourist destinations to those providing the tourists. 7. Apart from those effects, however, the margin scheme is in principle neutral as regards the VAT system. Over the chain of supplies as a whole, no more or less is charged than would otherwise be the case, and, in principle, no residual amount becomes irrecoverably embedded at an intermediary stage, so as to burden one or other of the economic operators involved. A comparative example may be helpful in that regard. 8. If the cost of (say, transport, hotel and restaurant) services bought by the travel agent and included in the package is 100, exclusive of VAT, if the travel agent’s net margin on those services is 20 and if VAT is levied at 20% (in all Member States concerned, if there are more than one), then: – under the normal scheme, the travel agent buys at 100, plus VAT of 20, making a VAT-inclusive price of 120; adding his margin of 20 to the VAT-exclusive price, he sells at 120, plus VAT of 24, making a VAT-inclusive price of 144; he deducts input VAT of 20 and accounts to the tax authority for the difference of 4 between output and input VAT; – under the margin scheme, the travel agent buys at 100, plus VAT of 20, making a VAT-inclusive price of 120; adding his margin of 20 to the VAT-inclusive price, he sells at 140, plus VAT of 4, making a VAT-inclusive price of 144; he deducts no input VAT but accounts to the tax authority only for the output VAT of 4 on his margin of 20. In both cases, the VAT-inclusive selling price is 144 and the tax authorities collect VAT of 24, the entire burden of which is borne by the purchaser of the package. 9. Where the services in question are provided in one or more Member States other than that in which the package is sold, under the normal scheme the travel agent cannot simply deduct the input VAT of 20 from his output VAT of 24. Unless he is registered for VAT in those other Member States, he must go through the rather more complicated process of claiming a refund there, (5) for which he might have to wait for some not inconsiderable time, by contrast with the system of immediate deduction when transactions are confined within a single Member State. Moreover, the Member States in question collect no VAT on services supplied in their territory. Under the margin scheme, however, neither difficulty arises. 10. There is no dispute between the parties as to the principles I have set out above. The difference of interpretation concerns only whether, for the margin scheme to apply, the person who buys the package must be the traveller (the person who actually consumes the services or other supplies (6)) or may also be another travel agent. That issue arises in particular, it appears, because it has become increasingly common for travel agents or tour operators (‘organisers’ in the terminology of the Package Travel Directive) to put together holiday or travel packages which they sell to another agent or operator (a ‘retailer’ in the terminology of the Package Travel Directive) before the final sale is made. However, there would be less scope for differing views if the language of the EU legislation were more consistent. 11. In the six languages in which the Sixth Directive was originally drafted (Danish, Dutch, English, French, German and Italian), the word ‘traveller’ or its equivalent was used throughout Article 26, except in the English version, which used ‘customer’ just once, in defining the scope of the scheme in Article 26(1): ‘where the travel agents deal with customers in their own name and use the supplies and services of other taxable persons in the provision of travel facilities’. (7) 12. With successive enlargements, that anomaly has spread into various other language versions, and has extended, in some cases, to instances where the English uses ‘traveller’. 13. In the Sixth Directive, the Estonian, Latvian, Lithuanian, Maltese, Polish, Portuguese, Slovak, Slovene and Swedish versions followed the English pattern, using ‘customer’ just once, while the Finnish, Greek, Hungarian and Spanish followed the other original languages in using ‘traveller’ throughout. In Czech, ‘customer’ was used throughout, even where the English used ‘traveller’. 14. In Directive 2006/112, the pattern changed somewhat. The five original (1977) languages other than English (Danish, Dutch, French, German and Italian), together with Czech, Estonian, Greek, Hungarian, Latvian, Lithuanian, Slovene and Spanish, use ‘traveller’ throughout. The English pattern is found in Bulgarian, Maltese, Polish and Swedish. ‘Customer’ is used throughout in Portuguese, Romanian and Slovak. Finnish uses ‘customer’ in three instances and ‘traveller’ in two. (8) 15. In 2002, the Commission proposed amendments to Article 26 of the Sixth Directive, (9) which included replacing the word ‘traveller’ by ‘customer’ throughout. (10) 16. In its explanatory memorandum, (11) the Commission gave the following reasons for proposing that change: ‘… one of the major problems raised by Member States and travel agents alike is the fact that the scheme could strictly only be applied when the travel service was sold to a traveller. Such a rule was tailored to the market situation in 1977, when travel packages were mainly sold by a travel agent directly to the traveller. Nowadays the situation has changed considerably. More persons are operating in the sector and the supply of travel packages is more fractionated than in 1977. Therefore more and more travel services are supplied either to other travel agents or to other taxable persons who use travel services as an incentive for their personnel or in the framework of their business, e.g. seminars. The current situation, whereby the special scheme is not applicable when the travel service is sold to a person other than the traveller, no longer ensures that VAT revenue is allocated to the Member State where the consumption actually takes place. When a travel agent sells a travel package to another travel agent, the normal rules of taxation should be applied. This means that he should be able to deduct the input VAT he paid to his suppliers and to charge VAT in the Member State where he is established on the whole value of his onward supply of a travel package to the second travel agent. In that case the VAT revenue on the initial supplies (e.g. hotel accommodation) is no longer allocated to the Member States where the different services are consumed, but is redirected to the Member State where the travel agent is established. To avoid this, several Member States with large tourism industries apply a different interpretation of this Article, and extend the scope of the special scheme to supplies of travel services by travel agents to clients other than travellers. The result is that the original purposes of this scheme, simplification and taxation in the Member State of consumption are better met. Nevertheless, this leads to differing applications of the special scheme within the Community, a situation which is not compatible with the proper functioning of the internal market and which distorts competition between traders established in different Member States. This is a situation that is unacceptable and therefore the Commission proposes that the first sentence of Article 26(2) be modified by deleting the words “to the traveller”. The consequence thereof is that the scope of the special scheme is substantially broadened. In its amended version, the special scheme must be applied for all supplies by travel agents under the conditions mentioned in Article 26(1), irrespective of the nature of the customer (private person, taxable person, business, other travel agents, etc.).’ 17. The proposal has not yet been adopted. It remains before the Council, within which, it appears, no agreement has been reached. Procedure 18. Those, essentially, are the circumstances in which, in 2006, the Commission analysed the application of the margin scheme across the European Union and took the view that 13 Member States were implementing it incorrectly (specifically, they took the customer approach rather than the traveller approach). Some of those Member States (12) then amended their legislation, but others did not. Although the Commission still wished to see its proposed amendment implemented, it considered that uniformity was essential in the internal market and that the unfair competitive advantage enjoyed by some travel operators should be eliminated. (13) 19. In accordance with the procedure laid down in Article 226 EC (now Article 258 TFEU), the Commission therefore sent letters of formal notice to all eight of the Member States concerned by the present cases, on 23 March 2007. In the light of their replies, it sent reasoned opinions to seven of those Member States on 29 February 2008 and to the eighth, the Kingdom of Spain, on 9 October 2009. Since the Member States did not comply with the reasoned opinions, the Commission brought the present actions on dates between 20 April and 1 September 2011. It seeks declarations to the effect that, by permitting travel agents to apply the margin scheme when providing travel services to persons other than travellers, the Member States have failed to fulfil their obligations under Articles 306 to 310 of Directive 2006/112. 20. There has been a full written procedure in all cases, with the exception of Case C-293/11 Commission v Greece, in which the Commission waived its right to submit a reply. Several Member States submitted statements in intervention in each other’s cases. A joint hearing was held on 6 March 2013 at which the Commission and all the Member States concerned presented oral argument. 21. It is undisputed in any of the cases that the relevant national legislation takes the customer approach. I therefore consider it unnecessary to set out any of that legislation here. The issue (the sole issue in seven of the cases and the first issue in Case C‑189/11 Commission v Spain) is simply whether that is the correct approach or whether, as the Commission submits, a correct interpretation of Articles 306 to 310 of Directive 2006/112 requires all Member States to apply the traveller approach. Brief summary of the main arguments 22. The Commission and the defendant Member States all agree that: (i) the aims of the margin scheme are to simplify procedures and ensure equitable collection of VAT revenue without otherwise derogating from the VAT system; (ii) while it is now common for travel or holiday packages to be put together by one travel agent or tour operator and sold to another before final sale to the traveller or holidaymaker, that was not the case when the Sixth Directive was adopted in 1977; (iii) a uniform interpretation is necessary to ensure a harmonised application of the VAT rules in all Member States which does not differentiate between travel agents; (iv) the customer approach embodies the interpretation best suited to achieve the aims of the margin scheme; and (v) that approach is in fact followed in the defendant Member States. Since these points are all undisputed, it does not seem useful to set out any detailed argument on them here; moreover, I can accept all these points, and I shall not devote any further consideration to them in my assessment below. Suffice it to say that, as regards (i) and (iv), I have set out the essentials in my presentation of the margin scheme, (14) that (ii) and (v) are agreed facts and that (iii) is uncontroversial. 23. While there is no dispute as to the need for a single, harmonised interpretation throughout the Union, the Commission considers that the broader interpretation involved in the customer approach cannot be achieved without a change to the legislation (the de lege ferenda view), whereas the defendant Member States consider that the provisions as they stand can – and should – receive that broader interpretation (the de lege lata view). 24. The lynchpin of the Commission’s argument is linguistic. In only one of five instances, only one of the six original language versions of Article 26 of the Sixth Directive used the term ‘customer’; in all other instances and in all other language versions – in particular in that in which the final text was debated and approved – the term ‘traveller’ was used throughout. The legislature’s intention was thus clearly that the margin scheme should be confined to cases in which the travel agent’s sale was direct to the traveller. (15) 25. In addition, in the Commission’s view, two phrases used in the provision would not otherwise make sense. If the meaning were ‘customer’, the words ‘in its own name’ in Article 26(1) of the Sixth Directive (Article 306(1) of Directive 2006/112) would be redundant, as travel agents always act in their own name vis-à-vis their customers (those who buy directly from them), though not always vis-à-vis travellers (who may not be the same persons). And in Article 26(2) of the Sixth Directive (Articles 307 and 308 of Directive 2006/112), the phrases ‘supplied … to the traveller’ and ‘to be paid by the traveller’ would be illogical if the purchaser of the service were another travel agent: where a package put together by one travel agent is sold to another travel agent before being sold to the traveller, how can the first travel agent’s margin (the basis of assessment for VAT) be calculated if the package is to be ‘treated as a single service supplied by [that] travel agent to the traveller’ but the second travel agent applies his own margin? 26. The Commission also stresses that, according to settled case-law, provisions which are in the nature of exceptions to a principle must be interpreted strictly. (16) The margin scheme is an exception to the principle of taxation at each stage in the chain of transactions and deduction of input tax at each stage prior to the retail stage. (17) 27. Although it agrees that the customer approach would be better suited to achieving the aims of the margin scheme, the Commission emphasises that Member States are required to apply the VAT legislation of the Union even if they consider it to be less than perfect. (18) 28. None the less, the Commission specifies that, in its view (which it appears to derive from the purpose of the scheme rather than from any words in the legislation), the margin scheme should apply when a business, which (as a legal person) cannot itself be a ‘traveller’, purchases a travel package to be used by its staff. What matters is simply that the package should not be sold on to the actual traveller. 29. By contrast, the defendant Member States (19) accentuate the need to ensure achievement of the aims pursued by the margin scheme. 30. As regards the Commission’s main linguistic point, they stress that the wording used in one language version of an EU provision cannot serve as the sole basis for its interpretation or be made to override the other language versions. Where there is divergence between language versions, the provision must be interpreted by reference to the purpose and general scheme of the rules of which it forms part. (20) Such a teleological approach has been taken by the Court to hold that the margin scheme applies to a hotelier who offers his customers a package including accommodation, return transport and a coach excursion, the transport services being bought in from third parties, even though he is not, formally speaking, a travel agent or tour operator. (21) It should likewise be applied here to ensure that the aims of the scheme are correctly achieved. 31. The absurdities which the Commission sees in the use of certain phrases are, in the Member States’ view, inconclusive. The English version of the provisions (from which all the other ‘customer’ versions derive) does not speak of travel agents who deal with their customers in their own name but who deal with customers (not necessarily directly their own) in their own name. There is thus no obvious redundancy in such wording – which is, in any event, retained by the Commission in its proposed amendment. However, since it is specified that the margin scheme is not to apply to travel agents who act solely as intermediaries, the words ‘in their own name’ could be redundant on any interpretation. And, as the Court has held, the words ‘to be paid by the traveller’ cannot be interpreted literally but may include payments by third parties. (22) 32. The defendant Member States point out also that the Court has consistently held that the requirement for strict interpretation of exceptions to the principles of the VAT system does not mean that the terms used should be construed in such a way as to deprive exceptions of their intended effect, and that any interpretation must be consistent with the objectives pursued and comply with the principle of fiscal neutrality. (23) 33. The Commission’s reference to Case C-304/05 Commission v Spain, (24) the Member States submit, is not relevant. That case concerned a provision of the Sixth Directive whose interpretation was clear from its wording. Here, it is quite evident that the wording is capable of giving rise to different interpretations, and has indeed done so. Assessment 34. In these proceedings, the Court finds itself in an invidious position. No consistent pattern can be seen in the way in which the existing language versions of Articles 306 to 310 of Directive 2006/112 use the words ‘customer’ and ‘traveller’ (neither of which is defined). A Commission proposal to rectify the situation (not itself a model of linguistic consistency) has failed to meet with agreement in the Council, to which it was submitted more than a decade ago. There would appear to be, if not stalemate, at least insufficient shared willingness to determine a uniform approach. There are two, mutually incoherent, interpretations, in favour of each of which arguments can be advanced. Eight Member States interpret the provisions in one way (formerly at least 13 did so), while the remainder – none of which has sought to intervene in order to submit its own point of view – interpret them in the other, without either approach being necessarily related to whether, in the relevant languages, Directive 2006/112 uses the word ‘traveller’ or ‘customer’. 35. It is hard to avoid the impression that the Court is being called upon to decide a matter of VAT policy (and of legislative drafting) which has proved beyond the capabilities or the willingness of the Member States and the legislature. 36. Be that as it may, the Court must provide a legal interpretation of the current text which will determine whether the Commission’s actions are (as regards the issue with which this Opinion is concerned) well-founded or not. 37. In that context, the number of Member States which have adopted one approach or the other cannot in my view be a factor of any legal relevance to the Court’s analysis (even if it might be a political consideration of some relevance for the legislature). Whatever the outcome of that analysis, a significant number of Member States will be called upon to amend their legislation. By the same token, it seems to me that little persuasive value can be attached to any practical difficulties which might arise for travel agents under either interpretation if it were applied uniformly – other, of course, than those which the margin scheme is specifically designed to avert. Neither approach is likely to be perfect in practice but, if at least eight (previously, at least 13) Member States have been able to implement the provisions in a particular way over a significant period, any difficulties entailed by that implementation (taken in isolation, rather than as part of an internally conflicting whole) appear unlikely to be decisive. 38. If the provisions governing the margin scheme were unequivocal, their clear meaning should in principle prevail, even if that were to weaken to some extent the achievement of the aims of the margin scheme. In my view, however, they leave room for interpretation, and the Court must have regard to the purpose and general framework of that scheme and to its own previous rulings in that context. (25) 39. It seems unprofitable to seek an answer though detailed analysis of the haphazard way in which the terms ‘traveller’ and ‘customer’ or their equivalents are now used in the different language versions of Articles 306 to 310 of Directive 2006/112. The Commission stresses that the word ‘customer’ was used only once in only one of the six original language versions of Article 26 of the Sixth Directive and has explained how that anomaly arose and was subsequently propagated. It is convinced – and I see no need to cast doubt on that conviction – that the Council’s intention was to use the word ‘traveller’ throughout. 40. However, I do not think one can necessarily infer, from an intention to use the word ‘traveller’ consistently, a concomitant intention to confine application of the margin scheme to situations in which the travel agent deals directly with the physical person who is going to consume or enjoy the services provided. 41. It is true that, taking the word at its face value, it is difficult to interpret ‘traveller’ as including ‘another travel agent’. However, a contextual reading which has regard to the purpose and general scheme of the provisions may lead to a broader interpretation. 42. On the one hand, the word ‘traveller’ cannot be given a rigorously literal interpretation in the context of the margin scheme. For Robert Louis Stevenson, to travel hopefully may have been a better thing than to arrive, (26) but he might have felt less hopeful had he been facing delayed flights, cramped seating in crowded aircraft or tasteless food on tiny plastic trays. For many if not most modern holidaymakers, the focus has shifted: it is the destination rather than the voyage which counts, (27) and one may book a resort holiday or other accommodation through a travel agent while arranging one’s own means of arrival. The latter was, specifically, the case with the ‘motoring holidays’ in Van Ginkel, (28) which the Court held to fall within the margin scheme. Moreover, it is clear that one person may buy a travel package to be used by another, but it would be surprising if the VAT treatment of the purchase were to depend on whether the purchaser was the actual traveller or a relative, holiday companion etc. Nor indeed is there any reason why a holiday booked through a travel agent should involve any significant travel at all: it might be more convenient (or perhaps cheaper, in the case of promotional offers) to book an inclusive stay at a spa resort in one’s own home town through a travel agent rather than directly.(29) For the purposes of the margin scheme, therefore, the ‘traveller’ is not necessarily one who ‘travels’, and actual ‘travel facilities’ or an actual ‘journey’ need not form part of the package in respect of which the travel agent is required to apply the scheme. 43. On the other hand, without there being any need to draw specific conclusions from the ways in which ‘customer’ or its equivalent has been used in different language versions, the mere fact that the term was allowed to insinuate itself into the legislation and there to multiply tends to belie the view that the legislature has ever attached decisive importance to the use of the word ‘traveller’. It may be noted, moreover, that the increasing use of the term ‘customer’ in the legislative provisions has accompanied the increasing frequency of sales of holiday or travel packages between travel agents. 44. It seems to me, therefore, that a legislative intention to use a single term to designate the person buying travel, accommodation or similar services from a travel agent – and ‘traveller’ was a convenient term to use – does not require the meaning of that term to be confined to a particularly narrow category of such persons. 45. Nor, in any event, does the Commission itself seek to interpret ‘traveller’ literally: it includes under the term, for example, a business entity which buys services for the use of its employees, the only condition being in its view that the package must not be sold on to whoever is the final consumer. 46. I thus cannot regard the text of the provisions governing the margin scheme as unequivocal, even on the assumption that the original intention was to use the term ‘traveller’ – which is itself not free from ambiguity – throughout. 47. That being so, the term may in my view be interpreted so as to extend to customers other than the physical persons who actually enjoy the travel or holiday services purchased from a travel agent (or, as the Commission suggests, than those who buy for the benefit of such persons), and indeed so as to include other travel agents who will then sell the services on. Given the uncertainty as between language versions, it should be so interpreted if that is required by the purpose and general framework of the margin scheme. The Court has already, in the light of such a requirement, interpreted ‘travel agent’ to include a hotelier offering an accommodation package which comprises transport and excursions and a trader organising language and study trips abroad. (30) A further parallel can be drawn with the Court’s interpretation of the phrase ‘persons taking part in sport’ – which, as it acknowledged, refers in normal usage only to natural persons – as capable of including corporate persons and unincorporated associations for the purposes of Article 13A(1)(m) of the Sixth Directive (now Article 132(1)(m) of Directive 2006/112). (31) 48. Crucially, to exclude the sale of travel or holiday packages by a travel agent or tour operator to another travel agent who will sell it on from the application of the margin scheme would run directly counter to the two aims which – as is common ground in these proceedings – the scheme was intended to achieve. 49. The Court has recognised the aim of adapting the normal rules on place of taxation, taxable amount and deduction of input tax to take account of the multiplicity of services in a travel or holiday package and of places in which they are provided, which entail practical difficulties for travel agents and tour operators of such a nature as to obstruct their operations. (32) When travel agent A puts together a package comprising, say, a coach tour of several Member States, with accommodation, restaurant meals and visits to tourist attractions in each of them, and sells that package to travel agent B, who sells it on to the natural persons who will participate in the tour, the practical difficulties entailed are all encountered by A, not by B. Even if the place of supply of A’s sale to B is not in the Member State in which B is established, B’s difficulties are in principle no greater than those involved in a simple cross-border supply – namely, the need to obtain a refund or deduction of input tax paid on a transaction in another Member State. B’s situation alone does not necessarily justify application of a special margin scheme. A, by contrast, has to deal with input tax on different services at different rates in different Member States – the very situation which the margin scheme is designed to alleviate. Yet under the traveller approach advocated by the Commission in the present proceedings it is B alone who will benefit from the scheme, while A will not. 50. Comparable considerations apply in relation to the second aim, that of ensuring that VAT revenue is correctly allocated to the Member State in which the relevant service is in fact provided and received. If, in the above example, the margin scheme is not applied to A’s sale to B, A will recover the amounts of VAT charged on services provided to and enjoyed by the tourists in the Member States visited, a process which is likely to result in a net payment to him of much or all of those amounts (33) and a loss of VAT revenue in those Member States. Although harmonised at EU level, VAT is a national tax, levied in each Member State at its own rates and under its own detailed rules. It is classified in Article 1(2) of Directive 2006/112 as ‘a general tax on consumption’. Although Title V (Articles 31 to 61) of Directive 2006/112 lays down particular rules as regards the place of supply where there is a cross-border element, it is inherent in the idea of a tax on consumption that it should crystallise at the time and place of actual consumption (that is to say, for a non-cumulative multistage tax like VAT, final consumption at the end of the chain of supply). In the situation in issue, the relevant services are physically both supplied and consumed in the same Member State. The cross-border element is, as regards those services, essentially artificial – the supply in A’s Member State is of A’s services, not of those of the service providers in the Member States visited. It would therefore run counter not only to the aims of the margin scheme but also to a fundamental principle of the common VAT system which that scheme is designed to uphold if revenue derived from consumption in one Member State were to accrue to the benefit of another Member State in which none of the services directly giving rise to that consumption were provided. 51. It is true that derogations from the general regime should be interpreted strictly but, as the Member States have pointed out, that does not mean that the terms used should be construed in such a way as to deprive them of their intended effect. Here, the Commission’s proposed interpretation would do just that. (34) 52. On that basis, I am compelled to conclude not only that the customer approach is better suited than the traveller approach to achieve the aims of the margin scheme, but also that the latter actually frustrates those aims in situations of the kind in which the Commission argues that it should be applied. Such a conclusion seems to me sufficient to justify dismissing the Commission’s actions in all these cases (subject to the proviso that, in Case C-189/11 Commission v Spain, there are three further issues to determine). 53. That said, it may be helpful, briefly, to mention any other major points made by the defendant Member States which also support that view and to respond to certain arguments raised by the Commission. 54. First, the Member States stress the principle of fiscal neutrality inherent in the VAT system, in the sense that VAT should not be applied in a way which distorts competition between suppliers. (35) They point out that, because (as I have explained in points 49 and 50 above) the practical and administrative difficulties involved in putting a travel package together are not alleviated by the Commission’s interpretation where the package is sold to another travel agent, that interpretation favours larger tour operators and travel agencies over smaller ones, which are less likely to have the necessary resources to cope with those difficulties. The latter are therefore less able to put packages together for sale to other travel agents. The Commission’s interpretation unjustifiably involves, moreover, treating a taxable person’s supplies differently for VAT purposes on the basis of the identity of his customer rather than on any criterion linked to the supply or the supplier. 55. I agree with that assessment. The criterion of size will give larger agencies an advantage over smaller agencies also in other ways, but application of the VAT rules should not add further discrimination. It is also true that the principle of neutrality, in this sense, is not a rule of primary law which can condition the validity of a provision, but a principle of interpretation, to be applied concurrently with other such principles. (36) Here, however, its application buttresses the view which I have reached on the basis of the principle which requires a provision whose meaning is not clear (particularly where there are conflicting language versions) to be interpreted in the light of the purpose and general scheme of the rules of which it forms part. 56. Second, the Commission has argued that the phrase ‘in their own name’ in Article 306 of Directive 2006/112 is redundant if the customer approach is adopted, since travel agents always deal with their customers in their own name (were that not so, the persons with whom they were dealing would not be their customers). 57. That argument seems weak. While it is true that a word or phrase used in legislation should in principle be presumed to serve its own intended purpose, I cannot accept that an interpretation which does no more than avoid redundancy should be made to prevail over one which much more clearly serves the intended purpose of the body of rules as a whole. Redundancy is not unknown in legislation. Here, the phrase ‘in their own name’ may easily be seen as simply an anticipation of the exclusion, in the following sentence, of travel agents acting solely as intermediaries. I note, moreover, that the Commission’s 2002 proposal to amend Article 26 of the Sixth Directive, which is supposed to implement the customer approach, continues to use the words ‘where the travel agents deal with customers in their own name’ – thus perpetuating the alleged redundancy. 58. Third, the Commission submits that the definition of ‘margin’ in Article 308 of Directive 2006/112 is unworkable if the customer approach is taken. If travel agent A puts together a package and sells it to travel agent B who sells it to a traveller, how can A’s margin be the difference between the VAT-exclusive price paid by the traveller and the actual cost to A of the goods and services provided by other taxable persons for the direct benefit of the traveller, when the price paid by the customer includes not only A’s margin but also B’s margin? 59. If, as the legislation stands, the word ‘traveller’ should, as I believe, be construed broadly to include customers of different kinds, in particular other travel agents, the problem disappears. (37) Moreover, as the Member States have pointed out, the words ‘to be paid by the traveller’ cannot be interpreted literally in that context. (38) 60. Fourth, the Commission refers to Case C‑204/03 Commission v Spain, (39) to the effect that Member States may not disregard express provisions of the VAT directives in order to produce a result more closely in line with the overall aims of that legislation. 61. Here again, I agree with the Member States that the case-law does not preclude an interpretation which produces such a result unless it runs counter to a clear and unequivocal provision. The provisions in issue in the present proceedings are, as has been amply demonstrated, not unequivocal. 62. Finally, however, it must be acknowledged that the customer approach is not a panacea for all possible imperfections in the margin scheme. Its most salient drawback is set out by the Commission in the explanatory memorandum to its proposed amendments to the Sixth Directive: ‘Several Member States also raised the issue of business trips and the problem this causes to companies, who are, in effect, final consumers of travel packages, as they will be unable, under the proposed new provisions of Article 26, to deduct the residual input VAT. If they order a travel package from a travel agent, they will [be] charged a price VAT included, and therefore this company will not be able to deduct this amount of VAT although this travel package is used for business purposes. This will cause residual VAT in the intermediary consumption stage, which is contrary to the basic principle of neutrality of the Community VAT system.’ (40) 63. Although acknowledged, that issue is not addressed in the proposed amendment. In the present proceedings, the Commission puts forward an interpretation under which the term ‘traveller’ would include companies purchasing business trips – thus, in effect, applying the customer approach to that extent (and, in so doing, embedding residual VAT at an intermediary stage). 64. The problem could be averted only if the traveller approach were adopted in its strictest interpretation, so as to apply the margin scheme only where the travel agent’s customer was a natural person consuming the services sold. Where the customer was a taxable legal person, the normal regime would apply and, if the services acquired were used for strictly business purposes and constituted cost components of the business’s taxable outputs, all the VAT on those services, in addition to that on the travel agent’s margin, could be deducted from the tax on those outputs and the principle of VAT neutrality for taxable persons would be respected. 65. That is not, however, the interpretation which the Commission proposes for the traveller approach. Moreover, the aims of the margin scheme are, as is agreed, specifically to simplify procedures and to ensure correct allocation of VAT revenue. There is no suggestion that it was intended also to guarantee full deductibility of input tax on travel services used for taxable business purposes, even if that would have been a desirable aim. 66. The existence of the issue which I have described does not, therefore, lead me to revise my conclusion that the customer approach should apply on a correct interpretation of the margin scheme, with the result that the Commission’s actions should be dismissed in so far as they seek declarations to the effect that, by permitting travel agents to apply the margin scheme to the provision of travel services to persons other than travellers, the Member States have failed to fulfil their obligations under Articles 306 to 310 of Directive 2006/112. Costs 67. Under Article 138(1) of the Court’s Rules of Procedure, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party’s pleadings. All the defendant Member States have applied for costs. Under Article 140(1) of the Rules of Procedure, Member States which intervene in proceedings are to bear their own costs. Conclusion 68. In the light of all the above considerations, I am of the opinion that – subject to the analysis and conclusions which I set out in my separate Opinion in Case C-189/11 concerning the remaining complaints against the Kingdom of Spain – the Court should: – dismiss the actions brought by the Commission, – order the Commission to pay the costs incurred by the Member States as defendants, and – order the Member States to bear the costs which they have incurred as interveners. Annex I Articles 306 to 310 of Directive 2006/112 (emphasis added) ‘Article 306 1. Member States shall apply a special VAT scheme, in accordance with this Chapter, to transactions carried out by travel agents who deal with customers in their own name and use supplies of goods or services provided by other taxable persons, in the provision of travel facilities. This special scheme shall not apply to travel agents where they act solely as intermediaries and to whom point (c) of the first paragraph of Article 79 [(41)] applies for the purposes of calculating the taxable amount. 2. For the purposes of this Chapter, tour operators shall be regarded as travel agents. Article 307 Transactions made, in accordance with the conditions laid down in Article 306, by the travel agent in respect of a journey shall be regarded as a single service supplied by the travel agent to the traveller. The single service shall be taxable in the Member State in which the travel agent has established his business or has a fixed establishment from which the travel agent has carried out the supply of services. Article 308 The taxable amount and the price exclusive of VAT, within the meaning of point (8) of Article 226, in respect of the single service provided by the travel agent shall be the travel agent’s margin, that is to say, the difference between the total amount, exclusive of VAT, to be paid by the traveller and the actual cost to the travel agent of supplies of goods or services provided by other taxable persons, where those transactions are for the direct benefit of the traveller. Article 309 If transactions entrusted by the travel agent to other taxable persons are performed by such persons outside the Community, the supply of services carried out by the travel agent shall be treated as an intermediary activity exempted pursuant to Article 153. If the transactions are performed both inside and outside the Community, only that part of the travel agent’s service relating to transactions outside the Community may be exempted. Article 310 VAT charged to the travel agent by other taxable persons in respect of transactions which are referred to in Article 307 and which are for the direct benefit of the traveller shall not be deductible or refundable in any Member State.’ Annex II Article 26 of the Sixth Directive (emphasis added) ‘Special scheme for travel agents 1. Member States shall apply value added tax to the operations of travel agents in accordance with the provisions of this Article, where the travel agents deal with customers in their own name and use the supplies and services of other taxable persons in the provision of travel facilities. This Article shall not apply to travel agents who are acting only as intermediaries and accounting for tax in accordance with Article 11A(3)(c). [(42)] In this Article travel agents include tour operators. 2. All transactions performed by the travel agent in respect of a journey shall be treated as a single service supplied by the travel agent to the traveller. It shall be taxable in the Member State in which the travel agent has established his business or has a fixed establishment from which the travel agent has provided the services. The taxable amount and the price exclusive of tax, within the meaning of Article 22(3)(b), in respect of this service shall be the travel agent’s margin, that is to say, the difference between the total amount to be paid by the traveller, exclusive of value added tax, and the actual cost to the travel agent of supplies and services provided by other taxable persons where these transactions are for the direct benefit of the traveller. 3. If transactions entrusted by the travel agent to other taxable persons are performed by such persons outside the Community, the travel agent’s service shall be treated as an exempted intermediary activity under Article 15(14). Where these transactions are performed both inside and outside the Community, only that part of the travel agent’s service relating to transactions outside the Community may be exempted. 4. Tax charged to the travel agent by other taxable persons on the transactions described in paragraph 2 which are for the direct benefit of the traveller, shall not be eligible for deduction or refund in any Member State.’ Annex III Terminology used in the different language versions Sixth Directive BG (43) CS DA DE Article 26(1) получател (recipient, beneficiary) zákazník (customer) rejsende (traveller) Reisender (traveller) Article 26(2), first sentence пътуващо лице (traveller) Article 26(2), third sentence пътуващо лице/турист (traveller/ tourist) Article 26(4) Турист (tourist) Directive 2006/112 BG CS DA DE Article 306 клиент (customer) cestující (traveller) rejsende (traveller) Reisender (traveller) Article 307 пътуващо лице (traveller) Article 308 Article 310 Sixth Directive EL EN ES ET Article 26(1) ταξιδιώτης (traveller) customer viagero (traveller) klient (customer) Article 26(2), first sentence traveller reisija (traveller) Article 26(2), third sentence Article 26(4) Directive 2006/112 EL EN ES ET Article 306 ταξιδιώτης (traveller) customer viagero (traveller) reisija (traveller) Article 307 traveller Article 308 Article 310 Sixth Directive FI FR HU IT Article 26(1) matkustaja (traveller) voyageur (traveller) utas (traveller) viaggiatore (traveller) Article 26(2), first sentence Article 26(2), third sentence Article 26(4) Directive 2006/112 FI FR HU IT Article 306 asiakas (customer) voyageur (traveller) utas (traveller) viaggiatore (traveller) Article 307 Article 308 asiakas (customer) matkustaja (traveller) utazó (traveller) Article 310 matkustaja (traveller) utas (traveller) Sixth Directive LT LV MT NL Article 26(1) klientas (customer) klients (customer) klienti (customer) reiziger (traveller) Article 26(2), first sentence keleivis (traveller) ceļotājs (traveller) vjaġġatur (traveller) Article 26(2), third sentence Article 26(4) Directive 2006/112 LT LV MT NL Article 306 keleivis (traveller) ceļotājs (traveller) konsumaturi (consumer) reiziger (traveller) Article 307 vjaġġatur (traveller) Article 308 Article 310 Sixth Directive PL PT RO (44) SK Article 26(1) klient (customer) cliente (customer) client (customer) zákazník (customer) Article 26(2), first sentence podróżny (traveller) viajante (traveller) cālātor (traveller) turista (tourist) Article 26(2), third sentence Article 26(4) cestujúci (traveller) Directive 2006/112 PL PT RO SK Article 306 nabywca (acquirer) cliente (customer) client (customer) zákazník (customer) Article 307 turysta (tourist) Article 308 Article 310 Sixth Directive SL SV Article 26(1) naročniki (customer) kunder (customers) Article 26(2), first sentence potnik (traveller) resande (traveller) Article 26(2), third sentence Article 26(4) Directive 2006/112 SL SV Article 306 potnik (traveller) kunder (customers) Article 307 resande (traveller) Article 308 Article 310 1 – Original language: English. 2 – Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax (OJ 2006 L 347, p. 1; ‘Directive 2006/112’). 3 – Council Directive 90/314/EEC of 13 June 1990 on package travel, package holidays and package tours (OJ 1990 L 158, p. 59). Article 1 states its purpose as being ‘to approximate the laws, regulations and administrative provisions of the Member States relating to packages sold or offered for sale in the territory of the Community’. 4 – Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes – Common system of value added tax: uniform basis of assessment (OJ 1977 L 145, p. 1; ‘the Sixth Directive’). Articles 306 to 310 of Directive 2006/112 merely recast the structure and wording of Article 26 of the Sixth Directive, without, in principle, bringing about any material change (see recital 3 in the preamble to Directive 2006/112). 5 – Under the provisions of, now, Council Directive 2008/9/EC of 12 February 2008 laying down detailed rules for the refund of value added tax, provided for in Directive 2006/112/EC, to taxable persons not established in the Member State of refund but established in another Member State (OJ 2008 L 44, p. 23), which repealed and replaced Eighth Council Directive 79/1072/EEC of 6 December 1979 on the harmonisation of the laws of the Member States relating to turnover taxes – Arrangements for the refund of value added tax to taxable persons not established in the territory of the country (OJ 1979 L 331, p. 11). 6 – Although the Commission’s definition of ‘traveller’ is in fact somewhat looser than that – see point 28 below. 7 – The Commission explained at the hearing that the text of the Sixth Directive was debated and agreed within the Council in its French version, which was intended to serve as the basis for all other languages; however, contrary to that intention, the final English text was in fact based on a parallel version in English, which had not been the basis of discussions. It cannot, however, be denied that the text was adopted in all six languages, each version being equally authentic. 8 – I reproduce the monolingual text of Articles 306 to 310 of Directive 2006/112 in Annex I to this Opinion, and of Article 26 of the Sixth Directive in Annex II. In both cases, I italicise the word ‘traveller’ or ‘customer’, as the case may be, or its equivalent, on each occurrence. In Annex III, I set out a table which indicates the word used in each provision, in each of the different language versions. At the hearing, the Commission stated that the Council had determined the final text in each language version of Directive 2006/112, without the Commission being in a position to react to any changes. 9 – Proposal for a Council Directive amending Directive 77/388/EEC as regards the special scheme for travel agents (COM(2002) 64 final). 10 – That was, in any event, the intention. In fact, at least the French, Greek, Italian and Swedish versions of the proposed new provisions all seem to have retained the word ‘traveller’ in at least one instance. 11 – At point 4.1.2.1. 12 – Cyprus, Hungary, Latvia and the United Kingdom. The Netherlands amended its legislation at a later stage (from 1 April 2012) and parallel proceedings which had been brought against that Member State (Case C-473/11) were withdrawn. 13 – See Commission press releases IP/08/333 and IP/11/76. 14 – The aim of simplifying procedure for travel agents has, moreover, been repeatedly stressed by the Court (see, for example, Case C-31/10 Minerva Kulturreisen [2010] ECR I‑12889, paragraphs 17 and 18 and case-law cited). The aim of correct allocation of tax yield was stressed by Advocate General Tizzano in his Opinion in First Choice Holidays (Case C-149/01 [2003] ECR I‑6289, point 25, footnote 13). 15 – See, however, point 28 below. 16 – See, for a recent example, Case C-360/11 Commission v Spain [2013] ECR I-0000, paragraph 18 and case-law cited. 17 – See Article 1(2) of Directive 2006/112. 18 – Case C-204/03 Commission v Spain [2005] ECR I‑8359, paragraph 28 and case-law cited. 19 – I do not think it useful here to attribute individual arguments – of which what follows is, in any event, only a summary – to individual Member States. 20 – See, for example, Case C-41/09 Commission v Netherlands [2011] ECR I‑831, paragraph 44 and case-law cited. See also Case C‑296/95 EMU Tabac and Others [1998] ECR I‑1605, paragraph 36. 21 – Joined Cases C-308/96 and C-94/97 Madgett and Baldwin [1998] ECR I‑6229, paragraphs 18 to 27. See also Case C-200/04 iSt [2005] ECR I‑8691, paragraph 22 et seq. 22 – First Choice Holidays, cited in footnote 14, paragraph 28 of the judgment. 23 – See, for a very recent example with regard to exemptions, Case C-91/12 PCF Clinic AB [2013] ECR I‑0000, paragraph 23. 24 – Cited in footnote 18; see, in particular, paragraph 25. 25 – See the case-law cited in footnote 20 above. 26 – Virginibus puerisque, iv, El Dorado (1881). 27 – There are cases of course in which the voyage or journey itself, or part of it, is the aim (certain cruises, for example, or legendary train journeys such as the Orient Express), and others in which the transport itself is the only service purchased from the travel agent (notably, perhaps, in the case of business travel). However, a significant part of travel agency business involves packages of which the services available at the destination are the central component, transport to and from that destination being simply an inevitable adjunct. 28 – Case C‑163/91 [1992] ECR I‑5723. 29 – In Minerva Kulturreisen, cited in footnote 14, the Court did rule that the margin scheme was not to apply to the sale by a travel agent of opera tickets in isolation ‘without provision of a travel service’, but it made clear that travel services included accommodation (see paragraphs 21 to 28 of the judgment). 30 – See, respectively, Madgett and Baldwin and iSt, both cited in footnote 21. 31 – Case C-253/07 Canterbury Hockey Club and Canterbury Ladies Hockey Club [2008] ECR I‑7821, paragraph 26 et seq. I note that, in that case, the Commission had submitted that the provision was to be interpreted ‘not literally, but so as to ensure the effective application of the exemption for which it provides, on the basis of the supply of services in question and that, therefore, regard must be had not only to the formal, legal recipient of that supply, but also to its material recipient or effective beneficiary’ (see paragraph 25 of the judgment). 32 – See the case-law cited in footnote 14 above. 33 – That would not be the case only if A were both registered for VAT in each of those Member States and made supplies there on which the output VAT exceeded all his input VAT there. Even then, however, there would be a flow of VAT revenue from the Member States in which the services were in fact provided and enjoyed to the Member State in which A was established, which would collect the output tax on his sale to B. 34 – See point 32 above. 35 – For the other sense of fiscal neutrality in the context of VAT, see footnote 40 below. 36 – See Case C‑44/11 Deutsche Bank [2012] ECR I‑0000, paragraph 45. 37 – The difficulty is addressed in the Commission’s proposed amendments to Article 26 of the Sixth Directive, essentially by replacing the word ‘traveller’ by ‘customer’ throughout Article 26(3) (corresponding to the last sentence of Article 26(2) in the unamended version; there are also other changes, but they have no particular bearing on the point under discussion). That, it seems to me, demonstrates the largely contrived nature of the objection. 38 – See point 31 above. 39 – Cited in footnote 18 above. The Commission cites also Case C‑269/00 Seeling [2003] ECR I‑4101, paragraph 54. 40 – Document cited in footnote 9, point 2, penultimate paragraph. The principle of neutrality referred to here is that VAT should be neutral in its effect on taxable persons, who should not themselves bear the burden of the tax. 41 – Point (c) of the first paragraph of Article 79 concerns the use of a suspense account for repayment of expenditure in the name and for the account of a purchaser or customer. 42 – Article 11A(3)(c) was the predecessor to point (c) of the first paragraph of Article 79. 43 – The Sixth Directive having been repealed before Bulgaria’s accession to the EU, the Bulgarian version is not an official translation. 44 – The Sixth Directive having been repealed before Romania’s accession to the EU, the Romanian version is not an official translation.

Lord Justice Pitchford : This is an appeal against conviction brought with the leave of the single judge. The appeal raises issues as to the proper treatment of evidence said to be cross admissible as between one count and other counts in the indictment, and as to the judge's decision to permit one of the counts in the indictment to go to the jury. The complainants are entitled to their anonymity and we shall use initials when necessary. The indictment At a re-trial before HHJ Milford QC sitting at Newcastle-upon-Tyne Crown Court the appellant faced an indictment containing five counts as follows: Count 1: On 13 March 2007, sexual assault of a woman, to whom we shall refer as SG, by touching, contrary to section 3 Sexual Offences Act 2003. Count 2: On 8 October 2007, sexual assault of a woman, to whom we shall refer as JH, by touching. Count 3: On 16 June 2008, sexual assault of a woman, to whom we shall refer as JU, by touching. Count 4: On 23 June 2008, assault by penetration of a woman, to whom we shall refer to as LR, contrary to section 2 Sexual Offences Act 2003. Count 5: On 11 September 2008 sexual assault of a woman, to whom we shall refer to as ES, by touching. After a trial between 27 June and 19 July 2011 the jury returned verdicts of not guilty upon counts 1 and 2 and unanimous verdicts of guilty upon counts 3, 4 and 5. The appellant was sentenced by the trial judge to a term of 8 years imprisonment upon count 4, and 5 years imprisonment upon counts 3 and 5 all concurrent. The evidence The appellant, now aged 59, qualified as a registered general nurse in 2000, and the following year was employed at the Spire private hospital in Washington, Tyne and Wear. At the time of the allegations brought by JU, LR and ES he was employed in the surgical recovery room looking after patients who were coming round after surgical procedure under general anaesthetic in theatre. It was the prosecution case that on several occasions the appellant sexually assaulted women under his care, some of whom were and some of whom were not recovering from anaesthesia. The jury heard evidence concerning two further patients who were not the subject of any count in the indictment. The first was a woman whom we shall call SK who attended the Spire on 30 May 2006 for the removal of an ovary. She came forward after the commencement of the first trial. Her evidence was admitted at the first and second trials as 'bad character' evidence pursuant to section 101(1)(d) Criminal Justice Act 2003. It was suggested that her complaint fell into the same pattern of offending as that represented by the five count indictment and it was the first incident in time. The witness gave evidence that once back in her room after surgery she became aware of her bed sheet being pulled back, her gown lifted and a hand touching her pubic area. She opened her eyes and saw a male nurse on the left side of her bed. She had been in his care on earlier occasions. His hand then squeezed her breast. She pretended to be asleep. He said, "Does that feel nice?" He replaced her bedclothes and left. She saw him going towards the door. She saw him again the following day when his behaviour was normal. She told no-one of her experience. In January 2010 she saw a picture of the appellant in a local newspaper in connection with the first trial. She then spoke to her brother's partner. As a result of her encouragement she eventually told her brother what happened and, subsequently, the police. The appellant gave evidence that he did indeed attend to the patient in the recovery room but at no time did he touch her inappropriately. Turning to count 1, SG was admitted on 12 March 2007 for breast augmentation. The complainant was not under the influence of anaesthetic. She complained that as she was getting ready for a visit from her mother after the operation, and the appellant was assisting her to put on a sports bra. He lifted her breasts into the bra before zipping the front. A care assistant, Susan Whittingham, gave evidence that it was not necessary for the appellant to handle the patient's breasts which would have been hard and swollen. That task was for the patient herself, while the assistant would merely zip up the bra. SG made no complaint at the time. When interviewed by the police, who contacted her by telephone, she said there had been "a creepy old man". She made her statement the following day. The defendant agreed that he had attended the patient. He could not recall the complainant but he would not have lifted her breasts. As to count 2, JH was admitted on 8 October 2007 for breast reconstruction. It was necessary following the procedure to carry out a bladder scan for the purpose of ascertaining whether the patient was retaining liquid. The patient was not at that time recovering from the effects of anaesthesia. Gel was applied to the patient's abdomen and a probe placed over it in order to produce the scan. It was necessary to lower the patient's knickers to the level of her pubic hair. The complaint was that the male nurse conducting the scan had pulled down the patient's knickers on the right side to thigh level, thus exposing part of her vagina. The complainant's husband supported this account. The appellant accepted that he carried out the scan. He accepted that if he had lowered the complainant's knickers as alleged it was unnecessary to do so. His evidence was that he had done only what was required. The issue was whether the appellant had exposed any part of the complainant's vagina. As we have said, the jury found the appellant not guilty of both counts 1 and 2. Neither of the complainants was, at the material time, recovering from the residual effects of anaesthesia when the alleged assaults occurred. In respect of each case there was a straightforward issue whether the appellant had behaved indecently towards the complainant. As to count 3, on 16 June 2008 JU was admitted for the removal of her adenoids and the fitting of grommets. She was taken from surgery to the recovery room under the effects of general anaesthetic. The complainant said that she recalled being with a male nurse in the presence of a female. When the female left, an inference she drew from the sound of her footsteps, the male nurse placed his hand under her gown and caressed her right breast. As the female returned he removed his hand. When they were next alone he repeated his action. This happened repeatedly until the male nurse began to manipulate her nipple. Although conscious, the complainant was unable to speak or to move. JU made no complaint at the time. She said she had not wanted to tell anyone. However, she returned to the same hospital in May 2009 for cosmetic surgery and, before she did, she told her friend that last time there had been a man present who gave her the creeps. On her friend's advice JU asked a female nurse at the Spire whether this time she could have a female chaperone. She gave a description of the male nurse who had previously attended her. The nurse responded by hugging her and telling her not to worry because the male member of staff had been suspended. The appellant said that he had no personal memory of the patient but could see from the records that both he and other males looked after the complainant. All sorts of people were going in and out. He denied impropriety. As to count 4, LR was admitted for breast surgery on 23 June 2008. While in recovery after general anaesthetic she said she was conscious but unable to move or to open her eyes. A man with a Tyne and Wear accent was talking to her. He placed his hands between her legs and placed his fingers inside her vagina. She was shocked and confused. When she was able to open her eyes she saw a male nurse who spoke with the same voice and accent as the man who had assaulted her. Following her discharge, the complainant, on 29 June, sent an anonymous email to the hospital director. As a result of the follow up she agreed to speak to the police. The complainant said she did not think that she could identify her assailant and when she took part in an identification procedure she did not identify the appellant. The other male who attended LR after her operation was a healthcare assistant, Michael Hume. He gave evidence that he could not have attended the patient alone because he was not, as an assistant, allowed to do so. He did not recall the patient and was not the person who assaulted her. Mr Hume agreed that the patient's notes indicated that he had spent the first 15 - 20 minutes with the patient following her arrival at recovery from the operating theatre. She was recorded as being unresponsive at 4.25 pm and 4.30 pm. She was said to be responding to voice at 4.35 pm. At those times he would not have been alone with the patient. When asked to examine the notes again in re-examination he said that the times noted at 4.35 pm and 4.40 pm were not in his handwriting although the nursing entries were. From 4.45 pm onwards it was accepted that the handwriting in the notes was the appellant's. The appellant denied that he was the patient's assailant. The prosecution observed that it was clear when the appellant gave evidence that his voice was very different in tone from that of Mr Hume. That was not a material consideration at the time Mr MacDonald QC made a submission of no case to answer. As to count 5, ES was in hospital on 11 September 2008 for an operation to her shoulder. She gave evidence that as she was coming around in the recovery room she felt a hand under her bedclothes. It reached inside her paper underwear and was placed on top of her vagina. It was removed and the same thing happened a second time. When she was able to open her eyes she saw a male nurse whom she described. She talked to him. She felt confused. When she was discharged home she made a complaint to her mother and informed the police. The theatre manager Janice Linley gave evidence. She said that she wheeled the patient from theatre into the recovery room where she was left in the care of the appellant. When she returned she saw that, for some reason, the curtains around the patient had been drawn across and she heard the appellant say from behind the curtains, "Sorry this is a bit personal". When she drew the curtain back she found the appellant standing beside the patient with ECG leads in his hands. Mrs Linley said nothing to the appellant but left the curtain open and the following day spoke to the hospital manager. In cross examination Mrs Linley accepted that patients in recovery had ECG electrodes attached to their chests to monitor heart rate. It was the recovery nurse's job to remove them when appropriate. She agreed that it may have been appropriate to draw the curtain around the bed for this purpose to protect the patient's privacy, especially when there was a male patient in the next bed, as there was on this occasion. The appellant denied that he had behaved inappropriately towards this patient. The jury also heard about a further incident which involved a patient to whom we shall refer as SH. She was admitted for a surgical procedure under general anaesthetic in March 2008. Immediately afterwards she said she was aware of a sensation in her vagina as though sexual intercourse had taken place. When she later made contact with the hospital it emerged that the appellant had not been on duty on that day. This was, the defence argued, an important incident since it demonstrated that a perfectly honest witness may make a genuine mistake about a sensation felt while recovering from general anaesthetic. Expert medical evidence The possibility of false memories of sexual abuse by the counts 3, 4 and 5 complainants was the subject of evidence from three eminent expert witnesses. Professor Mark Forest gave evidence for the prosecution. He is a working hospital consultant in anaesthetics and critical care. Professor Ian Hindmarch also gave evidence for the prosecution. He is a professor in human psycho-pharmacology, the study of the effect of drugs on the mind. Professor Hindmarch had a particular interest in the side effects of anaesthetic drugs. It was the defence case that witnesses who described sensations of sexual interference may have been experiencing the unwanted side effects of recovery from anaesthesia. In support of that case they relied upon the evidence of Professor Alan Aitkenhead who had been senior lecturer in anaesthesia and honorary consultant in Leicester from 1979 until 1988. He became Professor of Anaesthesia at Nottingham and honorary consultant from 1989 until his retirement in July 2010. As honorary consultant he worked as a clinician for about half the time in clinical practice as would a NHS consultant anaesthetist. He was editor of a standard text book, 'The Text Book of Anaesthesia' which was in its sixth edition. Dr Forrest explained that modern anaesthetic drugs had three constituent parts and purposes, called the triad: sleep induction, muscle relaxant and anaesthesia. During recovery of consciousness, which was designed to be swift, the stages were (i) recovery of auditory speech or sound perception, followed (ii) by touch and movement sensation and, finally, (iii) visual awareness and alertness. It was common ground between the experts that there were, in theory, two possible conclusions which the jury could reach upon the evidence of the witnesses SK, JU, LR and ES: either they were relating experiences accurately recalled or, honestly believing in the reality of their experience, their memory was in fact false having been induced by the effects of anaesthesia. Those false memories may have been created by (1) hallucination while awake, (2) dreaming while asleep or (3) misperception of an 'innocent' experience, such as an appropriate touching during a nursing procedure, while in a state between sleep and alertness. The preponderance of the evidence was that if the witnesses' memories were false, they were caused either by dreaming or by misperception. Dr Forrest, having examined the medical records, including the recovery room nursing notes recording the patients' stages of recovery from anaesthesia, and having considered the accounts given by the witnesses, expressed the opinion that the assertion of false memory was "considerably weakened" by the absence of amnesia and the impressive recall of the complainants. Professor Hindmarch considered that dreams and hallucinations could be excluded. The witnesses appeared contemporaneously to have been using their cognitive faculties both to decide upon and make sense of their experiences. They therefore appeared to be alert. It was possible that an experience could have been misperceived, but only if an innocent medical procedure had taken place which was capable of being misconstrued. Professor Hindmarch would not express an opinion as to the latter because post operative nursing procedure was outside his field of expertise. Professor Aitkenhead expressed the view that he could not exclude the possibility that false memory had been induced by sleep or misperception under the residual influence of anaesthetic drugs. It was the common view that experiences similar to those described by the witnesses were rare. Ground 1: count 3, submission of no case to answer The appellant argues that the judge should have acceded to a submission of no case to answer on count 3. First, the evidence was vague and insubstantial; secondly, the prosecution had failed to establish a prime facie case that the appellant had the opportunity to commit the offence. He had not been responsible for personal observation of JU until she was fully alert. Her evidence was that she had been assaulted during an earlier stage of recovery. If Mr MacDonald QC's submissions upon count 3 were to succeed, they would have an impact upon other counts in the indictment having regard to the judge's directions upon cross admissibility (see ground 2 below). In our judgment, there was sufficient evidence of sexual interference by the appellant, which we have already summarised, to enable the jury to adjudicate upon the reliability of JU's evidence. There was no dispute that the appellant was on duty throughout the complainant's stay in the recovery room. Mr Hume's evidence was that he was not permitted alone to attend to the patient. He was required to be under the supervision of the nurse, who was the appellant. The evidence was that staff would move in and out of the recovery room as and when circumstances required. While it was Mr Hume who made the initial observations of the patient at five minute intervals during her recovery, it was open to the jury to conclude that the appellant took advantage of Mr Hume's absences to interfere sexually with the patient. We reject the argument that this count should not have been considered by the jury. Ground 2: cross-admissibility directions to the jury We observe that the term 'cross admissibility' is a useful label which is frequently used by counsel and trial judges considering evidence relevant to a number of counts in the indictment, or evidence upon one count which may be relevant in proof of another. However, it is important to remember that, strictly, cross admissibility is a label which identifies only whether evidence relating to one count is also relevant to the jury's consideration of another. When it is 'bad character' evidence it must, by reason of the effect of section 112(2) Criminal Justice Act 2003, satisfy the requirements of a gateway under section 101(1), usually section 101(1)(d). When the issue arises whether evidence is 'cross admissible' between counts it is essential that thought is given to the questions: to what issue(s) may the evidence be relevant and for what purpose(s) may the jury properly consider that evidence upon one count is capable of supporting another? For reasons which we shall explain, we consider that this is what the judge did in the present case. Mr Alistair MacDonald QC recognised that evidence upon one count, or other 'bad character' evidence admitted under section 101(1)(d) Criminal Justice Act 2003, may be relevant in proof of a further count in the indictment. For example, a number of witnesses, unknown to one another, may make independent complaints of sexual assault by a defendant. Provided that the complaints were truly independent of one another, the fact that several similar complaints were made may be relevant to an important issue in the trial between the defendant and the prosecution. In the present case there were upon counts 3, 4 and 5 two issues for the jury to determine (1) whether the complainant's memory was accurate, or false by reason of the effects of anaesthesia and (2) whether, if the complainant's memory was accurate, the perpetrator of the assault was the appellant. The learned judge directed the jury, in terms to which we shall return, that when assessing the evidence of each complainant in counts 3, 4 and 5 the jury could have regard to the evidence of any other count 3 - 5 complainant, and the evidence of SK. First, when deciding whether the complainant was the victim of false memory the jury could consider the unlikelihood of the coincidence that four women had suffered false memory of sexual interference in the same hospital in similar circumstances, in the case of three of them during June – September 2008, and in the case of the fourth, during May 2006. Secondly, the judge directed the jury that if they were sure that the appellant had sexually assaulted any one of the count 3 – 5 complainants, or SK, and, if they concluded in consequence that the appellant had a tendency towards committing sexual offences against female patients under his care, the jury was entitled to consider to what extent that propensity assisted them to resolve, in the case of any (or any other) count, the questions (1) whether the complainant's memory was accurate or false and (2) whether any medical procedure was properly or inappropriately carried out. Mr MacDonald conceded that if it was, in the factual circumstances of the present case, permissible for the judge to provide the jury with these 'cross admissibility' directions, he had no complaint to make about their content; the directions given were balanced, fair and contained the appropriate warnings. Furthermore, it was conceded that there was no evidence that the complaints made were other than independent, although in the case of SK there was a question whether she may have been influenced by the contents of the newspaper article in which she had recognised the appellant's photograph. As to the latter, the jury received a specific direction. Mr MacDonald submitted that on the facts of the present case it was dangerous to permit the jury to treat the evidence of any one complainant (or SK) as relevant to the issue whether a second complainant was recounting an accurate or a false memory. As the argument was succinctly expressed in writing: "the mere fact that the prosecution disproved misperception in one or more of the patients does not increase the likelihood that the remainder have not suffered misperception. In this sense, the issue can be likened to one of causation. In that sense, it is a different issue to that normally encountered in that, in the normal case, there is no credible medical reason for innocence which the jury has to consider in coming to its verdict." Furthermore, Mr Macdonald objected that although the evidence was that false memories such as those asserted in the present case were rare, no statistical evidence was tendered by the prosecution to demonstrate the degree of improbability of this cluster of 'false' complaints. For that reason the jury was not provided with the tools with which to assess the probative value of the coincidence when making their judgment of the evidence of any particular complainant. For the first, and principal, of these submissions the appellant seeks to derive assistance from the decision and reasoning of this court in Norris [2009] EWCA Crim 2697. In Norris the appellant, a nurse, had been charged with the murder of four, and the attempted murder of one, elderly female patients under his care all of whom, it was the prosecution case, had died from hypoglycaemia induced by the appellant's exogenous administration of insulin to his patient. The issues for the jury were whether, in the case of each patient, the prosecution (1) had excluded the possibility that the patient had died from an extremely rare condition of naturally occurring hypoglycaemia and (2) if so, had proved that the appellant had administered the fatal dose of insulin to the patient. It was the prosecution case that [12], "severe hypoglycaemia in non-diabetics was a very rare occurrence… [To] have five such cases, where four had led to the death of the patient, was quite extraordinary … [S]imilar patterns in each case made the five cases mutually supportive". Quite apart from the evidence of pattern and opportunity the prosecution was able to point in the case of one of the victims to a particularly strong prime facie case against the appellant. This was the subject of a separate 'propensity' direction. Counsel for the respondent confirmed [68] that one of the reasons for adducing the evidence of rarity of cases of naturally occurring hypoglycaemia was "to demonstrate that because such a phenomenon was so rare, it would be extraordinary that all five cases in two hospitals in close proximity in a short period, were naturally occurring hypoglycaemia. It was not suggested at the trial that the jury could use the evidence … to show that all five cases must have been the result of malicious administration". [original emphasis] Counsel for the appellant conceded in argument [63] that as a general proposition the evidence in relation to one count was relevant and probative in relation to another on two crucial issues. As to the first: "First, he accepted that evidence on one count was relevant and probative in another to prove that the deaths of some of them were not the result of a rare medical phenomenon, i.e. naturally occurring hypoglycaemia in a non-diabetic patient …" Nevertheless, the court accepted the appellant's case that [65] "statistically speaking [the rarity of the naturally occurring condition] would not alter the odds of any one individual case being a naturally occurring phenomenon." It is the acceptance of this proposition by the court in Norris on which Mr MacDonald relies in support of his argument that the judge should not have permitted the jury to treat the counts 3 - 5 (and SK) evidence as mutually supportive upon the issue whether any one complainant was describing a true or a false memory. It is therefore of some importance to ascertain the reasons for the court's rejection of Mr Norris' first ground of appeal. Counsel for Mr Norris argued [65] that the jury should have received an explicit direction as to how they should approach the cross admissibility of the evidence upon the issue of causation of death. Further, they should have received assistance as to their approach to causation if there was a possibility that any one of the deaths was due to naturally occurring hypoglycaemia. At paragraph 76 of his judgment, Aikens LJ posed two questions: was there a danger that the jury would deduce from the "extreme unlikelihood of five cases of naturally occurring hypoglycaemia" that "the cause of the hypoglycaemia in each of the five cases must therefore have been non-natural? Would such a line of reasoning have been wrong and should the judge have made a more specific warning against it?" At first sight it may appear that the court was posing the question whether the unlikelihood of coincidence was inadmissible in consideration of causation of any one death. However, it is clear from the succeeding paragraphs that this was not the question the court was asking. At paragraph 77, Aikens LJ said: "77. Clearly it cannot follow, either as a matter of logic or probability, that because it would be "extraordinary" to have five cases of hypoglycaemia resulting from natural causes in so small an area and so short a space of time, therefore it is evidence to demonstrate that it is either certain or more likely that all of the five cases were the result of non-natural causes. Such a line of reasoning would be wrong in terms of legal analysis and, we suspect, must also [be] wrong in terms of scientific or probability analysis. It was not the conclusion that Professor Ferner or Dr Kroker was suggesting by their evidence. We are satisfied that each was simply indicating that, based on their experience, it would be quite extraordinary to have five cases of naturally occurring hypoglycaemia in the circumstances postulated by the defence." [original emphasis] At paragraph 78 Aikens LJ observed that the trial judge had sensibly avoided the risk of false reasoning by directing them that they must decide separately upon each count whether naturally occurring hypoglycaemia could be excluded. Aikens LJ continued: "78. … If, as we must assume they did, the jury dutifully followed the judge's directions on the issue of proof of the cause of hypoglycaemia in each case, then they could not have considered the particular evidence of Professor Ferner and Dr Kroker we have highlighted as supporting a conclusion that it therefore followed that in all five cases the cause of the hypoglycaemia must have been non-natural. 79. Thus we conclude that the direction that the judge gave on the "cross admissibility" of evidence concerning the cause of the hypoglycaemia in each of the five victims cannot validly be criticised.… " [original emphasis] Mr MacDonald's argument is that the rarity of false memory in recovering patients, and the unlikelihood of coincidence of false memory in these four patients, was or should have been treated by the judge as inadmissible to support either and both of the following propositions: (1) Any one of the four complainants was not the victim of false memory; and (2) All of the four complainants were not victims of false memory. In our judgment the conclusion of the Court in Norris at paragraphs 77 - 79 supports Mr MacDonald's argument as to proposition (2) but it does not support his argument as to proposition (1). It is necessary to recall that Mr Norris was not arguing that the evidence in support of one count was inadmissible upon another in support of the issue of causation. The risk which the Court was considering was that the jury might have jumped to the conclusion that, because a cluster of deaths caused by naturally occurring hypoglycaemia would be quite extraordinary, all of the five deaths were caused by the exogenous administration of insulin. That line of reasoning was forbidden since the statistical chance that any one of the deaths was non-natural remained constant. It seems to us that Mr MacDonald's argument not only lacks support in authority but it also defies experience. Coincidence may be unlikely in a variety of circumstances. One is that four independent complainants are lying about sexual assault. Another is that four independent complainants are suffering from the rare phenomenon of false memory of sexual assault. The jury was just as entitled, when considering the evidence of any one of the complainants, to have regard to the unlikelihood of a cluster of false memories as they would have been entitled, if the defendant's assertion had been that they were lying, to have regard of the unlikely coincidence that they were all liars. However, before the jury could be entitled to have regard to the unlikelihood of a cluster of victims of false memory, there would have to be expert evidence that the coincidence was indeed unlikely because this was not a matter about which the jury would have experience. In Norris the jury could not have paid any regard to the 'extraordinary' coincidence of allegedly natural deaths from hypoglycaemia without the expert evidence of Professor Ferner and Dr Kroker. There was such evidence in the present case. What the jury could not do was, on the basis of coincidence, leap to the conclusion that all four of the complainants were recounting true rather than false memories. What was required was an examination of the evidence relevant to each count separately and a separate conclusion upon the reliability of each complainant's memory. In reaching their conclusion upon the evidence relevant to each count the jury was entitled to have in mind the rarity of false memory of sexual assault and, if they so concluded, the unlikelihood of the coincidence upon which the defence relied. HHJ Milford QC explained to the jury (summing up, page 2/7) the defence case that four of the complainants were coming round from anaesthesia. The defence was not saying that the women were telling lies. They believed they were speaking the truth and the defence made "an utterly fair point" that for this reason they would appear to be far more convincing witnesses than those who know perfectly well they were not telling the truth. Separate verdicts must be returned. They did not stand or fall together (summing up, page 3/19). In the case of counts 3, 4 and 5 the issue in each case was the same: "… [h]ave the prosecution proved that the memory of the complainant is a true memory or is it possible that the memory is a false memory caused by the anaesthetic". As to the evidence of the four complainants the judge said (summing up, page 7/12): "…it is necessary to consider each count separately and return separate verdicts. It is not permissible just to lump the evidence together and look at the global picture and say, 'Well he must be guilty.'" The judge pointed out (summing up, page 8/1) that the count 3 - 5 complainants all made similar complaints: "The defence case is that none of these ladies is lying; each is suffering from a false memory caused by the anaesthetic, either a dream or a hallucination or a misperception of an event which did occur. When considering the evidence of any one of these three complainants and the suggestion that she is suffering from a false memory you are entitled to consider the evidence of the other two complainants and of [SK] and ask yourselves: what are the chances of three other women who are unconnected and have all been patients at the Spire by coincidence also making similar allegations by reason of false memory against the same source; the greater the number of the allegations and the greater their similarity the less likely that a coincidence has occurred." The judge was in these passages making quite clear to the jury that, while the evidence of one witness might be treated as supportive of another, they were not permitted to lump the evidence together to reach a blanket conclusion upon counts 3 – 5. He proceeded to draw the jury's attention to the complaint of SH (summing up, page 8/22) in respect of which it was established that the appellant was not even on duty at the relevant time. He continued at page 9/17: "If you choose to adopt this approach but you have already rejected the evidence of a particular complainant or [SK] you should ignore her evidence for the purpose of proving the guilt of the defendant … If you concluded that the memory of a particular complainant may have been false you are entitled to take that into account in favour of the defendant when considering whether the allegation of any other complainant arose as a result of false memory." The judge proceeded to explain (summing up, page 10/3) the second way in which the evidence might be 'cross admissible'. If in respect of any one complaint the jury was sure of the appellant's guilt it was open to them to conclude that the appellant had a tendency to commit sexual offences in the circumstances alleged. That was a factor which the jury could consider as relevant to the issues, first, whether another complainant had described a true or a false memory and, second, whether she may have misperceived a normal and appropriate nursing procedure. As in the case of the coincidence direction, Mr MacDonald had no complaint to make about the terms of the judge's propensity direction provided that it was appropriate to give such a direction at all. The judge gave a conventional warning as to the limitations of propensity evidence and concluded (summing up, page 11/17): "You must not attach undue weight to the proved tendency or let it dominate your mind; you must decide the case on all the evidence relating to a particular count which includes the defence evidence. Although I have described these approaches as the first and second approach you do not have to apply them in that order and you do not have to apply either of them if you do not wish to do so." In our judgment, there is no prospect either that the jury would have misunderstood the judge's direction, or that they might have fallen into the trap of reasoning improperly to the conclusion that the rarity of the coincidence upon which the defence relied disproved the defence upon all three counts, without examining the state of the evidence, including the defence evidence, upon each count separately. We do wish to point out that when the jury is being invited to consider the evidence of several complainants for an assessment of the unlikelihood of coincidence, care needs to be taken by the judge before also giving the propensity direction. A conclusion, partly based upon the unlikelihood of coincidence, that the defendant is guilty upon one count (and therefore has a propensity to commit such offences) may enhance the probability of guilt upon other counts, but the jury should be aware of the risk of overvaluing the accumulation of inference. In the present case the jury received the appropriate warning. Secondly, Mr MacDonald advanced the bold submission that the jury should not have been permitted to consider the unlikelihood of the coincidence that the complainants were suffering from false memory without reliable statistical proof of the degree of unlikelihood of the coincidence. In the course of evidence given by the expert medical witnesses the results of surveys and research were explored, but none of them was asked to place a statistical probability value upon the cluster of cases the jury was considering. Their evidence concentrated upon each complainant, the anaesthesia administered, the stage of the patients' recovery when the alleged assault was experienced, and the quality of the witness' recall. Mr MacDonald's argument was that without an appreciation of the statistical probability of coincidence the jury could have had no sound basis for reaching a conclusion based, even in part, upon that coincidence. He does not rely, in support of his argument, upon any principle of law or evidence approved in the cases but seeks to draw an analogy with the admission of DNA evidence. Juries, he submits, are permitted to consider DNA evidence only because the evidence is given meaning by the value of the probability that more than one person in the population may be found to have an identical profile. In our judgment, Mr MacDonald's analogy is a false one. Any evidence capable of narrowing a range of relevant possibilities is likely to be admissible, e.g. the offender had dark hair, was left handed and walked with a limp. The evidence may establish circumstances which, when considered as a whole, have the effect of proving guilt. It is not the law that a statistical value must be placed upon any coincidence on the unlikelihood of which one of the parties to a criminal trial relies. DNA evidence is capable of being, together with other evidence in the case, such a potent source of identification that the prosecution is required to tender evidence of statistical probability (properly explained to the jury) so that it can be evaluated fairly. In some circumstances, even the absence of statistical precision will not prevent the jury considering DNA evidence provided that they understand its probative relevance and its limitations (see, e.g. Bates [2006] EWCA Crim 1395, particularly at paragraphs 29 - 31). The use of statistical evidence by expert forensic scientists does not imply that every time the prosecution relies upon the remote chance of coincidence it must prove the statistical probability of that coincidence. If that were the case the admission of such evidence, approved in Freeman and Crawford [2008] EWCA Crim 1863, [2009] 1 Cr. App R 15, would be impermissible in the overwhelming number of prosecutions relying on circumstantial evidence for their potency, including the prosecution in Norris. We recognise that there will be occasions on which the nature of the evidence is such that either the evidence will be excluded on the grounds of fairness or it will be the subject of warnings to the jury as to its limitations. The probative value of the evidence may be tenuous and for that reason its effect unfairly prejudicial or, while the evidence may have an enhanced probative value upon one or more issues, it may require a warning that it should not be overvalued. Such warnings are commonplace, for example, when propensity evidence is admitted. If the evidence is admitted, the requirements for directions in each case must depend upon the judgment of the trial judge as to the nature and effect of the evidence and the issues which the jury is being asked to resolve. These problems should always, we think, be the subject of discussion before speeches. It may be necessary for the judge to warn the jury against using the evidence for a purpose which would be unfair. In the present case, the nature of the evidence was such that no statistical evaluation could realistically be attempted, not least because the precise circumstances of the complainants were not replicated in the research papers to which the experts referred. The experts were, in the main, reporting the clinical experience of themselves and their colleagues and comparing the available research with the present cases. As the judge pointed out these were circumstances which the jury was entitled to consider subject to the warnings given in his summing up. Since Mr MacDonald has no complaint to make of the judge's directions to the jury upon their approach to the evidence, it does not appear to us that the risk of unfair prejudice to the appellant's case is made out. For these reasons we conclude that the verdicts of the jury are safe and the appeal is dismissed.

Mr Justice Harrison: This is an application for judicial review of a decision by the defendant to certify the claimant's allegation of breach of her Article 8 rights under the European Convention of Human Rights ("ECHR") as being manifestly unfounded pursuant to section 72(2)(a) of the Immigration and Asylum Act 1999 ("the 1999 Act"). The defendant so certified on 17 September 2002. That is, therefore, technically the decision to which this application relates but, following consideration of further matters in the intervening period, the defendant subsequently confirmed the decision in a comprehensive letter dated 2 October 2003. That latter decision is, therefore, also a relevant decision to be considered in this case. The claimant is a Somali national whose identity and date of birth are matters of dispute. According to documents in the defendant's possession, the claimant is Sadia Mohamed Hassan born on 13 February 1980. According to the claimant, she is Sadia Abdulkadir A born on 13 October 1984. She left Somalia in 1998 and, after spending a short time in Kenya, arrived in Italy where she remained for 3½ years between 1998 and 2001, after which she came to the United Kingdom on 9 December 2001, seeking leave to enter as a visitor. She applied for asylum on 12 December 2001 on the basis of membership of a minority clan in Somalia called the Benadirs. Her mother, Rama Ahmed Barakow, had arrived in the United Kingdom on 29 March 1999 and had been granted indefinite leave to enter as a refugee on 28 June 2000 on the basis of her membership of that minority clan. When she arrived, she gave the name of her husband as Abdulkadir A Mohamed and she listed seven children, the second oldest daughter being Sadiya Abdulqadir A born in 1984. On 10 January 2002 the claimant made a human rights claim to remain in the United Kingdom, inter alia, under Article 8 of the ECHR based on her mother and her younger sister being resident here. On 17 January 2002 the claimant was granted bail by an immigration adjudicator who considered statements by two witnesses, A Shire Jama and Saciido Elmi Hassan, purporting to corroborate the mother's account of the claimant's identity and age. On 21 January 2002 the claimant's solicitors requested confirmation that she would be admitted as the dependent minor child of a settled refugee. On 24 January 2002 the defendant declined to give that confirmation on the ground that the documents in his possession showed that the claimant's date of birth was 13 February 1980, not 13 October 1984 as claimed, so she would no longer be a minor. On 15 April 2002 the claimant's solicitors sent to the defendant the documents, including the two witness's statements previously mentioned, used in connection with the claimant's bail application, suggesting that they corroborated her date of birth as being 13 October 1984 so that she would, at that time, still be under the age of 18, and requesting that she be granted leave to remain as a refugee like her mother. On 23 April 2002 the defendant stated in reply:- "The Secretary of State has considered the statements that you have submitted on your client's behalf, however he is not satisfied that this gives conclusive proof of your client's age. The Secretary of State is aware that your client was issued with an Italian residence permit and an Italian identity card, which clearly state that her date of birth is 13 February 1980. The Secretary of State also notes that the same date of birth is recorded on your client's passport and on a letter written by your client's employer in support of a visa application. In light of the above the Secretary of State does not accept that your client is a minor." On 13 August 2002 the defendant certified the claimant's asylum claim under section 11(2)(a) of the 1999 Act on the ground that the claimant was properly returnable to Italy who had accepted responsibility to deal with her asylum claim pursuant to the Dublin Convention. By letters dated 13 and 17 September 2002 the claimant made a human rights appeal under section 65 of the 1999 Act alleging that her removal to Italy would be in breach of Article 8 of the ECHR. By letter dated 17 September 2002 the defendant certified the allegation of a breach of the claimant's human rights under the ECHR as being manifestly unfounded in accordance with section 72(2) of the 1999 Act. In dealing with her Article 8 claim the defendant stated:- "You allege that your client's removal to Italy would constitute a breach of her human rights under Article 8 of the ECHR, as her mother is presently resident in the United Kingdom. The question for the Secretary of State is whether the undoubted interference with your client's right to respect for her family life, if she were returned to Italy, would be proportionate and commensurate when balanced against his legitimate concerns in the public interest to maintain a credible and effective immigration control to the United Kingdom, and to deter abuse of the asylum system. The Secretary of State takes the view that it will be open to your client to apply at a British Consulate or Embassy in Italy for the appropriate entry clearance to enable her to return lawfully to the United Kingdom to resume her family life." On 13 October 2002 the claimant became 18 if, as she claims, she is Sadia Abdulkadir A born on 13 October 1984. On her case, therefore, she was no longer a minor by that date and so the defendant's safe third country family links policy would no longer apply to her. Under that policy, which originated in March 1991 and was re-iterated in July 2002, potential safe third country cases would normally have their asylum claims considered substantively in the United Kingdom if the applicant is an unmarried minor and a parent is in the United Kingdom. On 2 October 2003 the defendant wrote an eight page letter to the claimant's solicitors setting out in considerable detail the history of the alleged lies told by her since she came to this country. It will be necessary to summarise that aspect of the matter in due course but, for present purposes, it is sufficient simply to refer to the defendant's conclusions set out in paragraphs 37 to 42 of that letter in which he stated:- "37. On the totality of the evidence before him, the Secretary of State remains confident that he was entitled to reach the conclusion that your client's human rights appeal under section 65 of the Immigration and Asylum Act 1999 was bound to fail. Your client is not credible and she cannot establish that removal would infringe her human rights under Article 8. She has given a number of conflicting accounts and she cannot reasonably be believed. She has admitted that her family told her to lie to the Immigration Service and, as a result of this readiness to employ lies and deceit in the furtherance of their ends, they cannot be believed. 38. Contrary to the various assertions and statements from your client and her family, whose credibility has been wholly undermined, the Secretary of State is satisfied that he may continue to rely upon the objective evidence before him. This evidence, provided by the Italian authorities and provided by your client to the British Embassy in Rome, establishes incontrovertibly that your client was living openly and lawfully and working regularly in Italy for over three years with official permission to remain there. The photographs, the videotapes and the visa applications demonstrate that she was able to exercise free will there. 39. Even if your client could be believed about being a minor, which he does not accept, the Secretary of State was entitled to conclude that there would be no arguable breach of Article 8 to return her to Italy, and no Adjudicator could regard his conclusion as unlawful. 40. Your client was obviously able to live safely in Italy. It is inconceivable that an Adjudicator could believe the story of forced child labour and prostitution. 41. Your client had not enjoyed family life with her "mother" for a very long time, on her own account since 1997. In any event, her "mother" and uncle, as recognised refugees in the UK were and are able to visit her in Italy. 42. Any interference with her family life as could be shown by your client is plainly justified. The Secretary of State is entitled to regard the maintenance of a firm and consistent policy of immigration control as of great importance. Your client was able to live independently in Italy and wishes to live in the United Kingdom instead because her "mother" is now settled here. She should have made an honest application for a visa. She has no other claim to be here. Instead she has told a series of falsehoods in order to circumvent immigration control and now wishes to take advantage of her presence here. It is inimical to proper immigration control if those who dishonestly evade the proper controls are allowed to benefit from that evasion." Shortly after receipt of that letter the claimant's solicitors served on the defendant the result of a DNA test which confirmed that Rama Ahmed Barakow is the claimant's mother. Following receipt of that information, the defendant replied on 5 November 2003 maintaining his position that the claimant was able to live and work in Italy and that, if she wanted to join her mother in the United Kingdom, she could and should have made an honest application for entry clearance and not have employed a series of falsehoods to try and circumvent immigration control. It was asserted that any interference with her family life that she has re-established with her mother since her unlawful facilitation to the United Kingdom was plainly justified in the interests of a firm and consistent immigration control, and that those who dishonestly evade the proper controls can have no legitimate expectation of being permitted to benefit from it to the disadvantage of those who comply with the requirements of immigration control. Following the claimant's arrival in the United Kingdom, enquiries made by the immigration service revealed that she had travelled in a plane from Rome to Birmingham on 9 December 2001 sitting next to her uncle who had bought the tickets. On arrival, she had hung back and did not present herself at immigration control until some time after her uncle who had in fact been detained. She was not in possession of any documents although she had a valid passport, travel document and Italian residence permit in the name of Sadia Mohamed Hassan, together with the ticket her uncle had bought, when she embarked at Rome. She gave the name of Sadia Abdulkidir A to immigration control at Birmingham Airport. Her uncle, Mohammed Ahmed Barakow, was found to have a number of documents in his possession, some of which were in the name of Sadia Mohamed Hassan, as well as a number of photographs of her and some video tapes showing her on holiday in Venice and at a celebration in Pescara in 2001. When he was interviewed, he agreed that he had gone to bring the claimant back to the United Kingdom and that he was aware that she did not qualify for entry because she did not have the appropriate visa. Enquiries of the Italian authorities showed that the claimant was known to them as Sadia Mohamed Hassan born on 13 February 1980. She had entered Italy on 9 February 1998 and had been granted a residence permit in May 1998 which had subsequently been extended to May 2005. She had permission to work as a domestic. Enquiries of the entry clearance officer in Rome showed that she had made three visa applications in the Hassan name to travel to the United Kingdom in August 2000, October 2000 and February 2001, although each application had subsequently been withdrawn. The documents used to support those visa applications were a Somali passport issued to her in Rome in March 1998 in the Hassan name with a date of birth of 13 February 1980, an employment record showing she had been working in Pescara since 1998, another document confirming the name of her employer and a "Titre de Voyage" giving her Hassan name and date of birth as 13 February 1980. When interviewed at Birmingham Airport, the claimant said that she had flown direct from Nairobi to Birmingham although there is not such a direct flight. When she was interviewed more fully on 6 January 2002 she said that she had been in Somalia in 1998 and had subsequently spent one and a half years in Nairobi and had then been in Italy for two weeks before coming to the United Kingdom. She said that she had never worked and that she had never held a passport, although she agreed that her photograph was on the copy passport shown to her. She said she had never held an identification card and she denied ever having applied for a visa. When shown a copy of a visa application made by her, she agreed that it contained a photograph of her and thought that somebody must have signed it for her. Similarly, she denied that the Italian residence document in her name was hers although she agreed that it had a photograph of her on it. She said that she had used documents provided by a lady called Halima who pretended that she was her daughter. She denied that her uncle had brought her to the United Kingdom or that she had travelled with him. She said she happened to meet him at the airport and he offered to carry her bag. She had not come through immigration control with him because she was not feeling very well and had gone to the toilet without telling him that she was unwell. After an interval, her solicitors asked for her to be further questioned. On this occasion she said that the residence permit was hers. She had lied because she had been attacked on three occasions by some Italian youths who had tried to rape her and she had reported it to the police. She then claimed to have arrived in Italy in the year 2000. When it was pointed out that her residence permit was granted in 1999, she said she was still in Somalia at that time. She insisted that her real name was Sadia Abdulkadir A and that her sister was one year older than her, although she had said in the previous interview that she was the oldest daughter. The claimant's account changed yet again when she made a witness statement in these proceedings on 21 November 2002. She said that Halima obtained her Somali passport and her Italian residence documentation for her, and she had also taken her on three occasions to the British Embassy to help her fill in her visa applications. She agreed that the story she gave to the entry clearance officer was untrue. She did not even know that her mother was in the United Kingdom at that time and she did not know why Halima was trying to send her to the United Kingdom. She said that Halima had made her work for an Italian lady for about three years, keeping most of her wages, and had forced her into prostitution. Finally, she said that she had not told the truth in her interview on 6 November 2002 because she had been told what to say by her family. In fact, a note by the entry clearance officer showed that, when she applied for her visa in October 2000, she had come in person. She had also said that she wished to go to the United Kingdom to her aunt's wedding. In her very recent statement dated 18 November 2003, the claimant said that she did not know that her mother was in the United Kingdom when she made the three visa applications. It had been Halima's decision that she should make the applications although she didn't know why. She said that Halima controlled her life and forced her into prostitution. The photographs which were found in her uncle's luggage were included amongst the documents produced by the defendant in these proceedings. According to the defendant, they showed her to be a happy carefree young lady with friends in Italy over a period of time. The claimant said in a subsequent statement that Halima had made her look happy so that she could show them to the men using her as a prostitute. Having seen the photographs, I am inclined to agree with the defendant. Indeed, the account of her being forced into prostitution was not mentioned by her at all during her interview on 6 January 2002. The only other evidence to which I need to refer are the statements of A Shire Jama and Saciido Elmi Hassan. Dealing first with A Jama, the evidence from his statements is that he was employed by the Ministry of Health in Somalia from 1976 to 1988. He came to the United Kingdom in 1988 and was naturalised as a British Citizen in 2001. He knew the claimant's mother, Rama, and also Saciido Hassan, in Somalia because they were both midwives there. In fact, Rama had delivered his eldest daughter who was born on 10 February 1984, and he is sure that Sadia had not been born by that time. His knowledge came from his contact with Sadia in Somalia and his recollection of the children that her mother had at various stages of contact with him. He had subsequently bumped into a mutual friend in this country and thereafter had made contact with Rama again. Saciido Hassan has indefinite leave to remain in the United Kingdom as a refugee. The evidence from her statements is that she delivered Sadia as a midwife in 1984. She knows it was 1984 because her sister was getting married the next day and Rama was not able to come to the wedding because she had just given birth. She saw Sadia many times after she was born in Somalia. She has also met Sadia since she arrived in the United Kingdom from Italy and she confirmed that she is definitely Rama's daughter. Two conclusions can be drawn from the factual background of this case. Firstly, the claimant entered this country by deception and thereafter told a pack of lies and gave a number of different accounts. Secondly, there is a dispute as to her correct identity and age although it is now accepted that she is the daughter of Rama Barakow. The core issue to be decided in this case is whether the defendant was entitled to certify the claimant's allegation of a breach of Article 8 as being manifestly unfounded pursuant to section 72(2)(a) of the 1999 Act which provides:- "72 (1)…… (2) A person who has been, or is to be, sent to a member State….is not, while he is in the United Kingdom, entitled to appeal - (a) under section 65 if the Secretary of State certifies that his allegation that a person acted in breach of his human rights is manifestly unfounded." In other words, the issue is whether the defendant was entitled rationally to conclude that no adjudicator could find that there was a breach of Article 8. The test to be applied is whether the claimant's allegation of a breach of Article 8 is bound to fail (see The Queen on the application of Razgar v Secretary of State for the Home Department [2003] EWCA Civ 840 per Dyson LJ at para 112). As has been said, that is a very high threshold. Article 8 of the ECHR provides as follows:- "1. Everyone has a right to respect for his private and family life, and his correspondence. 2. There shall be no interference by a public authority with the exercise of this right except such as is in accordance with the law and is necessary in a democratic society in the interests of national security, public safety or the economic well-being of the country, for the prevention of disorder or crime, for the protection of health or morals, or for the protection of the rights and freedoms of others." The defendant has given two reasons for concluding that the claimant's human rights claim is manifestly unfounded. Firstly, it is said that no adjudicator could believe her account as to her age and identity. Secondly, it is said that, even if an adjudicator did believe her account as to her age and identity, he could not find that there was a breach of Article 8 if she were returned to Italy. In either case, it is said, the claimant's allegation of a breach of Article 8 was bound to fail. It is right to say that, since the DNA evidence came to light, the defendant has placed more emphasis on the second, rather than the first, reason. I do not find that surprising because, although the claimant has told a series of falsehoods to circumvent immigration control, there is some evidence which lends some support to her claim on the issue of her age and identity, namely the DNA evidence, which shows that Rama Barakow is her mother, and the statements of A Jama and Saciido Hassan which suggest that Rama Barakow gave birth to a daughter called Sadia in 1984. Also, when she arrived in this country in 1999, Rama Barakow gave the name of her second daughter as Sadiya Abdulqadir A born in 1984. Of course, that does not in itself prove that the claimant is the daughter Sadia to which that evidence relates. It must also be borne in mind that A Jama and Saciido Hassan are friends of the family and that the claimant has admitted in her witness statement in these proceedings that her family, in effect, told her to tell lies in her interview. Whilst an adjudicator would, in my view, be bound to disbelieve the claimant's latest account of being forced into prostitution in Italy as being incredible, I do not consider that the Secretary of State could reasonably conclude that an adjudicator would be bound to disbelieve her account of her age and identity. There is a factual dispute on that issue such that it cannot be said at this stage that the claimant was bound to fail because an adjudicator was bound to disbelieve her on that issue. I turn then to the second reason given by the defendant for concluding that the claim was manifestly unfounded, namely that, even if an adjudicator did believe her account as to her age and identity, he would still have been bound to conclude that there was no breach of Article 8 in returning the claimant to Italy. Put shortly, the defendant accepts that there would be an interference with the claimant's family life under Article 8(1) if she were returned to Italy, but it is submitted that it is plainly necessary and proportionate to return her in the interests of maintaining a firm and effective system of immigration control, and that any adjudicator would be bound to conclude that the interference with her family life was justified under Article 8(2). The defendant's position is that the claimant should have made an honest application for entrance clearance before leaving Italy. Ms Naik pointed out on behalf of the claimant that the claimant does not have identification documents in the name of Sadia Abdulkadir A with which to make such an application in Italy and that the defendant is obliged to consider that obstacle. Also, she submitted that the defendant has not taken account of the claimant's emotional relationship with her mother, the fact that they became separated because of the civil war in Somalia, that she had been living as a minor without either of her parents in Italy, that she has now been living with her mother in this country for two years and that she has no family or relatives in Italy. Ms Naik also contended that the defendant, when certifying the Article 8 claim, had failed to take account of the defendant's safe third country family links policy and the fact she was a member of a minority clan who would qualify for asylum as a refugee. Ms Naik placed considerable reliance on the decision of the Court of Appeal in The Queen on the application of Nadarajah v Secretaryof State for the Home Department [2003] EWCA Civ 840. That was a case where the Secretary of State had certified the appellant's asylum claim on safe third country grounds and had certified his human rights claim under section 72(2)(a) of the 1999 Act. He was a Tamil from Sri Lanka whose asylum claim had previously been rejected in Germany. His wife had entered the United Kingdom in August 2001 and claimed asylum which had been refused. An adjudicator dismissed her appeal on the ground that no objective risk of ill-treatment had been shown but, in doing so, she found that the heart of the wife's story was credible although part of that narrative had been rejected by the Secretary of State when certifying the appellant's human rights claim as being manifestly unfounded. The Court of Appeal concluded that it was not a case where Article 8(2) was bound to trump the appellant's claim that his removal to Germany would interfere with his right to family life because it was a case where an adjudicator might conclude that his view of the facts was so different from that which informed the decision of the Secretary of State as substantially to undermine the basis on which he performed the Article 8 exercise. The Court did not consider, on the facts of that case, that an appeal was bound to fail. Ms Naik made the point that, in that case, neither the appellant or his wife had any status in the United Kingdom whereas in this case the claimant's mother does have refugee status. Whilst I note the decision in Nadarajah, I am very conscious that these kind of cases are very fact sensitive and there are certainly important factual differences between that case and the present case. In the case of Razgar, which was considered at the same time as Nadarajah, the Court of Appeal dealt with the position where an adjudicator might differ on the facts from those found by the Secretary of State. That is relevant to this case because the second reason given by the defendant for certifying the Article 8 claim is predicated on the assumption that the adjudicator accepts the claimant's account as to her age and identity, although the defendant does not accept that account. In Razgar, Dyson LJ stated at paragraphs 41 and 42 as follows:- "41. But even if the adjudicator were to conclude that the Secretary of State's analysis was wrong, it would not necessarily follow that the Secretary of State acted in breach of a claimant's ECHR rights in such a case. It would remain open to the adjudicator to decide that the conclusion reached by the Secretary of State was lawful (and did not breach the claimant's human rights) because it was in fact a proportionate response even on the factors as determined by the adjudicator. 42. Where the essential facts found by the adjudicator are so fundamentally different from those determined by the Secretary of State as to substantially undermine the factual basis of the balancing exercise performed by him, it may be impossible for the adjudicator to determine whether the decision is proportionate otherwise than by carrying out the balancing exercise himself. Even in such a case, when it comes to deciding how much weight to give to the policy of maintaining an effective immigration policy, the adjudicator should pay very considerable deference to the view of the Secretary of State as to the importance of maintaining such a policy. There is obviously a conceptual difference between (a) deciding whether the decision of the Secretary of State was within the range of reasonable responses and (b) deciding whether the decision was proportionate (paying deference to the Secretary of State as far as is possible). In the light of Blessing Edore, we would hold that the correct approach is (a) in all cases except where this is impossible because the factual basis of the decision of the Secretary of State has been substantially undermined by the findings of the adjudicator. Where (a) is impossible, then the correct approach is (b). But we doubt whether, in practice, the application of the two approaches will often lead to different outcomes." It seems to me, therefore, when considering this reason given by the defendant for certifying the human rights claim predicated on the assumption that the claimant's account as to her age and identity is correct, that I should probably consider whether the defendant's decision was proportionate, paying deference to the defendant so far as possible, rather than whether the defendant's decision was within the range of reasonable responses, although I doubt whether the outcome would be different in either case. Ms Naik placed considerable reliance on the alleged failure of the defendant to consider the safe third country family links policy, and on the suggestion that the claimant was bound to be accepted as a refugee. However, as Mr Underwood QC pointed out on behalf of the defendant, the safe third country family links policy deals with whether an asylum claim should be considered substantively in this country, but in this case the claimant's asylum claim has already been certified by the defendant on a safe third country basis under section 11 of the 1999 Act. It will therefore be dealt with in Italy, not in this country, there having been no judicial review challenge to the section 11 certification. The certification which is challenged in these proceedings is the certification of the human rights claim under section 72 of the Act. The only other avenue open to the claimant would have been an application for leave to enter under paragraph 352D of HC 395 as a child of a refugee. However, even though the claimant would probably have been able to satisfy all the other conditions of paragraph 352D, she would not have been able to satisfy condition (vi) which requires her to have obtained entry clearance. It is the failure of the claimant to obtain entry clearance, together with the series of falsehoods and dishonesty used to circumvent immigration control, that really lie at the heart of the defendant's case. Mr Underwood submitted that, if entry clearance is required, the defendant is entitled in the ordinary case to require the immigrant to go abroad and obtain it. It was, he said, fundamental that, where the Rules required entry clearance, they should not be evaded. Reliance was placed on R v Secretary of State for the Home Department, ex parte Mahmood [Court of Appeal, 8 December 2000] which was a case where an asylum seeker was trying to stay in this country on the basis of marriage. At paragraph 23 of his judgment, Laws LJ stated:- "Firm immigration control requires consistency of treatment between one aspiring immigrant and another. If the established rule is to the effect - as it is - that a person seeking rights of residence here on grounds of marriage (not being someone who already enjoys a leave, albeit limited, to remain in the UK) must obtain an entry clearance in his country of origin, then a waiver of that requirement in the case of someone who has found his way here without an entry clearance and then seeks to remain on marriage grounds, having no other legitimate claim to enter, would in the absence of exceptional circumstances to justify the waiver, disrupt and undermine firm immigration control because it would be manifestly unfair to other would-be entrants who are content to take their place in the entry clearance queue in their country of origin." At paragraph 26 Laws LJ went on to remark that it was simply unfair that the claimant should not have to wait in the queue like everybody else unless he can demonstrate some exceptional circumstance which reasonably justifies his jumping the queue. One case where exceptional circumstances were established was the case of Shala v Secretary of State for the Home Department [2003] EWCA CIV 233, which was relied upon by Ms Naik. That case, however, was very different to the present case. Indeed, Schiemann LJ described it in paragraph 24 of the judgment as distinguishable from the mass of cases because the claimant came here at a time when his failure to apply for a visa was accepted by the Home Office as wholly explicable and he applied for permission on the day he arrived from Kosovo which was in the middle of a dreadful civil war. Furthermore, the Home Office had delayed for four years before interviewing him. However, it is also to be noted that, in paragraph 13 of the judgment given by Keene LJ, he stated:- " In short, therefore, in deciding whether or not the Secretary of State has struck the balance fairly between this appellant's right to respect for his family life and the proper maintenance of immigration control, this court will recognise that the Secretary of State is to be allowed a significant area of judgment. He is entitled to a significant margin of discretion before the court will conclude that he has gone wrong in the relative weight which he has attached to the conflicting interests." I must therefore bear in mind that, when assessing whether the defendant has fairly struck the balance between the claimant's right to respect for family life and the proper maintenance of immigration control, he is entitled to a significant margin of discretion, or considerable deference. I also bear in mind that it is relevant to take account of the message that would be sent out if the courts were to decide that the defendant was not entitled to conclude that an appeal to an adjudicator would be bound to fail. That was a matter referred to by the Lord Chief Justice in the case of YA v Secretary of State for the Home Department [2003] EWCA CIV 1012 which was another case involving a section 72 certification of a human rights claim. At paragraphs 29 and 30, the Lord Chief Justice stated:- "29. In my judgment, where there is a sequence of events, such as occurred here, which involve deliberately seeking to undermine the asylum regulation provisions within this jurisdiction it is the Secretary of State's entitlement to say to the court in weighing the balance between the interests of the children and the interests of the public weight has to be given to the consequences that would flow from the family being given the right to appeal in this jurisdiction. 30. The problems with which the Government are faced in trying to give effect to their policy in relation to asylum are well known. It is not unreasonable, as Mr Underwood QC submits, to say that if the court were to interfere with the grant of the certificate in this case, this would result in other children, in the position of these children, being faced with the same disruption with which these children have been faced in consequence of the actions which were taken by their parents. It is therefore appropriate, in my view, in finding where the balance lies, to take into account the message that would be sent out if the courts were to decide that the Secretary of State was not entitled to conclude that an appeal to an adjudicator would be bound to fail." In the case of The Queen on the application of Ekinci v Secretary of State for the Home Department [2003] EWCA CIV 765 it was held by the Court of Appeal that, when certifying a human rights claim as manifestly unfounded under section 72, it was immaterial that the claimant was likely to fail to qualify for entry clearance if returned. That is something that should be decided when the claimant came to apply for it. As Simon Brown LJ stated at paragraph 16, it would be bizarre and unsatisfactory if, the less able the claimant is to satisfy the full requirements of entry clearance, the more readily he should be excused the need to apply. That point is relevant when considering Ms Naik's point that, on return, the claimant would not have valid identification papers in her name (as alleged by her), the implication being that she would not be granted entry clearance. That is a matter which would be considered if and when the claimant applied for entry clearance. In considering this matter, I attach importance to the undoubted deception that was practised by the claimant to gain entry to this country when what she should have done was to apply for entry clearance. The fact that she would not have had identification documentation for what she says is her correct identification is of her own making. She has told a pack of lies to circumvent immigration control and she has therefore engineered the very basis of her claim, the right to respect for family life, by so gaining entry to this country. It would, in my view, be sending out the wrong message if the court were not to uphold the certificate under section 72 unless it could be shown that there were exceptional circumstances to justify a contrary conclusion. I do not consider that there are such exceptional circumstances in this case, even assuming that the claimant is who she says she is. This is not an Article 2 or Article 3 case involving the right to life or torture or inhuman and degrading treatment. It is an Article 8 case involving the right to respect for family life. As Dyson LJ stated in Samaroo v Secretary of State for the Home Department [2001] EWCA CIV 1139 at paragraph 36, the right to respect for family life is not regarded as a right which requires a high degree of constitutional protection. The claimant has only lived with her mother for two years since coming to this country in December 2001, having previously not lived with her since 1997, albeit that that was due to family dispersal arising from civil war in Somalia. She lived in Italy for 3½ years, coming to this country, on her account, when she was 17. She is now, on her account, 19 and no longer a minor dependent child. She would not have family living with her in Italy but she could be visited and supported by her mother and uncle. When balancing such interference with the claimant's family life against the need for a firm and effective immigration policy and the need not to send out the wrong message by, in effect, rewarding the deception practised by the claimant by allowing her to benefit from it, and bearing in mind the considerable deference to be afforded to the defendant on that aspect of the matter, I consider that the defendant was entitled to conclude, even accepting the claimant's account of her age and identity to be correct, that no adjudicator would hold that there had been a breach of Article 8. In my view, the defendant's decision was both within the range of reasonable responses and it was proportionate. Taking into account the matters I have mentioned, he was entitled to conclude that an appeal to an adjudicator on the human rights claim was bound to fail. This is a case which, in my judgment, crosses the high threshold and which entitled the defendant to certify the claimant's human rights claim as manifestly unfounded pursuant to section 72(2)(a) of the 1999 Act. I would therefore dismiss this application. - - - - - - - - - - - - - MR JUSTICE HARRISON: For the reasons set out in the judgment that has been handed down this application is dismissed. MR BEARD: I am most grateful, my Lord. The Secretary of State understands that the claimant in this case is publicly funded, in which case the Secretary of State asks for the ordinary order to the effect that costs be awarded, but will only be enforced with the leave of the court. MR JUSTICE HARRISON: Yes, there is a form of wording now. MR BEARD: I am sorry, I do not have it. MR JUSTICE HARRISON: Then the order will be made in the usual form. MR BEARD: I am most grateful, my Lord. MR JUSTICE HARRISON: Thank you very much. MR JORRO: My Lord, thank you for that indication. My Lord, I have an application to make on behalf of the claimant, which is an application for permission to appeal to the Court of Appeal against your Lordship's judgment. MR JUSTICE HARRISON: Yes. MR JORRO: My Lord, there are two points and they relate to paragraphs 38 and then to 39 of your Lordship's judgment. The first point, in relation to paragraph 38, is this ­­ MR JUSTICE HARRISON: Yes. MR JORRO: My Lord, it relates to the family policy. In your judgment, my Lord, you have agreed with the defendant's proposition that the family policy is relevant to the question of whether or not a section 11 certificate should be issued, and not then relevant to the question of the Article 8 claim being manifestly unfounded. My Lord, my submission is this: that the family policy is specifically designed to ensure compliance with Article 8. That is its very purpose. On that basis, my Lord, I submit, respectfully, that it is not illogical to say that a policy, the very purpose of which is designed to ensure compliance with Article 8 obligations by the United Kingdom, can be considered to be irrelevant to the question of whether or not the claim by an individual that her Article 8 rights would be breached, is to be considered clearly unfounded. The very essence of the issue in the policy goes to this question of whether or not Article 8 is engaged. On our submission, obviously, on your Lordship's finding, at least for the purposes of this judgment, the claimant was a minor who had a refugee mother in the country when she arrived here and claimed asylum. On that logic it was wrong, we say, for it to have been certified in the first place. Your Lordship says: well, that goes to a separate issue. My submission is: no, it does not. It goes to the issue which is at the heart of the policy, ie the United Kingdom's obligations under Article 8 of the Convention. The point, as I understand it, has not been dealt with by the Court of Appeal. It was put aside, as it were, in the case of Nadarajah and it is a live point of general public importance. I would submit that it has a real prospect of success in this case. On that basis I would ask for permission to appeal. My other submission is this: it relates to your Lordship's paragraph 39, which in turn sets out the Secretary of State's case. Basically the Secretary of State's case is that the claimant is a liar. She has come to this country and told a whole series of lies. On your Lordship's judgment she was a very young child indeed when she arrived in Italy, about 13 years old, and only 17 when she came here. That, I submit, has a relevance to this issue of her deceptiveness. It is different, and it is considered generally to be different, between a child telling lies, particularly when told to do so, from an adult doing so. There is an issue there. So, my Lord, on both those points, relating, as I say, to paragraphs 38 and 39, I ask for permission to appeal to the Court of Appeal. MR JUSTICE HARRISON: Thank you very much. Yes, Mr Beard? MR BEARD: My Lord, the Secretary of State opposes the application for permission to appeal. This is not one of those cases where your Lordship should be granting such permission. It is a matter that, if the claimant wishes to pursue it, should be raised with their Lordships directly. In relation to the paragraph 38 point, your Lordship has made crystal clear that the matter in relation to their policy relates to the section 11 certificate. That policy relates to whether or not the Secretary of State will exercise his discretion to consider an asylum application substantively. The Dublin Convention makes it possible that where someone has come from another Member State he does not have to do so. That certification was made pursuant to section 11 of the 1999 Act. No challenge was brought, as your Lordship has found. There is no possible ground of appeal that has any reasonable prospect of success in relation to that element. Your Lordship, furthermore, has considered carefully the Secretary of State's analysis of Article 8, of both 8.1 and 8.2, and reached the conclusion that there is no infringement in the return of this person. The circumstances, therefore, mean that there again reference to the policy adds nothing. As to the second point, your Lordship has made findings that there are doubts about the claimant's age and identity. Far from saying it was clear that she was in fact 13 or 17 at the relevant points, your Lordship has indicated the continuous pattern of deception ­­ recognised that in this case. Those are factual matters which your Lordship has reached conclusions on. Those are not matters either upon which there is any reasonable prospect of success, or, indeed, raise a legitimate point of law in this context, in any event. In the circumstances, this is not a case where your Lordship should exercise his discretion to grant permission to appeal. MR JUSTICE HARRISON: Thank you very much. Mr Jorro, anything further you want to say? MR JORRO: My Lord, very briefly, on the first point only. There is a certain element begging the issue with respect to the Article 8 point, because our submission, of course, is that if your Lordship had considered that the policy was relevant to the Article 8 issue, then it would have been a different matter in terms of the consideration, because, of course, under the policy it is certainly arguable that the claimant would have qualified. She was a minor, her mother was a refugee. MR JUSTICE HARRISON: Yes, I see. Thank you very much. Well, I am afraid, Mr Jorro, I am not prepared to grant permission to appeal. If you wish to take it further you will have to go to the Court of Appeal. MR JORRO: Thank you, my Lord. MR BEARD: I am most grateful. MR JUSTICE HARRISON: Thank you both very much. MR JORRO: My Lord, in case I need it, can an order for detailed assessment for that part of the ­­ MR JUSTICE HARRISON: Yes

Order of the President of the Court of First Instance of 8 October 1997. - Comité européen des fabricants de sucre v Council of the European Union. - Sugar - Common organization of the markets - Fixing of intervention prices - Interim measures procedure - Suspension of operation. - Case T-229/97 R. European Court reports 1997 Page II-01649 Summary Keywords Applications for interim measures - Suspension of operation of a measure - Conditions for granting - Serious and irreparable damage - No such damage in the case of an association of sugar manufacturers seeking suspension of the fixing of a disadvantageous intervention price (EC Treaty, Art. 185; the Rules of Procedure of the Court of First Instance, Art. 104(2)) Summary The urgency of an application for interim measures must be assessed in relation to the necessity for an interim order to prevent serious and irreparable damage to the party applying for them. It is for that party to prove that it cannot wait for the outcome of the main proceedings without suffering damage that would entail serious and irreparable consequences. An application for interim measures, submitted by an association of sugar manufacturers and requesting the suspension of a legislative provision fixing for the following marketing year the derived intervention price for white sugar, must be dismissed where the alleged damage consists of, first, a continuing reduction in the guaranteed sugar production quotas for Community manufacturers, although there can be no real danger of a reduction in those quotas until a time by which it is probable that judgment will already have been given in the main proceedings and, second, loss of a considerable share of the European sugar market to the advantage of importers of non-Community sugar, damage which has not been demonstrated to be serious and irreparable and, in any event, does not appear to be irreversible having regard to the effects of possible annulment of the contested provision.

LORD JUSTICE EVANS: This is an appeal from a judgment given by His Honour Judge Hallgarten QC in the Commercial Court on 26th July 1999. He decided three preliminary issues, which had been ordered to be tried by Rix J on 6th November 1998. The issue as ordered was "whether or not the claim is time barred as alleged in paragraph 10 of the amended points of defence served 21st April 1998". As the learned judge indicated, the issue gave rise to three sub-issues, which he defined as follows: "1.If the time-bar was incorporated in the contract of sale, does it serve to extinguish any liability which the defendants may otherwise owe? 2.Was the time-bar in fact incorporated into the contract of sale? 3.If the time-bar would serve to extinguish liability, and was incorporated, was the contract of sale subject to the Unfair Contract Terms Act 1977 ('UCTA'), whereby the claimants are precluded from relying on such time-bar?" The three issues all arose out of paragraph 10 of the defence, which alleged: "In any event, the Plaintiff's claims are time-barred as follows: (i)[as amended] The Defendants' General Terms and Conditions were incorporated into the contract or, in the alternative, the Agreement. (ii)Section 10 of such Terms and Conditions provided inter alia as follows: '. . . All liability whatsoever on [the defendants'] part shall cease unless suit is brought within six months after a delivery of the goods. . . ' (iii) The goods (scil The Fuels) were delivered on or about the 22nd February 1995. (iv)The action herein was commenced on 25th July 1996. In reliance on the aforesaid Section 10, the Defendants deny liability." The contract was for the supply of bunkers, the claimants being a United States company which owned or operated a number of ships. They arranged for bunker liftings through a United States brokerage company, Bunkerfuels Corporation of Cranbury, New Jersey. In the present case the sale was broked by the United Kingdom company, Bunkerfuels UK Ltd. The person concerned at Bunkerfuels UK was a Mr Jack Varela. He arranged a purchase from the respondent, Exnor Craggs Ltd, who were represented by Mr Mark Paul. The respondents are an English company which is based in Grimsby. The bunkers were supplied to a vessel, the Julius Hammer, at Suez on 22nd February 1995. On 24th March 1995 the appellants paid the respondents for them. Pursuant to the contractual terms, title in the fuel passed to the appellants then if not before. It was not until July 1996 (that is to say, some seventeen months later) that the claimants' vessel was arrested in Egypt by the company which had supplied the bunkers. That was a company called Societe Cooperative des Petroles. When the vessel was arrested by those suppliers, it was apparently because the suppliers were claiming that they had not been paid for the bunkers in question by whoever had placed the order with them. Little is known about the exact basis of the suppliers' claim. The points of claim read as follows: "9The Supplier has commenced legal proceedings in Egypt against the Vessel and/or her Owners and/or Disponent Owners and/or Managing Owners and/or Master and/or Charterers alleging that it has not received payment as aforesaid. . . " The reference to "as aforesaid" is a little unclear. There is no allegation in the pleading of any contract between the suppliers and any other party. The vessel was released from arrest upon payment of a substantial sum by way of security bond for US$227,528.38 and it is that which forms the basis of the damages claim which the appellants now bring against the respondents from whom they contracted to buy the bunkers in question. The claim is that the arrest came about because of a breach of contract by the respondents. The claimants rely upon the statutory implied terms in section 12 of the Sale of Goods Act 1979. Section 12(1) contains the term to the effect that the seller has a right to sell the goods. That may be sufficiently called the undertaking as to title. In section 12(2) there is specified a further implied term: "(b)the buyer will enjoy quiet possession of the goods except so far as it may be disturbed by the owner or other person entitled to the benefit of any charge or encumbrance so disclosed or known." Section 12(2)(a) provides for a further term to the effect that the goods were free from a charge or encumbrance at the time when the property passed. The claimants allege breaches of both those terms. The allegations necessarily are in general terms because of the paucity of information regarding the precise nature of the proceedings which have been brought in Egypt. Broadly, however, Mr Charkham submits that there are grounds for alleging at least two breaches of contract. First, that there was some defect in the title to the goods which has resulted in the later arrest of the ship. The significance of that alleged breach is that it occurred, if at all, at the time when the bunkers were delivered in February 1995. Secondly, there was, he says, a breach of the term as to quiet enjoyment (that is section 12(2)(b)), the importance of that allegation being that the breach occurred only in July 1996 when the vessel was arrested. For that reason counsel has emphasised the alleged breach of the provision as to quiet possession rather than the further allegation of a breach of the term as to title. It must be observed that the basis of the claim made in Egypt is not at all clear. The likelihood would seem to be that the bunkers in question were consumed by the vessel long before July 1996. There may well be room for considerable debate as to whether any residues of those bunkers remained in the vessel in July 1996. It may also be observed that any such debate would seem, on the face of it, to be highly artificial and likely to be unproductive. However, we must assume for present purposes that a ground or grounds for claiming damages from the defendants by reason of the subsequent arrest of the vessel may be made out. The circumstances in which the contract was made were set out by the learned judge at pages 10-12 of his judgment. This account and these findings are not challenged by Mr Charkham on this appeal and they can therefore be accepted as follows: "In consequence Mr Earnest Janssen of BUSA [the United States brokers] telephoned Mr Varela instructing him that BUK were to place the stem with the defendants. Mr Varela accordingly telephoned his counterparty at the defendants, Mr Mark Paul, and, agreement having been reached between them, Mr Varela sent the following to the defendants at 17.04 on 7th February 1995 addressed to 'Buyer and Seller': 'In accordance with instructions received from Ocean Ships Inc we confirm placing following nomination.' Certain details were set out and the fax continued: 'The above details are the basis of the contract between buyer and seller which is governed by sellers terms and conditions of sale. Bunkerfuels UK Ltd is acting as brokers only.' About half an hour later, at 17.34 Mr Paul sent to BUK a fax in slightly different terms which it is common ground contained or evidenced the contract. That fax identified the purchaser in somewhat wider terms, amplified the details, eg as to payment terms, and concluded: 'This nomination has been placed in accordance with our general terms and conditions of sale and delivery (copy available upon request).' This fax was copied by BUK to BUSA but it is not clear whether BUSA passed it to the second claimants. They did, however, provide what might be called a resume which included the following provision: 'The terms and conditions of this sale, unless otherwise stipulated, are subject to the seller's general terms and conditions. Particular attention should be given to clauses concerning cancellation (which generally require a force majeure situation) and the price validity period. If the buyer is not in possession of same and wishes a copy, a written notice must be sent to Bunkerfuels Corporation, by facsimile or telex, within 24 hours of the date and time this confirmation is sent.' The resume concluded: We will assume that all parties agree to this confirmation unless we are notified in writing within 24 hours of the date and time that this message is sent.' There is not evidence that the fax was sent otherwise than to the claimants. The above narrative is sufficient to show that the contract purported to incorporate the defendants' general terms and conditions." The terms and conditions in question are included in the bundles before us in two forms. The first is printed on a total of seven pages. It was in that form that the terms had, some time prior to the making of the contract, been supplied by the respondents to the United Kingdom brokers. We also have them in another form where they appear on four pages, each bearing two columns in rather smaller print. The relevant term is the last, section 10, which is headed "Disputes" and which I should read in full: "The agreement entered into with the Buyer shall be governed by the laws of the United Kingdom. The applicability of the Uniform Sales Act is expressly excluded. All disputes arising or resulting from or touching our agreement with the Buyer shall be referred exclusively to the determination of the competent Court at London, unless we should decide to apply to another Court or we should submit to the determination and judgment of such other court of law. All liability whatsoever on our part shall cease unless suit is brought within six months after delivery of the goods or the date when the goods should have been delivered." Perusal of the earlier terms, sections 1-9, show that there was detailed provision for the incidents of a contract such as this. There are, in particular, stringent time limits for what are described generally as matters relating to "measurements, quantity and quality" in section 3. It would seem that these reflect the nature of a contract such as this. In short, disputes as to quantity or quality have to be determined within a very short time after delivery. Clause 3/10 requires immediate notice and formal notice of claim within ten days after delivery. There are further provisions regarding the passing of ownership, in particular in section 5.6 and section 7. Those are directly relevant, of course, to the assertion that there was a breach of the term as to title in the present case. Mr Charkham's submission with regard to the layout of the general terms and conditions is that no prominence whatever is given to what is for present purposes the relevant sentence; that is, the six-month time bar contained in the very last sentence of the last clause, which is section 10. Factually, that submission is entirely correct. We have not been troubled with consideration of the details of any of the other clauses. Mr Charkham submits that in so far as there are stringent requirements and time limits, for example with regard to quantity and quality, those are matters which the buyer of bunkers in circumstances such as this would naturally expect to find. Therefore, he submits, no prominence need be given to them. It is otherwise, he submits, when there is a general time limit of the kind which is relied on in the present case. There was evidence that the terms in question had been in use by the respondents from about the mid 1980s. The evidence before the judge included that of Mr Paul. Paragraph 11 of his witness statement reads: "The reason why the 6 months time bar was implemented in Section 10 of the terms and conditions is as follows. Claims usually relate to quantity or quality of the fuel supplied, or non-payment of the price. The terms and conditions give a detailed procedure should there be a dispute as to quantity and quality. It is usually apparent from the outset, when supply takes place if there has been a short delivery. Disputes as to quality are usually discovered within a matter of days when the vessel starts to use the fuel. It is for this reason that, pursuant to Section 3.10 we require notification within 10 days of any claim. This is a more than reasonable period to allow a party because, as I have said, disputes are usually apparent by this stage. The terms and conditions ensure that we retain samples taken at delivery for a period of up to 2 months. I understand that some suppliers may keep samples for up to a period of 6 months but generally no longer. This is considered more than sufficient as a dispute on quality is usually apparent by that stage. Usually Exnor Craggs Ltd give credit of 30 days. This is the industry norm. I have known instances of credit periods being granted of 45 days and, rarely, 60 days but this is the maximum. Therefore, 6 months usually gives ample time for a potential dispute to have crystallised." Much evidence was placed before the judge on what was essentially a construction issue and the learned judge made a number of findings. He did so in the context of the second issue, that is to say under the heading "Incorporation". He had been referred to a great number of other forms used by suppliers of bunkers and had even heard expert evidence, presumably as to the practices in this particular trade. Among the issues which he decided, as I shall indicate shortly, were the questions whether the clause and its terms should properly be regarded as either onerous or unusual. He made some detailed findings at page 18 of his judgment as to the general picture which was created as a result of what he called "a diligent trawl of no fewer than 60 different standard terms of sale proffered by bunker suppliers or dealers". He stated his conclusions under four headings. They included paragraph 4: "In about a third of forms (say about 20) there were limitations along the lines set out under sub-head 3 above [that is to say time limits] in relation to any claim. As to notice provisions, these varied from one to 45 days; as to the time to start proceedings the periods varied from one month to one year. Of to these provisions the vast majority were not the mutual clauses (cf the Himmerland [that was a judgment reported at [1965] 2 Lloyds Rep 353, to which he had referred earlier] but operated only in favour of the sellers." Those findings are criticised by Mr Charkham in his submissions on this appeal. The learned judge decided all three issues in favour of the respondents. His conclusions were stated as follows. First, with regard to construction, which he described as the "pure construction argument" he held that there was no reason put forward for derogating from the plain meaning of the clause. "By contrast . . . Mr Davey [counsel for the respondents] was able to advance and extol the benefits of certainty and finality. Upon expiry of six months the defendants would know where they were and would, if they wished, be able to treat any transaction as history. True, there might be claims which only surfaced after the expiry of six months, but a period of six months is not itself an unreasonable period of limitation, either in the context of commercial transactions generally or bunker transactions in particular". He went on to say that there was no requirement to give the clause a strained construction so as to reallocate risk in circumstances which would only arise, as he said "with relative rarity" - that is to say, when the claim surfaces as late as this one did. In support of his conclusions on construction, he referred to the judgments of the House of Lords in The Evje [1974] 2 Lloyds Rep page 57 and The Himmerland, to which I have already referred. The latter judgment was concerned, of course, with the well-known Centrocom clause which frequently appears or appeared in charter parties with well-known short time limits within which proceedings have to be commenced. Secondly, with regard to the incorporation issue, the learned judge made the findings of fact which I have already quoted and he later referred to the extrinsic evidence, which he summarised. He explained that it was not disputed but that the terms and conditions were incorporated as a document. The contention was that: ". . . if . . . the-time bar would serve to defeat the claim in this case, it was solely that provision of the terms and conditions which was not incorporated." He then recited Mr Charkham's reliance upon the principle of construction which is exemplified in the following authorities in particular - Thornton v Shoe Lane Parking [1971] 2 QB 163, Interfoto Pictures Library Ltd v Stiletto Visual Programmes Ltd [1989] 1 QB 433, AEG (UK) Ltd v Logic Resource Ltd [1996] CLC 265 and Laceys Footwear (Wholesale) Ltd v Bowler International Freight Ltd [1997] 2 Lloyds Rep 369. That principle is summarised in the 28th edition of Chitty on Contracts in paragraph 12/015 as follows: "Onerous or unusual termsAlthough the party receiving the document knows it contains conditions, if the particular condition relied on is one which is a particularly onerous or unusual term, or is one which involves the abrogation of a right given by statute, the party tendering the document must show that it has been brought anything fairly and reasonably to the other's attention. 'Some clauses which I have seen,' said Denning LJ, 'would need to be printed in red ink on the face of the document with a red hand pointing to it before the notice could be held to be sufficient.'" The learned judge held, first, that that principle had no application in the present case where, unlike the cited authorities, there was an express reference to the terms and conditions in question in the contractual documents themselves. Moreover, it was a reference first made by the brokers who, on any view, were acting, whether exclusively or not, as agents for the buyers. Secondly, however, he proceeded to consider whether, if that was wrong, the present clause, clause 10, should be regarded as either onerous or unusual for the purposes of this rule of construction. He found, partly on the evidence before him and partly, clearly, from his own knowledge of these matters, that neither adjective could properly be applied to a clause such as this. He concluded: "In those circumstances, even had I held that in this case the right approach to the question of incorporation was that set out in the Interfoto case, I would still have concluded that the defendants were entitled to invoke the time-bar." Thirdly and finally, with regard to the third sub-issue, the judge recorded that it was not in dispute that if the Unfair Contract Terms Act applied in the present case, then the effect of section 6(1) would be to override clause 10 in relation to claims arising under section 12 of the Sale of Goods Act. The issue before him arose under section 26 of the Unfair Contract Terms Act, which reads as follows: "26. International supply contracts. (1)The limits imposed by this Act on the extent to which a person may exclude or restrict liability by reference to a contract term do not apply to liability arising under such a contract as is described in sub-section (3) below . . . (3)Subject to sub-section (4), that description of contract is one whose characteristics are the following - (a)either it is a contract of sale of goods or it is one under or in pursuance of which the possession or ownership of goods passes; and (b)it is made by parties whose places of business (or, if they have none, habitual residences) are in the territories of different States..." As Mr Charkham pointed out, those two requirements of an exceptional case are cumulative. There are further requirements in sub-section (4) which are disjunctive but which are not relevant in the present case. The learned judge rejected submissions that the present case was within the wording of section 26(3)(b). The submission was that the reference to the words "it is made by parties whose places of business are in the territories of different states" was satisfied here because the contract was in fact made in London by the brokers and therefore the fact that the sellers and the buyers had their places of business in the territories of different states (that is to say, the United States of America and the United Kingdom) was not material. The learned judge rejected that argument and held: ". . . although UCTA is not altogether clear and suffers from shifts of language, it seems to me that 'party' means 'party to the contract', ie someone who accepts liability as a principal. Its meaning is in my view reinforced by section 27(2)(b) which touches on contracts concluded by an agent - albeit what that subsection deals with are contracts with a party who is a consumer." Then the learned judge held that the relevant place of business for the party in question was the true place of business of that party, and not the place of business of the agents through whom the contract happened to be made. Mr Charkham, to whose submissions I would pay tribute for their care and for the clarity with which they were presented to us, both in writing and orally, has submitted, first, that the learned judge was in error in failing to concentrate upon the alleged breach of the quiet possession term in section 12(1)(b) of the 1979 Act. He says that that was important because the essence of that allegation of breach is that the breach did not occur and therefore no claim could be made in respect of it until after the six-month period had expired. By eliding the allegation of a breach of that term with the more general allegation of a breach of the term as to title, in Mr Charkham's submission, the learned judge diminished the importance of that factor. He submitted, secondly, that the central feature of the present case is that the relevant claim arose after the six months' period had expired. It follows that if clause 10 has the effect for which the respondents contend, then that claim effectively is still-born because no proceedings can be taken in respect of it. Mr Charkham submitted, thirdly, that the learned judge's summary of the evidence with regard to other forms of terms and conditions was not accurate. He said in particular that very many of them were governed by foreign laws. There was no evidence before the judge as to what those foreign laws were. There was in any event considerable scope for argument as to what was the effect of the individual clauses in particular forms. He submitted, fourthly, that the learned judge was wrong to consider the type of clause (that is to say, its general characteristic as a clause which seeks to prevent claims being brought after a specified period) when deciding whether sufficient notice of the existence of the clause was given to the other party, rather than the effect of the particular clause and specifically in the circumstances of this case. He emphasised, in relation to incorporation, that the clause in the present case has first, as he submits, the nature of a particularly onerous or unusual term, and secondly, that its effect is to abrogate the buyer's statutory rights given by section 12 of the Sale of Goods Act. These submissions therefore overlap the construction arguments, where Mr Charkham submits that the clause has such unjust and unfair consequences in the circumstances of the present case (where the clause effectively prevents any claim being brought, because it could not be brought within the six-month period) as being sufficient ground for denying such a wide interpretation of the clause in this case. These submissions of Mr Charkham were developed in the skeleton argument and he has taken us through the different steps of his submission which he says lead to that conclusion. He submits, first, that the clause should properly be regarded as an exceptions clause, not merely a limitation clause, relying on the speech of Lord Sumner in Atlantic Shipping and Trading Co Ltd v Louis Dreyfus & Co [1922] 2 AC 250 at 261. He submitted that the judgment of Rix J in BHP Petroleum Ltd v British Steel Plc [1999] 2 Lloyds Rep 583, if it is to a contrary effect, at pages 589-590, is wrong, but he also referred us to the citations by Rix J from the House of Lords' judgments in Ailsa Craig v Malvern [1983] 1 Lloyds Rep 183. For my part, I am content to accept for present purposes that the proper approach to construing this clause is that which is adopted when an exceptions or exclusion clause is under consideration. That has been said to be a more stringent approach than when the clause merely seeks to limit the amount which may be recovered. I would add just this: it seems likely to me that the authorities are consistent with each other. The proper approach to interpretation would take account both of the kind of clause it is and the nature and extent of any rights which it purports to take away from the opposing party or to modify. However that may be, I am content to adopt the more stringent approach which has been referred to in relation to exceptions clauses. Mr Charkham submits that the respondent's construction flouts business common sense and he adopts the familiar authorities to the effect that a construction which leads to an wholly unreasonable result is likely to be rejected by the courts in a commercial contract such as this. Mr Charkham's submission does not, in my view, take sufficient account of the factor which was referred to by the learned judge; that is to say, the advantages for the seller and possibly for the buyer also if a line is drawn under a contract such as this after a certain, not unreasonably short, period has passed. On the wording of the clause Mr Charkham submitted, first, that the reference to "bringing a suit" in clause 10 must imply that it was possible to bring a suit - which, of course, could not be done in relation to the alleged breach of the term to quiet possession until after the six-month period had expired. The words "all liability whatsoever shall cease" implied, he submitted, that there was a liability in existence prior to the cessation provided for at the end of the six-month period. Therefore, he said, on those narrow pedantic grounds, as well as the more general considerations, the clause should not be construed so as to defeat the present claims. With regard to incorporation, Mr Charkham referred us to the authorities which were also referred to by the judge; in particular, to the fact that in the Interfoto case, different reasons for reaching the same conclusion were given by Dillon LJ on the one hand and by Bingham LJ on the other hand. The former concluded that the clause was not incorporated in the contract; the latter that, although incorporated, the clause should not be given effect to in the circumstances of the case. Where the two judgments are at one is in upholding the approach which is summarised in the passage from Chitty which I have already read. With regard to the judgments in the AEG case, Mr Charkham showed us that the majority held that, in applying the test of incorporation as set out in Chitty, it was appropriate to consider what may be called, for short, the construction and effect of the particular clause. That appears specifically at page 273D in the judgment of Hirst LJ. On the other hand, Hobhouse LJ, who dissented, held that the proper approach was to consider what kind of clause was in issue, and then to decide whether sufficient steps had been taken to bring the existence of that kind of clause to the notice of the other party and also to decide whether the particular clause was onerous or unusual by reference to the kind of clause that it was. It was wrong, he said, to apply that test to the specific terms of the clause in question. As he pointed out at page 277B and following, that was a case where difficulties arose because the clauses, which were not of an unusual kind, were unreasonably drafted. He thought that to concentrate upon the precise meaning of the particular clause in question meant that: ". . . one is completely distorting the contractual relationship between the parties and the ordinary mechanisms of making contracts. It will introduce uncertainty into the law of contract." Mr Charkham emphasised that diversity of view because in the present case the learned judge referred to the judgment of Hobhouse LJ with approval and it was that which had led him, Mr Charkham submitted, to consider not so much the effect of this particular clause as simply the kind of clause which it was. This summary has not done justice to Mr Charkham's submissions, but I hope to have covered the main points which he has raised in support of his contentions, first, that the clause should bear a narrower construction than that for which the respondents contend; and, secondly, that insufficient was done by the respondents to bring this clause to the attention of the buyers in this particular case. As regards the third issue, with regard to the Unfair Contract Terms Act, Mr Charkham repeated the submissions which he made to the judge. My conclusions are as follows. I will deal with the issues in reverse order. In my view the learned judge was entirely right to reject the submissions with regard to the application of the Unfair Contract Terms Act. It seems to me as clear as could be that the reference in section 26(3)(b) to a contract which is "made by the parties", and then refers to the places of business of the parties, is referring to the principals to the contract in question and not to the agents through whom the contract may have been made. The reference to section 27(2)(b), where the statute draws a distinction between the parties on the one hand and others who may make the contract on his behalf on the other hand, seems to me to underline the fact that the reference to "parties" in section 26(3)(b) is to the principals and not to their agents. It is unnecessary and superfluous to say that there are other reasons which would make Mr Charkham's suggested construction, it seems to me, wholly impractical. The question whether the contract was within the Act or not would depend not upon the place of business of the parties to the contract, but to the possibly wholly coincidental location of the places of business of the agents through whom the contract was made. The place of business of the parties would be likely to be referred to in a written contract; the place of business of the agents might well not be. Insofar as Mr Charkham suggested that there were general considerations as to the likely reasons for making the exemption which is found in section 26, it seemed it me that those submissions fell at the first hurdle. The exemption is a limited one in respect of a particular kind of contract, namely contracts for the sale of goods only, and any such explanation would have to take account of that fact also, as Mr Charkham's does not. Therefore I would uphold the judge's order as regards issue number 3. I for my part would take issues 2 and 1 together. They are, of course, separate issues but they do overlap. The fact that they overlap is perhaps emphasised by the divergence of opinion in, first, the Interfoto case and secondly in AEG. In the former case, Interfoto, the two Lords Justices reached the same result but on the two different bases to which I have referred. It seems to me that the question of incorporation must always depend upon the meaning and effect of the clause in question. It may be that the type of clause is relevant. It may mean that the effect of the particular clause in the particular case is relevant. That, of course, was the division of opinion in the AEG case. But whichever it is, applying that test in the present case, the first stage is to ask what type of clause clause 10 is. It is a clause which has the effect of a time bar clause which excludes liability after a certain period has passed. Mr Charkham does not submit, as I understand it, that that type of clause could properly be regarded as either onerous or even unusual in a contract of this kind. But, assuming in his favour that it is necessary to apply the majority test in AEG, then the question arises whether this clause, which provides a six-month time limit, can justify either of those adjectives. Then the preliminary question, which was decided by the learned judge as his first ground of decision, was that the authorities are of doubtful application in a case such as the present where there was an express acknowledgement in the contractual documents that the terms and conditions in question were incorporated. Mr Charkham submits that the Interfoto test, as he called it, has to be applied, even in a case where the other party has signed an acknowledgement of the terms and conditions and their incorporation. It seems to me that Mr Charkham could be right in what might be regarded as an extreme case, where a signature was obtained under pressure of time or other circumstances, and where it was possible to satisfy the Interfoto test; that is to say, that the clause was one which was particularly onerous or unusual for incorporation in the contract in question. I would prefer to put the matter more broadly and to say that the question is whether the defendants have discharged the duty which lies upon them of bringing the existence of the clause upon which they rely (and, if Mr Charkham is right, of the effect of that particular clause) to the notice of the other party in the circumstances of the particular case. As I have indicated, in some extreme circumstances, even a signature might not be enough. On the other hand, in the present case there was an express acknowledgement. It seems to me that, given the nature of this term and condition and its effect, as relied upon by the respondents, it cannot be said that the respondents failed in their duty to bring the existence of that term to the notice of the buyers, through, of course, their agents, to whom the term had been long available for their perusal. Mr Charkham does not hesitate to submit that the clause in question should have had, as he puts it, the red hand approach. I would doubt very much whether that is practical in the context of a commercial contract such as this. In my view, the respondents did, in this particular case, where there was an express acknowledgement of the existence of the terms, certainly discharge their duty of bringing it sufficiently to the notice of the buyers for the clause to form part of the contract. That makes it unnecessary to make any explicit findings, as the learned judge did, as to whether this clause was properly to be regarded as onerous or unusual; but, as I have already indicated, I have taken account of the effect of this clause in reaching the conclusion which I have already stated. It seems to me that there is in fact no evidence which supports the proposition that this clause is in any way extreme or totally unexpected to be found in a contract such as this. Finally, therefore, I come to the question of construction. The most formidable argument, undoubtedly, is that the clause on the respondents' construction prevents the claimants from bringing a suit which could not be brought during the six-month period, simply because the breach occurred after that period ended. On the evidence that we have seen, this situation is certainly highly unusual and may even be unprecedented. It may be that Mr Charkham regards that as an argument in his favour, but it seems to me that it is not. It does not lead to an inference that the parties would have given the clause a more limited meaning if they had contemplated this unusual situation arising some time in the future. It seems to me rather that the evidence shows that the risk of circumstances such as this arising was so small that one can accept that they were almost certainly not present to the minds of the parties, nor would they have been to the minds of persons placed as the parties were. It seems to me to follow from that that, if the matter had been raised, the risk would have been recognised as minuscule (to use a word which I suggested in argument). In those circumstances, even had the possibility been raised, the parties could well have agreed that the clause should remain as it was; in other words, that the buyers should accept that minuscule risk rather than seek to renegotiate the contract. In effect, the buyers would not be aware of any significant commercial disadvantage to themselves by agreeing at that stage to accept this small risk, if there was thought to be any real risk. That is perhaps another way of saying that I do not see any grounds in the present case for supposing that the parties intended that clause to have less than its clear effect. The effect is clear and, in my judgment, the learned judge was right to find as he did on issues 1 and 2. I would dismiss the appeal accordingly. LORD JUSTICE HENRY: I agree. LORD JUSTICE WALLER: I also agree. ORDER: The appeal is dismissed with costs here and below. Detailed assessment of the respondent's costs of the appeal. Permission to appeal to the House of Lords refused. (Order not part of approved judgment)

SECOND SECTION CASE OF MEHMET KOÇ v. TURKEY (Application no. 36686/07) JUDGMENT STRASBOURG 17 February 2009 FINAL 06/07/2009 This judgment may be subject to editorial revision. In the case of Mehmet Koç v. Turkey, The European Court of Human Rights (Second Section), sitting as a Chamber composed of: Françoise Tulkens, President,Ireneu Cabral Barreto,Vladimiro Zagrebelsky,Danutė Jočienė,András Sajó,Nona Tsotsoria,Işıl Karakaş, judges,and Sally Dollé, Section Registrar, Having deliberated in private on 27 January 2009, Delivers the following judgment, which was adopted on that date: PROCEDURE 1. The case originated in an application (no. 36686/07) against the Republic of Turkey lodged with the Court under Article 34 of the Convention for the Protection of Human Rights and Fundamental Freedoms (“the Convention”) by a Turkish national, Mr Mehmet Koç (“the applicant”), on 27 July 2007. The applicant was represented by Ms F. Danış, a lawyer practising in Diyarbakır. The Turkish Government (“the Government”) were represented by their Agent. 2. On 26 February 2008 the Court declared the application partly inadmissible and decided to communicate to the Government the complaint concerning the length of the criminal proceedings. It also decided to rule on the admissibility and merits of the application at the same time (Article 29 § 3). On 21 October 2008 the President of the Second Section refused to include in the case file the applicant’s just satisfaction claims, which were filed outside the time-limit (Rule 38 § 1). THE FACTS 3. The applicant was born in 1979 and lives in Diyarbakır. On 27 April 1999 he was arrested. On 24 May 1999 the public prosecutor filed a bill of indictment, charging him under Article 125 of the former Criminal Code. On 13 December 2002 the Diyarbakır State Security Court convicted the applicant as charged. On 7 October 2003 the Court of Cassation quashed that decision. Following the abolition of the State Security Courts in 2004, the Diyarbakır Assize Court took over the case and on 19 April 2007 convicted the applicant. The applicant appealed. On 12 December 2007 the Court of Cassation upheld the judgment. THE LAW 4. The applicant complained that the length of the criminal proceedings in his case had been incompatible with the “reasonable time” requirement laid down in Article 6 § 1 of the Convention. The Government rejected that claim. 5. The Court observes that the criminal proceedings against the applicant began on 27 April 1999 when he was arrested, and ended on 12 December 2007 when the Court of Cassation upheld his conviction. They thus lasted some eight years and seven months for two levels of jurisdiction. 6. The Court notes that this complaint is neither manifestly ill-founded within the meaning of Article 35 § 3 of the Convention nor inadmissible on any other grounds. It must therefore be declared admissible. 7. The Court reiterates that the reasonableness of the length of proceedings must be assessed in the light of the circumstances of the case (see, among many other authorities, Pélissier and Sassi v. France [GC], no. 25444/94, § 67, ECHR 1999‑II). Having regard to the total length of the proceedings before the trial court in the present case, the Court is not convinced that these proceedings were conducted within a reasonable time. In the light of the foregoing, the Court holds that there has been a violation of Article 6 § 1 of the Convention. 8. As to just satisfaction, the Court makes no award as the applicant failed to submit his claim for damages within the time allotted to him (see Taner v. Turkey, no. 38414/02, § 35, 15 February 2007). FOR THESE REASONS, THE COURT UNANIMOUSLY 1. Declares the remainder of the application admissible; 2. Holds that there has been a violation of Article 6 § 1 of the Convention; 3. Dismisses the applicant’s claim for just satisfaction. Done in English, and notified in writing on 17 February 2009, pursuant to Rule 77 §§ 2 and 3 of the Rules of Court. Sally DolléFrançoise TulkensRegistrarPresident

OPINION OF MR ADVOCATE GENERAL MANCINI DELIVERED ON 23 OCTOBER 1984 ( ) Mr President, Members of the Court, 1. By order of 20 June 1984 the Court assigned Case 50/84, Bensider and Others v Commission, to the Fifth Chamber for preliminary consideration of the admissibility of the originating application. The background to that development can be described in a few words. By application lodged at the Court Registry on 25 February 1984, the Italian undertaking Bensider and six Belgian undertakings sought, pursuant to the second paragraph of Article 33 of the ECSC Treaty, a declaration that Decision No 3717/83 of 23 December 1983 was void. That decision had introduced for steel undertakings and steel dealers a production certificate and an accompanying document for deliveries of certain steel products in the Member States and elsewhere. By application lodged at the Court Registry on 8 March 1984, the applicants also applied for suspension of the operation of the decision; but that application was dismissed by the President of the Court by order of 23 May 1984. In the meantime, by an application on a procedural issue received at the Registry on 30 March, the Commission objected that the originating application was inadmissible and asked the Court to give a decision thereon under Article 91 of the Rules of Procedure, without considering the substance of the case. That is why the matter was assigned to this Chamber. 2. Before I set out the facts giving rise to the question to be dealt with, some clarification may be useful. In their application, the applicants describe themselves as dealers in second steel products: they therefore fall within the category of “steel dealers” covered, in addition to steel undertakings, by Decision No 3717/83. Article 2 of that decision defines dealers as “distributive undertakings ... which effect ... sales ... within the common market, of the steel products listed in Annex I”. The reason for this wording is simple. By describing dealers as “distributive undertakings”, the dealers are brought, rations personae, within the scope of the ECSC Treaty; Article 80 thereof provides that, for the purposes of the Treaty, “undertaking” means any undertaking “regularly engaged in distribution other than sale to domestic consumers or small craft industries”. The important consequences which flow from that definition from the procedural point of view will become apparent in due course. 3. The facts of this case are essentially marked by two dates: 31 December 1983, when Decision No 3717/83 was published in the Official Journal (L 373), and 25 February 1984, when the applicants lodged an application for a declaration that that decision was void. It was on the basis of those dates that the Commission lodged the objection to which I have referred. It is based on two distinct “charges”. The first, which was addressed to the six Belgian undertakings, is to the effect that the application was lodged out of time. The second relates only to the Italian undertaking: it is conceded that Bensider's application is in time, by virtue of the extension of the time-limit on account of the distance between its registered office and the seat of the Court; but that application too is inadmissible because the applicant had no capacity to be a party to legal proceedings when the application was lodged. I shall consider the two charges in the order in which they are given. 4. There is no doubt, as in indeed stated in the order of the President of 23 May 1984, that the application by the six undertakings whose registered offices are in Belgium reached the Court Registry after the prescribed period had expired. In order to comply with the time-limits laid down by the Community rules applicable in this case (third paragraph of Article 33 of the ECSC Treaty, Article 81 of the Rules of Procedure and Article 1 of Annex II thereto), the Belgian undertakings should have lodged their application by 17 February 1984 at the latest. In the event, the application was registered on 25 Febraury 1984. In his submissions in reply to the objection, the lawyer representing the applicants does not appear to dispute that fact but asserts that, by reason of the indivisibility of the application, which follows from the identical title and purpose of the action brought jointly by the Italian undertaking and the Belgian undertakings, the latter are entitled to the longer period available to Bensider. Because there is no doubt that Bensider's application was lodged in time, and is therefore admissible, the indivisible nature thereof — it is argued — extends that admissibility to the other applicants. Moreover there is no legislation or case-law to the contrary. The argument is attractive, but without foundation. There is no doubt that the multiple claims made in this case are characterized by the same petitum and causa petendi, and therefore by indivisibility, or to put it better, connexity. However, that does not justify aligning the various periods prescribed for the lodgment of applications by the various parties with the longest such period. There is no doubt that, where several applications are connected, there is procedural unity, in other words the applications are dealt with and discussed jointly. But that does not affect their independent nature: there is evidence that, inter alia, the procedural positions of the various applicants are wholly independent. Thus, no ground for discontinuance of the proceedings which arises with respect to one of the applicants (for example death or better still mere abandonment of the proceedings) affects the position of the others. The same applies regarding the time-limits for applications under Community law and any extension thereof under Article 1 of Annex II to the Rules of Procedure. That article provides: “time-limits for all parties save those habitually resident in the Grand Duchy of Luxembourg shall be extended as follows: for the Kingdom of Belgium: 2 days; ... for the Italian Republic ...: 10 days”. It is easy to see that the extension is provided for and calculated solely on the basis of the distance between the residence of the party and the seat of the Court. Since that calculation relates exclusively to the residence of each applicant, it is not apparent why it should cease to apply in a case of connexity or a collective application. For these reasons, the application by the Belgian undertakings is irretrievably out of time and should be declared inadmissible. 5. It remains to be considered whether the application can be declared admissible as far as the Italian undertaking is concerned. As regards the observance of the time-limit, the Commission acknowledges that in this case the action against Decision No 3713/83 was brought in due time and is therefore in order. Being granted a longer period within which to lodge its application, Bensider had to do so by 25 February 1984 at the latest, and that is what it in fact did. The application is, however, vitiated in another respect. Bensider describes itself as a “società a responsabilità limitata” [private limited company] governed by Italian law. However, on 25 February 1984 it was not yet entered in the commercial register in the city in which its princiapl office is located. Since, under Italian law and in particular pursuant to Article 2331 and 2475 of the Civil Code, it is “by entiy in the commercial register [that] a company acquires legal personality” (Article 2331), it seems obvious — the Commission claims — that on the date of lodgment of the application Bensider had no entitlement to institute proceedings before this Court. “Pas d'action sans personnalité” is the premise upon which the defendant relies; and in the result the application must be declared inadmissible by reason of the applicant's lack of capacity to be a party to legal proceedings. I do not believe that it is necessary here, because the facts are clearly set out in the Report for the Hearing, to describe in detail the complications attending the birth of the applicant, or to recall how it entered the world of the law. I would note however that the first argument upon which Bensider relies is based on the practice, which is widespread both in Italy and elsewhere, whereby a general meeting of a company may ratify, with retroactive effect, the steps taken by the sole director before entry of the company in the commercial register. In the present case, thanks to this fictio iuris, Bensider is said to have had capacity to be a party in legal proceedings as from 9 February, the date of the instrument constituting it, and therefore it also had that capacity on 25 February 1984, when the application in these proceedings was lodged at the Registry. The applicant contests the Commission's objection from a second viewpoint. The Commission relies on an Italian provision — by virtue of which the capacity to be a party to legal proceedings is conditional upon entry in the commercial register — which is unknown to the Community system. That provision — it is argued — cannot therefore be relied upon in the proceedings before this court. Like the Commission, I consider the application inadmissible; but, in my opinion, in order to reach that conclusion it is unnecessary to follow the path suggested by the lawyer representing the Commission. Admittedly, in principle, anyone wishing to check whether a natural or legal person is entitled to be a party to legal proceedings will ask whether that person has capacity to act under his national law. However, it is not always necessary to carry out such a check as a preliminary measure. Let me take an example as close as possible to the presente case: the legal personality acquired by an undertaking (for example, a steel dealer) under the law of the State in which it operates does not in itself mean that it is also entitled to act under the second paragraph of Article 33 of the ECSC Treaty. Naturally, the converse is also true: thus, the fact that an undertaking has no legal personality does not automatically prevent it from relying upon that article. What is suggested by this example? It seems to me to be possible to derive from it a rule of conduct: in the Community context the admissibility of an application for a declaration that a measure is void may certainly be considered on the basis of the conditions specifically imposed by the Community procedural system; there is, however, no inescapable obligation to establish, as a matter of priority, whether the conditions laid down by national law for such actions have been satisfied. There are many decisions of this Court to that effect. I would add that, where it is necessary to decide as to the capacity of a person to be a party to proceedings before this Court, the Court has always adopted a realistic approach and dealt with the specific aspects of each case so as not to attach excessive importance to the formal requirements of the laws of the various Member States (cf. recent judgment of 28 October 1982 in Case 135/81, Groupement des Agences de Voyages, Asblv Commission, [1982] ECR 3799). In the last analysis, it seems to me that for locus standi to be validly established for the purposes of Community procedure, the Court attaches particular importance to one requirement: that the party should be capable from the outset of lawfully exercising its rights as a party to proceedings. In other words, it must have the locus standi appropriate to the right which it intends exercising in the specific proceedings in question. I shall now consider the present case. It too concerns locus standi to be a party to Community proceedings: as I have just observed, therefore, the solution is to be sought in the relevant law. The question which then arises is whether, upon expiry of the period for an action to be brought (25 February 1984), Bensider was lawfully empowered to exercise its right of action, as provided for in the second paragraph of Article 33 of the ECSC Treaty. I do not think so. I shall first mention the conditions laid down in that provision. It provides that “Undertakings ... may ... institute proceedings ... against general decisions or recommendations which they consider to involve a misuse of powers affecting them. In the first place, therefore, the action must be taken by an undertaking. The undertaking therefore may challenge the general decisions or recommendations, but only on one ground: the misuse of powers affecting them directly. I shall analyse these two conditions one after the other. Fulfilment of the first condition cannot, it seems to me, be ascertained otherwise than by reference to the definition of undertaking given in Article 80 of the ECSC Treaty. I have already stated in Section 2 of this Opinion that, with the clear intention of subjecting steel dealers to Community rules in the iron and steel market, Article 2 of Decision No 3717/83 identifies those dealers as “distributive undertakings ... which effect ... sales ... within the common market”. That provision therefore requires that the undertakings upon which it imposes certain obligations should fulfil the requirements laid down in the more general definition contained in Article 80: that is to say they must be undertakings which regularly engage in distribution. In that phrase the emphasis clearly falls upon the adverb, What does “regularly” mean? I can say unhesitatingly tha nowhere in the abundant case-law of th( Court have I found any precedent tc clarify the meaning and scope of the word. It is a fact, however, that in ai least two of the three cases in which il was referred to the undertakings in question had engaged in trade and sales frequently and for a long time (judgment of 20. 3. 1957 in Case 2/56 Mining Undertakings of the Ruhr Basin v High Authority of the European Coal and Steet Community [1957] and [1958], ECR 3; order of 4. 12. 1957 in Case 18/57 Nola v High Authority of the European Coal and Steel Community [1957] and [1958], ECR 121; judgment of 19. 3. 1964 in Case 67/63 Société Rhénane d'Exploitation et de Manutention “SOREMA” v High Authority of the European Coal and Steel Community, [1964] ECR 151). Are those decisions a sufficient basis for the view that regularity involves repeated and prolonged distribution activity? I doubt it because such an interpretation leaves too many questions unanswered (how many instances of distribution are necessary before it can be discribed as “repeated”? And how much time must pass before it can be described as “prolonged”?). I think, rather, that the correct solution is to be arrived at by reference to a dictionary of the French language (Petit Robert, Paris, 1981) in which the word “habituel” is stated to describe conduct “qui tient de l'habitude par sa régularité, sa constance”. Those are two concepts which can be examined by a court without any difficulty. On the basis of Article 80, therefore, distribution activity must be other than occasional: that is to say normal, ordinary or, if you prefer, effective activity. Does Bensider fulfil that requirement? Article 4 of the instrument constituting it does in fact state that its object is to act as an intermediary and to trade in iron and steel products. But nobody who goes through its curriculum vitae can reasonably assert that, at the end of the period prescribed for the bringing of an action, that object had been pursued by the management of the company in a normal or effective manner. At least, the documents relating to the case provide no indication to that effect: and I think that that is a sufficient basis for the conclusion that on 25 February 1984 Bensider did not have the locus standi contemplated in the second paragraph of Article 33 of the ECSC Treaty to institute proceedings against Decision No 3717/83. 6. I shall now go on to the second of the two requirements laid down in Article 33: the existence with respect to the applicant of “a misuse of powers affecting [it]”. I shall begin by considering the question raised for the first time by the Commission during the oral phase of the proceedings. At that time, reiterating to the letter an argument put forward in the order of the President of 23 May 1984 (paragraph 25), the representative of the defendant maintained that, regardless of Bensider's legal circumstances when the application was lodged, it had no interest in bringing an action against Decision No 3717/83. That measure entered into force on 1 January 1984 and, even if the argument as to retroactive ratification is upheld, that date preceded by a long period the constitution of Bensider: therefore, unless it is acknowledged that the Commission misused its powers to the detriment of a nonexistent undertaking, the application must be declared inadmissible. The lawyer representing Bensider reacted to that argument by asserting that, in this case, the application is directed not against an individual decision but against a general decision, and therefore one which is capable of affecting the Italian undertaking to the same extent as the other applicant companies and the whole iron and steel industry in general. Once more i concur with the objective pursued by the Commission, but not with the argument which the Commission puts forward to achieve that objective. In fact, to maintain that at a time within the period allowed for challenging a general decision one of the persons to whom that decision is addressed cannot challenge it since it did not exist when the decision was issued is (a) to confuse the legal position of the addressee of a rule (which is a matter of substantive law) with its interest in bringing an action concerning the illegality of the measure containing that rule (which, by contrast, is preeminently a matter of procedure), (b) to confuse misuse of powers, which is a defect in the Community measure, with the effect of the measure thus vitiated, that is to say with the injury which the measure produces in the sphere of interest of the addressee. It is recognized that misuse of powers relates only to the measure itself: I would almost go as far as to say that that is an intrinsic — albeit abnormal — feature of it, in so far as it consists in the objective failure of the measure to correspond to the stated purpose of the rule. But, if that is the case, it cannot be said that, like any other legal defect, it can directly injure a particular person. It is only the measure, and can only be the measure, which is injurious; the measure is obviously capable of adversely affecting the interests of a person who came into existence after the measure was adopted and of which that person is in any event an addressee. I do not intend to dwell any longer on the concept of misuse of powers. But on the other hand it is necessary to clarify, needless to say only with respect to the question of admissibility, the meaning of the expression “à leur égard”. In fact there is a judgment of the Court on this point (9 June 1964 in Joined Cases 55 to 59/63 and 61 to 63/63, Acciaierie Fonderie Ferriere di Modena and Others v High Authority [1964] ECR 211) which appears to me to be decisive. At page 448 in the French version, which I prefer because it is more precise, the Court held that the ground of misuse of powers “n'est recevable, dans le cas d'un recours contre une décision générale, que si le requérant ... [expose] de façon perdente les raisons pour lesquelles l'adoption de la décision attaquée cause un préjudice direct à ses intérêts”. And the Court concluded: “puisque l'acte attaquée affecte toutes les requérantes dans la même mesure, on ne saurait prétendre qu'il porte une atteinte directe aux intérêts individuels de chacune et qu'il est donc entaché de détournement de pouvoir ‘à leur égard’”. In short, collective interests are not to be taken into account; undertakings may bring actions against general decisions of the ECSC only to defend their individual interests: uti singuli therefore, not uti cives. Is that so in Bensider's case? I think it is possible to say that it is not. In so far as such an examination is permissible here, I should point out that Decision No 3717/83 is addressed to all steel dealers as a category, requiring from all of them a production certificate for deliveries intended for the other Member States. I do not therefore see how it can directly injure the individual interests of Bensider, particularly when Bensider had only just come into being. Moreover, this has been acknowledged both in the application and in the oral phase of the proceedings by the lawyer representing the applicant, who stated that the latter “paraît concernée par [la] décision au même titre que les autres sociétés requérantes et ... que le négoce privé dans son ensemble”. Those considerations lead me to the conclusion that, seen separately from those of the other applicants, Bensider's application is inadmisible since it does not fulfil the requirements laid down in the second paragraph of Article 33 of the ECSC Treaty. When the application was lodged, the applicant did not in fact regularly cany on the activity of distribution and therefore did not have the requisite locus standi. It then railed to demonstrate, in limine litis, the existence of any misuse of powers affecting it. In view of that analysis, it seems superfluous to consider the objection that Bensider's application is inadmissible by virtue of the applicant's lack of locus standi according to the rules and practices obtaining in Italy. What is more, such an examination could not be decisive because, as I observed above, under Community law a lack of capacity to be a party to proceedings under national law does not prevent an applicant from being recognized as having a right of action before this Court. 7. In view of all the foregoing considerations, I propose that the Court declare inadmissible the application lodged at the Registry on 25 February 1984: as Egards Bensider società a responsabilità limitata, because of failure to fulfil the procedural requirements laid down in the second paragraph of Article 33 of the ECSC Treaty; as regards the six Belgian undertakings, because of their failure to comply with the procedural time-limits. In view of the fact that they have failed in their submissions, the applicants should be ordered to pay the costs — including the costs which were reserved in the proceedings relating to the application for interim measures. ( ) Translated from the Italian.

CIVIL APPELLATE JURISDICTION Civil Appeal Nos. 303 304, 2036 of 1991. From the Judgement and Order dated 5.1.1991 of the Cauvery Water Disputes Tribunal in C.M.P number. 4, 9 and 5 of 1990. Chander Shekharan, Additional Solicitor General, K. Parasaran, F.S. Nariman, Dr. Y.S. Chitale, S.S. Javali, A.S. Nambiar, P.S. Poti, C. Shivappa, M.S. Ganesh, V. Krishnamurthy, P.K. Manohar, Smt. S. Vasudevan, M.Veerappa, Mohan Katarki, Atul Chitale, K.H. Nobin Singh, T.T. Kunhikannan, Mrs. Sushma Suri and A.K,. Srivasatava for the appearing parties. The Judgement of the Court was delivered by KASLIWAL, J., Special Leave granted in S.L.P C No. 4991 of 1991. These appeals by grant of special leave are directed against the order of the Cauvery Water Disputes Tribunal dated January 5, 1991. The above appeals have been filed by the Governments of Tamil Nadu and Union Territory of Pondicherry in respect of Civil Misc. Petition in short M.P Nos. 4 and 9 of 1990 by the Government of Tamil Nadu and CMP No. 5 of 1990 filed by the Union Territory of Pondicherry and dismissed by the Tribunal by a companymon order dated January 5, 1991. As identical questions of law arise in these cases, we would state the facts of C.M.P filed by the Government of Tamil Nadu. The Government of Tamil Nadu filed a companyplaint dated 6th July 1986 on the ground that the interests of the State of Tamil Nadu and of its inhabitants particularly the farmers in the Cauvery Delta had been and is prejudiciously and injuriously affected by the executive action taken and proposed to be taken by the upper riparian State of Karnataka and by the failure of that State to implement the terms of the agreements relating to the use, distribution and companytrol of the waters of river Cauvery. The said companyplaint was made to the Central Government under Section 3 of the Inter State Water Dispute Act, 1956 hereinafter referred to as the Act . The Central Government by Notification dated 2.6.1990 companystituted the Cauvery Water Disputes Tribunal and passed the following order of reference No.21/1/90-WD Government of India Bharat Sarkar Ministry of Water Resources Jal Sansadhan Mantralaya New Delhi, 2nd June, 1990. REFERENCE In the exercise of the powers companyferred by subsection 1 of Section 5, of the Inter-State Water Disputes Act, 1956 33 of 1956 ,the Central Government hereby refers to the Cauvery Water Disputes Tribunal for adjudication, the water disputes regarding the inter-State river Cauvery and the river valley thereof, emerging from letter No. 17527/K2/82-110 dated the 6th July, 1986 from the Government of Tamilnadu companyy enclosed . By order and in the name of The President of India A. CHITALE SECRETARY, WATER RESOURCES Chairman, The Cauvery Water Disputes Tribunal, New Delhi. During the pendency of above reference the Government of Tamilnadu filed C.M.P. No. 4 of 1990 praying that the State of Karnataka be directed number to impound or utilise water of Cauvery river beyond the extent impounded or utilised by them as on 31.5.1972, as agreed to by the Chief Ministers of the Basin States and Union Minister for Irrigation and Power. It was further prayed that an order be passed restraining the State of Karnatake from undertaking any new projects, dams, reservoirs, canals etc., and or from proceeding further with the companystruction of projects, dams, reservoirs, canals etc. in the Cauvery Basin. On 8.9.1990 C.M.P. No.5 of 1990 was filed by the Union Territory of Pondicherry seeking an interim order directing the States of Karnataka and Kerala to release the water already agreed to, that is, 9.355 T.M.C. during the months September to March. The Government of Tamilnadu filed another emergent petition C.M.P. No.9 of 1990 to direct the State of karnataka to release at least 20 T.M.C. of waters as a first instalment pending final orders on C.M.P. No. 4 of 1990. This petition was submitted on the ground that the Samba crop cannot be maintained without additional supplies at Mettur Reservoir. All the above C.M.Ps. were opposed by the State of Karnataka and the State of Kerala both on merits as well as on a preliminary objection that the Tribunal had numberpower or jurisdiction to entertain these petitions to grant any interim relief. The preliminary objection was based on the ground that the Tribunal companystituted under the Act had limited jurisdiction. It had numberinherent power like an ordinary civil companyrt. It was having only those powers which have been companyferred on it under the Act and there was numberprovision of law which authorised or companyferred any jurisdiction on the Tribunal to grant any interim relief. The Tribunal upheld the objection raised on behalf of the State of Karnataka, and State of Kerala and as a result of which by its order dated January 5, 1991 ordered that the Tribunal cannot entertain the applications for the grant interim reliefs and the C.M.P. Nos. 4,5 and 9 were held to be number maintainable in law and as such dismissed. Aggrieved against the aforesaid order of the Tribunal these appeals have been filed by the State of Tamilnadu and the Union Territory of Pondicherry. Dr. Y.S. Chitale, appearing on behalf of the respondent, State of Karnataka raised an objection that this Court had numberjurisdiction to entertain any appeal against the impugned order of the Tribunal. It was submitted that Article 262 of the Constitution clearly provided that in respect of adjudication of disputes relating to waters of Inter State rivers has to be decided by law made by Parliament in this regard. Clause 2 of Article 262 further provided that Parliament may by law provide that neither the Supreme Court number any other Court shall exercise jurisdiction in respect of any such dispute or companyplaint as is referred to in Clause 1 , numberwithstanding anything companytained in this Constitution. It was submitted that the Inter-State Water Disputes Act, 1956 was enacted by the Parliament, to provide for the adjudication of disputes relating to waters of Inter-State river, and river valleys. Section 11 of this Act provided as under Notwithstanding anything companytained in any other law, neither the supreme Court number any other companyrt shall have or exercise jurisdiction in respect of any water dispute which may be referred to a Tribunal under this Act. It was thus companytended that the above Section 11 clearly took away number only jurisdiction of any other Court but also of the Supreme Court in express terms. On the other hand Mr. K. Parasaran, learned companynsel appearing on behalf of the State of Tamilnadu companytended that the provisions companytained in Section 11 of the Act read with Article 262 of the Constitution only excluded the jurisdiction of the Supreme Court or any other Court to decide any dispute or companyplaint with respect to the use, distribution or companytrol of the waters of, or in, any Inter- State river or river valley. It was submitted that the appellants have number companye before this Honble Court to get a decision on merits of any dispute which is already pending before the Tribunal. The grievance of the appellants is only to the extent that the Tribunal wrongly decided that it had numberjurisdiction to entertain any interim application, as such dispute was number referred to it in the reference made by the Central Government. It was submitted that this Court has the jurisdiction to decide the scope of the powers of the Tribunal under the Act and in case the Tribunal has wrongly refused to exercise jurisdiction under the Act, then this Court is companypetent to set it right and direct the Tribunal to entertain such application and to decide the same on merits. In order to appreciate the above companytroversy it would be proper to refer to Article 262 of the Constitution and Section II of the Act which read as under Article 262-Adjudication of disputes relating to waters of inter-state rivers or rivers valleys Parliament may by law provide for the adjudication of any dispute or companyplaint with respect to the use, distribution or companytrol of the waters of,or in, any inter-State river or river valley. Notwithstanding in this Constitution Parliament may by law provide that neither the Supreme Court number any other Court shall exercise jurisdiction in respect of any such dispute or companyplaint as is referred to in clause 1 . Section 11 Notwithstanding anything companytained in any other law, neither the Supreme Court number any other companyrt shall have or exercise jurisdiction in respect of any water dispute which may be referred to a Tribunal under this Act. A perusal of the above provisions leaves numbermanner of doubt that numberwithstanding anything in the Constitution, Parliament is authorised by law to provide that neither the Supreme Court number any other Court shall exercise jurisdiction in respect of any dispute or companyplaint relating to the use, distribution or companytrol of the waters of, or in, any inter-State river or river valley. The dispute referred by the Central Government to the Tribunal under the Act relates to the above companytroversy and as such this Court has numberjurisdiction to decide the merits of the dispute raised by the appellants and pending before the Tribunal. The companytroversy, however raised by the appellants in these appeals is that they had submitted the applications before the Tribunal for granting interim relief on the ground of emergency till the final disposal of the dispute and the Tribunal wrongly held that it had numberjurisdiction to entertain the same. The Tribunal is a Statutory authority companystituted under an Act made by the Parliament and this Court has jurisdiction to decide the parameters, scope, authority and jurisdiction of the Tribunal. It is the judiciary i.e. the companyrts alone have the function of determining authoritatively the meaning of a statutory enactment and to lay down the frontiers of jurisdiction of any body or Tribunal companystituted under the Statute. Francis Bennion in his book Statutory Interpretation on pages 53 and 548 has dealt the matter as under Under the British Constitution, the function of determining authoritatively the meaning of a parliamentary enactment is entrusted to the judiciary. In the words of Richard Burn they have the exposition of Acts, which must number be expounded in any other sense than is truly and properly the exposition of them. This is but one aspect of the Courts general function of applying the relevant law to the facts of the case before it. The starting point is, therefore, to companysider this function. It is the function of the companyrt alone to declare the legal meaning of an enactment. If anyone else such as the draftsman of the provision purports to lay down what the legal meaning is the companyrt will tend to react adversely, regarding this as an encroachment upon its companystitutional sphere. A Constitution Bench of this Court in Sanjeev Coke Manufacturing Company v. Bharat Coking Coal Ltd. Anr., 1983 1 SCR 1000 at P. 1029 observed as under No one may speak for the Parliament and Parliament is never before the Court. After Parliament has said what it intends to say what the Parliament meant to say. None else. Once a statute leaves Parliament House, the Courts is the only authentic voice which may echo interpret the Parliament. This the Court will do with reference to the language of the statute and other permissible aids. The executive Government may place before the Court their understanding of what Parliament has said or intended to say or what they think was Parliaments object and all the facts and circumstances which in their view led to the legislation. When they do so, they do number speak for parliament. No act of Parliament may be struck down because of the understanding or misunderstanding of Parliamentary intention by the executive government or because their the Governments spokesmen do number bring out relevant circumstances but indulge in empty and selfdefeating affidavits. They do number and they cannot bind Parliament. Validity of legislation is number to be judged merely by affidavits filed on behalf of the State, but by all the relevant circumstances which the Court may ultimately find and more especially by what may be gathered from what the legislature has itself said. We have mentioned the facts as found by us and we do number think that there has been any infringement of the right guaranteed by Art. 14. In Kehar Singh and Anr. v. Union of India and Anr., 1989 1 SCC 204 at p. 214, this Court observed as under In the companyrse of argument, the further question raised was whether judicial review extends to an examination of the order passed by President under Art. 72 of the Constitution. At the outset we think it should be clearly understood that we are companyfined to the question as to the area and scope of the Presidents power and number with the question whether it has been truly exercised on the merits. Indeed, we think that the order of the President cannot be subjected to judicial review on its merits except within the strict limitations defined in Maru Ram v. Union of India. The function of determining whether the act of a companystitutional or statutory functionary falls within the companystitutional or legislative companyferment of power, or is vitiated by self-denial on an erroneous appreciation of the full amplitude of the power is a matter for the Court. In the dispute relating to river Cauvery itself an application under Article 32 of the Constitution was filed by the Tamil Nadu Cauvery Neerppasana Vilaiporulgal Vivasayigal Nala Urimal Padhugappu Sangam which was said to be a society registered under the Tamilnadu Societies Registration Act asking this Court for direction to the Union of India to refer the dispute under Section 4 of the Act and this Court in Tamil Nadu Cauvery Neerppassna Vilaiporulgal Vivasayigal Nalaurimal Padhugappu Sangam v. Union of India Ors. 1990 3 SCC 440 allowed the petition and directed the Central Government to fulfil its statutory obligation and numberify in the official Gazette the companystitution of an appropriate tribunal for the adjudication of the water dispute. Thus, we hold that this Court is the ultimate interpreter of the provisions of the inter-State Water Disputes Act, 1956 and has an authority to decide the limits, powers and the jurisdiction of the Tribunal companystituted under the Act. This Court has number only the power but obligation to decide as to whether the Tribunal has any jurisdiction or number under the Act, to entertain any interim application till it finally decides the dispute referred to it. There is thus numberforce in the above argument raised by Dr. Y.S. Chitale. We would number examine the companytroversies raised on merits in these appeals. It was companytended on behalf of the appellants before the Tribunal that it had jurisdiction to entertain these miscellaneous petitions for interim relief. Firstly, for the reason that when the Tribunal while exercising powers of granting interim relief it will be only exercising incidental and ancillary power, as the interim reliefs prayed for arise out of the water dispute which has been referred to the Tribunal. Secondly, under Article 262 of the Constitution of India, once the Parliament has enacted the Act providing for adjudication of a dispute in regard to sharing of water of Cauvery Basin, numberother Court in the companyntry has the jurisdiction to grant an interim relief and, as such, the Tribunal has the inherent powers to grant the interim relief, otherwise petitioners shall be left with numberremedy for the enforcement of their rights. The Tribunal examined the scheme of the Act after adverting to the provisions of Sections 3 to 6-A of the Act held that this Act was a companyplete companye in so far as the reference of a dispute is companycerned. The Tribunal was authorised to decide only the water dispute or disputes which have been referred to it. If the Central Government was of the opinion that there was any other matter companynected with or relevant to the water dispute which had already been referred to the Tribunal, it was always open to the Central Government to refer also the said matter as a dispute to the Tribunal companystituted under Section 4 of the Act. The Tribunal further held as under The interim reliefs which had been sought for even if the same are companynected with or relevant to the water dispute already referred cannot be companysidered because the disputes in respect of the said matters have number been referred by the Central Government to the Tribunal. Further, neither there is any averment in these petitions that the dispute related to interim relief cannot be settled by negotiations and that the Central Government has already formed the opinion that it shall be referred to the Tribunal. In case the petitioners of C.M.P. Nos.4,5 and 9 of 1990 are aggrieved by the companyduct of the State of Karnataka and an emergent situation has arisen, as claimed, they companyld have raised a dispute before the Central Government and in case the central Government was of the opinion that the said dispute companyld number be settled by negotiations, the said dispute companyld also have been referred by the Central Government to the Tribunal. The Tribunal then referred to the reference order dated 2.6.1990 and observed that in the letter dated 6.7.86, from the Government of Tamilnadu, which is the basis of the reference, the State of Tamilnadu sought reference of the following dispute to the Tribunal The executive action taken by the Karnataka State in companystructing Kabini, Hemavathi, Harangi Swarnavathi and other projects and expanding any ayacuts which executive action has resulted in materially diminishing the supply of water to Tamilnadu which executive action has materially affected the predescriptive rights of the ayacutdars already acquired and existing and which executive action is also in violation of the 1892 and 1924 Agreements and b the failure of the Karnataka Government to implement the terms of the 1892 and 1924 Agreements relating to the use, distribution and companytrol of the Cauvery waters. The Tribunal from the above letter dated 6.7.86 inferred that numberinterim dispute in regard to the release of waters by the Karnataka Government from year to year subsequent to the date of the request made by the State of Tamilnadu was at all referred to the Tribunal. The Tribunal thus held that in their opinion the Tribunal cannot entertain the prayer for interim relief unless the dispute relating to the same was specifically referred to the Tribunal. The Tribunal then companysidered the question as to whether the granting of an interim relief by the Tribunal will be in exercise of incidental or ancillary powers. After referring to certain decisions of this Court, the Tribunal observed that the incidental and ancillary powers must relate to the actual dispute referred and number to any other matter including granting of interim reliefs which are number at all subject matter of reference. The Tribunal further held that the Tribunal will have the power to pass such companysequential order as are required to be made while deciding the said dispute and will also have incidental and ancillary powers which will make the decision of the reference effective but these power are to be exercised only to enable it to decide the reference effectively but number to decide disputes number referred including a dispute in regard to grant of interim relief interim reliefs. The Tribunal also adverted to the provisions of Sections 9 and 13 of the Act as well as inter- State Water Disputes Rules, 1959 and held that these provisions were also indicative of the fact that the Tribunal had numberpower to grant any interim relief of the nature asked for. It was observed in this regard that in case intention of Parliament was that the Tribunal may be able to grant any interim relief without the dispute being referred to the Tribunal, it would have either provided such powers in the Act itself or in the rules framed under the Act, but this has number been done. As regards the second submission the Tribunal held that it was wrong to companytend that the State of Tamilnadu was left with numberremedy available to it, because it was open for the State of Tamilnadu to approach the Central Government and if the Central Government found that the dispute was companynected with or related to the water dispute already referred to the tribunal, it was open to it to refer the said dispute also to the Tribunal in regard to the granting of an interim relief. In the view taken above, the Tribunal was of the opinion that it cannot entertain the applications for the grant of interim reliefs. We have companysidered the arguments made by Mr.K. Parasaran on behalf of the appellants and Dr. Chitale and Mr. Nariman for the respondents. Learned companynsel for the Union Territory of Pondicherry adopted the arguments of Mr. Parasaran and learned companynsel for the State of Kerala adopted the arguments of Dr. Chitale. A perusal of the order of reference dated 2.6.90 as already extracted above clearly goes to show that the Central Government had referred the water disputes regarding the inter-State river Cauvery and the river valley thereof, emerging from letter dated 6th July, 1986 from the Government of Tamilnadu. Thus all the disputes emerging from letter dated 6th July, 1986 had been referred to the Tribunal. The Tribunal companymitted a serious error in omitting to read the following important paragraph companytained in the aforesaid letter dated 6.7.86 REQUEST FOR EXPEDITIOUS ACTION IN REFERRING THE DISPUTE TO TRIBUNAL From 1974-75 onwards, the Government of Karnataka has been impounding all the flows in their reservoirs. Only after their reservoirs are filled up, the surplus flows are let down. The injury inflicted on this State in the past decade due to the unilateral action of Karnataka and the suffering we had in running around for a few TMC of water every time and crops reached the withering stage has been briefly stated in numbere Enclosure- XXVIII . It is patent that the Government of Karnataka have badly violated the interstate agreements and caused irrepairable harm to the age old irrigation in this State. Year after year, the realisation at Mettur is falling fast and thousands of acres in our ayacut in the basin are forced to remain fallow. The bulk of the existing ayacut in Tamilnadu companycentrated mainly in Thanjavur and Thiruchirappalli districts is already gravely affected in that the cultivation operations are getting long delayed, traditional double crop lands are getting reduced to single crop lands and crops even in the single crop lands are withering and falling for want of adequate wettings at crucial times. We are companyvinced that the inordinate delay in solving the dispute is taken advantage of by the Government of Karnataka in extending their canal systems and their ayacut in the new projects and every day of delay in adding to the injury caused to our existing irrigation. The above passage clearly goes to show that the State of Tamilnadu was claiming for an immediate relief as year after year, the realisations at Mettur was falling fast and thousands of acres in their ayacut in the basin were forced to remain fallow. It was specifically mentioned that the inordinate delay in solving the dispute is taken advantage of by the Government of Karnataka in extending their canal systems and their ayacut in the new projects and every day of delay is adding to the injury caused to their existing irrigation. The Tribunal was thus clearly wrong in holding that the Central Government had number made any reference for granting any interim relief. We are number companycerned, whether the appellants are entitled or number, for any interim relief on merits, but we are clearly of the view that the reliefs prayed by the appellants in their C.M.P. Nos. 4,5 and 9 of 1990 clearly companye within the purview of the dispute referred by the Central Government under Section 5 of the Act. The Tribunal has number held that it had numberincidental and ancillary power for granting an interim relief, but it has refused to entertain the C.M.P. Nos . 4,5 and 9 on the ground that the reliefs prayed in these applications had number been referred by the Central Government. In view of the above circumstances we think it is number necessary for us to decide in this case, the larger question whether a Tribunal companystituted under the Water Disputes Act has any power or number to grant any interim relief. In the present case the appellants become entitled to succeed on the basis of the finding recorded by us in therir favour that the reliefs prayed by them in their C.M.P. Nos. 4,5 and 9 of 1990 are companyered in the reference made by the Central Government. It may also be numbered that at the fag end of the arguments it was submitted before us on behalf of the State of Kanataka that they were agreeable to proceed with the C.M.Ps. on merits before the Tribunal on the terms that all party States agreed that all questions arising out of or companynected with or relevant to the water dispute set out in the respective pleadings of the respective parties , including all applications for interim directions reliefs by party States be determined by the Tribunal on merits. However, the above terms were number agreeable to the State of Tamilnadu as such we have decided the appeals on merits. In the result the appeals, are allowed, the Judgment of the Cauvery Water Disputes Tribunal dated 5.1.1991 is set aside and the Tribunal is directed to decide the C.M.P. Nos. 4,5 and 9 of 1990 on merits. In the facts and circumstances of the case we direct the parties to bear their own companyts. SAHAI,J. I agree with brother Kasliwal, J. that under the companystitutional set up it is one of the primary responsibilities of this Court to determine jurisdiction power and limits of any tribunal or authority created under a statute. But I have reservations on other issues including the companystruction of the letter dated 6th July, 1986.

LORD JUSTICE STUART-SMITH: I will ask Lord Justice Robert Walker to give the first judgment. LORD JUSTICE ROBERT WALKER: This is an appeal with the leave of the judge from an order of His Honour Judge Cockroft made in Leeds County Court on 1st November 1999. The order dismissed a claim for damages made by Alan Swain against his employer, Denso Marston Ltd, arising out of an industrial accident on 8th August 1996. Mr Swain, who is left-handed, suffered a crush injury to his right hand including the fracture of his ring finger. Quantum was agreed at £2,040 if liability was established. Mr Swain is an experienced production fitter. At the time of his accident he had worked for Denso Marston Ltd for about 14 years. On the day in question he was required to strip down part of the conveyor system at his employer's premises in Armley Road, Leeds. The bearings on the conveyor roller needed replacing. To do that, Mr Swain had to remove various components and then the roller itself. Mr Swain expected the roller to be hollow as his experience had been that conveyor rollers always were. This was a solid metal roller weighing about 20 kilograms. As Mr Swain removed the last of the bolts holding the roller in place, while he supported the roller with his right hand, the unexpected weight trapped his right hand against the metal frame and caused the crush injury. The judge accepted Mr Swain as a totally honest and conscientious employee and witness. Mr Swain had candidly accepted that at the work place he was regarded as the resident expert expected to know more about the plant and machinery than anyone else. The conveyor had been supplied by outside suppliers, Precision Engineering of Pontefract, and Mr Swain had originally seen it at their premises. It had been fully assembled when Mr Swain saw it, and he had never had occasion to strip it down himself. He had not been told by the suppliers about the weight of the roller and no brochure was available to him. It was common ground at trial that the issue of liability depended not on common law principles but on the application of the Manual Handling Operation Regulations 1992 (SI 1992 No 2793 -"the Manual Handling Regulations"). These came into force on 1st January 1993 in implementation of the Manual Handling Directive (90/269/EEC) which was itself the fourth individual directive made under the Framework Directive (89/391/EEC). Regulation 4 of the Manual Handling Regulations is in the following terms at (1): "Each employer shall - (a) so far as is reasonably practicable, avoid the need for his employees to undertake any manual handling operations at work which involve a risk of their being injured; (b) ..... (i) make a suitable and sufficient assessment of all such manual handling operations to be undertaken by them, having regard to the factors which are specified in column 1 of Schedule 1 to these Regulations and considering the questions which are specified in the corresponding entry in column 2 of that Schedule, (ii) take appropriate steps to reduce the risk of injury to those employees arising out of their undertaking any such manual handling operations to the lowest level reasonably practicable, and (iii) take appropriate steps to provide any of those employees who are undertaking any such manual handling operations with general indications, and where it is reasonably practicable to do so, precise information on - (aa) the weight of each load, and (bb) the heaviest side of any load whose centre of gravity is not positioned centrally." Schedule 1 of these Regulations lists relevant factors including the bodily tasks involved, the loads and the working environment. Regulation 4 (1) (b) (i) - the duty to make suitable and sufficient assessment of unavoidable manual handling operations which involve a risk of injury - is the subject of official guidance published by the Health and Safety Executive. The assessment is normally carried out by trained personnel of an employer's health and safety staff, or by specialist consultants. The requirement for an assessment is in line with the general policy in Art 6 of the Framework Directive, that is, to avoid risks so far as possible and to evaluate unavoidable risks, and to combat risks at source. In this case no assessment under paragraph 4 (1) (b) (i) had been carried out by or on behalf of the employer. The judge noted that in Regulation 4 (1) (b) (iii) the words "where it is reasonably practicable" qualify the obligation on the employer to provide precise information. The obligation on the employer to take "appropriate steps to provide ..... general indications ..... of the weight of each load" is however unqualified, except so far as some further qualification is inherent in the phrase "appropriate steps". The judge thought that the word "appropriate" relates to the means of communicating the information, and does not add any further qualification. The judge referred, for confirmation of this, to Art 6 of the Manual Handling Directive (which uses the unqualified words "must ensure"). The judge seems to have been concerned that an unqualified obligation under Regulation 4 (1) (b) (iii) might be oppressive to an employer which was blameless at common law. He found what he called "the key to the problem" in the notion that sub-paragraphs (i) (ii) and (iii) of Regulation 4 (1) (b) must be read conjunctively. The judge said: "It follows, in my judgment, that it is only where a suitable and sufficient risk assessment has been undertaken which reveals the existence of the risk, in this case namely that the roller was a solid metal roller that the obligations under (ii) and (iii) arise." The judge referred to Redgrave, Health and Safety 3rd ed, paragraph 6-8 (page 734) and to the decision of this Court in Hawkes v London Borough of Southwark, 10th February 1998. The judge said that once the risk from a heavy roller had become known the situation would have been different (in fact it is now totally different because a new roller has been fitted weighing only 3 kilograms). The judge continued: "The difficulty of this case is that it was the 'resident expert', if I can use his own phrase, the very experienced fitter, performing this task for the first time during the period that the machine had been installed at the defendant's premises who suffered this accident. It seems to me that in reality what he was doing was not merely stripping the conveyor but making exactly such suitable and sufficient assessment as 4 (1) (b) (i) envisages, and it is significant ..... that the two engineers who have been instructed ..... in a joint statement, come to the conclusion that the necessary risk assessment could be delegated to the claimant. It is difficult to see how any employer in this situation could make a suitable and sufficient assessment of risk without unscrewing the screws holding the roller in precisely the way in which this most experienced employee was doing. Unfortunately the accident occurred before the assessment envisaged in 4 (1) (b) (i) was complete, and the obligation in 4 (1) (b) (iii), therefore, since (i), (ii) and (iii) are to be taken conjunctively, did not arise." Quite apart from the correct construction of Regulation 4 (1) of the Manual Handling Regulations, that seems to me, with all respect to the judge, an impossible view of the facts. I should perhaps record that Mr Swain's evidence in his witness statement was that he asked to have another fitter allocated to help him on the job but that no one was available and he was told to go ahead on his own. He said in his statement: "I was under a lot of pressure that day as management wanted production up and running." This court has been told that the assertion of a request by Mr Swain for assistance was not relied on at trial and that it was for that reason there was no cross-examination on that point. The court is left with the bare fact that Mr Swain did the job on his own. However, it seems to me quite plain that he did it as an urgent maintenance job and not as part of an assessment required by the regulations. Denso Marston Ltd has a health and safety officer, Mr Keith Fairburn, who would have been the natural person to be in charge of the necessary assessment even if Mr Swain, as an experienced fitter, had been asked to assist in part of the task. Had Mr Swain been asked to undertake or to assist in undertaking the sort of assessment of risk which Regulation 4 (1) (b) (i) requires, he should have done so under the guidance of the health and safety officer and he should have had the nature of the task explained to him; he should have been given time to think about it and plan it; he should have been asked what assistance he needed; and he should have had the opportunity of contacting suppliers and (if necessary) getting copies of manuals and specifications which were not available at the work place. None of that, in fact, occurred. That ground on which the judge based his judgment cannot, in my view, be supported, and Mr Axon (appearing in this court, as below, for the employer) has not sought to do so. Nor can I accept that the fact that Regulation 4 (1) (b) imposes three separate obligations (if that is what the judge meant by "conjunctively") exonerates an employer from liability for breach of an obligation under sub-paragraph (iii) simply because the employer is also in breach of its obligation under subparagraph (i). As Mr Richard Copnall (appearing in this court, as below, for Mr Swain) submitted, it would be a perverse result if a conscientious employer who made a proper assessment under subparagraph (i) faced further obligations under subparagraphs (ii) and (iii), whereas an employer which flouted the first obligation would be excused from compliance with the other obligations. Mr Axon has not sought to argue against that. Mr Axon has sought to uphold the judgment by way of a respondent's notice and a skeleton argument developing submissions on different lines. Mr Axon has contended that obligations imposed by or under the Framework Directive are not invariably absolute obligations. That is undoubtedly so: see in particular Art 5 paragraph 4 of the Framework Directive. But the language of Regulation 4 is, with some exceptions which I have already noted, unqualified. Art 6 of the Manual Handling Directive is even less qualified. As to Regulation 4 (1) (b) (iii), I would partly accept the point made in paragraph 2 of the respondent's notice, that "appropriate" relates not only to the means of communication but also more generally to the practicalities of what is needed: for instance, it would not be appropriate for an employer to insist on burdening a canteen assistant who only moved kitchen equipment and food with technical information about how to strip down a conveyor. That may provide the answer to some of the hypothetical puzzles (about grand pianos loaded with the family silver, lawn mowers and stubborn drawers and bolts) with which Mr Axon beguiled the court. Fortunately, it is not necessary to decide those questions today. The fact that Mr Swain did not have any idea of the weight of the roller which he had to remove was directly relevant to his health and safety, as his accident showed. Mr Axon also relied in his skeleton argument on the presumption against criminal sanctions (see Section 33 (1) (c) of the Health and Safety at Work Act 1974) in the absence of fault. That argument deserves serious consideration but the existence of criminal sanctions cannot be decisive if the meaning of the regulations is plain: see the recent decision of this Court in Stark v Post Office (2nd March 2000) in which Waller LJ cited the observations of Lord Simmonds in LNER v Berriman [1946] AC 278,313. In paragraph 1 of his respondent's notice and in his oral submissions Mr Axon has sought to develop the judge's conjunctive construction of Regulation 4 (1). He has argued that an employer's obligation under sub-paragraph (iii) arises in conjunction with the duties imposed by sub-paragraphs (i) and (ii), and that a duty to transmit information under sub-paragraph (iii) arises only if a proper assessment under sub-paragraph (i) would identify a risk of injury. In this case, he says, an assessment would not have identified the risk which caused Mr Swain's injury. In support of this part of his argument Mr Axon has referred to the Court of Appeal decision in Hawkes v London Borough of Southwark and to the note in Redgrave which the judge quoted in his judgment. In that case the Court of Appeal, differing from the trial judge, held that a proper assessment of the task of the London borough's carpenters in carrying unusually heavy doors up awkward staircases in flats without a lift would have shown it was a two-man job. No assessment had been made by the borough council. The Court of Appeal accepted that if an assessment had been made, and had shown it was a one-man job, there would have been no civil liability for bare breach of Regulation 4 (1) (b) (i), because the breach would not have been causative of the damage which had occurred. Mr Axon has sought to establish the present case as a parallel case. The judge made findings which seemed to support that view. The judge referred at the end of his judgment to what he called the total inability on the part of either employer or employee to measure the risk until the last bolt had been removed by which time it was too late. Mr Copnall submitted that there was no evidence to support those findings. It seems to me that there was precious little evidence to support them. In any event, I cannot accept the judge's conclusion. On the known facts of this case Denso Marston Ltd had a health and safety officer. The employer knew who had manufactured and supplied the conveyor in question. Any proper assessment by or on behalf of the employer would have been a systematic assessment under the control of either an outside consultant or the health and safety officer (even if part of the task was delegated to a person who was an experienced employee). The assessment would have considered whether repairs and non-routine maintenance for specialised plant and machinery should be carried out by the employer's staff, or by the manufacturer. The assessment would have had to consider what manual handling tasks were involved in repairs and non-routine maintenance. If no brochure or specification was available the assessment might have involved making inquiries of the manufacturer. If none of that had been possible (or none of that had disclosed the weight of the roller) then prudence would have dictated the assumption that it might be unexpectedly heavy. That assumption might have been communicated to those employees who needed the information under Regulation 4 (1) (b) (iii). For these reasons, despite Mr Axon's very clear and concise submissions, I consider that the judge was wrong in his approach and in his conclusion and that his decision cannot be upheld on any of the alternative grounds put forward in this court. I would allow this appeal and enter judgment for the agreed sum of £2,040 with interest from the date of the accident. LORD JUSTICE STUART-SMITH: I agree. Order: Appeal allowed with the costs below as agreed and those of appeal to be remitted for detailed assessment

Mr Justice Nelson: This is an appeal by way of Case Stated from a decision of the City of London Justices, sitting at The Justice's Rooms, London EC4, who on 7.10.2002 convicted the Appellant of driving a motor vehicle having consumed excess alcohol, contrary to section 5(1) of the Road Traffic Act 1988, and schedule 2 to the Road Traffic Offenders Act 1988. The Facts. At 2305 hours on 12 November 2001 the Appellant was stopped by police in Queen Victoria Street, driving a yellow BMW motorcar. It was noted that her breath smelt of intoxicating liquor. She was breathalysed and, having provided a positive sample, was arrested at 2310 and taken to Snow Hill Police Station. There she provided two samples of breath on the Camic Datamaster device, one reading showing 42 mgs of alcohol in 100 ml of breath and the other 41 mgs in 100 ml of breath. As the readings were both below 50 mgs the Appellant was offered the statutory option of replacing the lower of these samples with a specimen of her blood. She elected to do this. Dr Wall, the City of London Police Force medical examiner, obtained a sample of blood from the Appellant between 0010 and 0020 on 13 November 2001. The sample was divided into two containers, one being given to the Appellant and the other to Police Sergeant Moggeridge, who sealed it. A sample labelled "Dr Wall, PC 276B Lee, Snow Hill, 13.11.01, 00.15 hrs, KHATIBI" was received at the forensic science laboratory, Chorley, on 15 November 2001 and analysed by Mr Robinson and his assistant Debbie Kirkham. The sample was divided into four smaller samples, two of them being analysed by Mr Robinson and two by Debbie Kirkham. Each used the same procedure on two separate machines. The results ranged from 90.00 to 91.3, the average of the four readings being rounded down to 90. An allowance of 6 was deducted, giving a reading of not less than 84 milligrammes of alcohol in 100 millilitres of blood, that is, in excess of the permitted level. The hearings at the Magistrates Court. The Appellant pleaded not guilty on 21 January 2002 and a pre-trial review was held on 5 February 2002. The Appellant's counsel Ms Renee Calder, who appeared before this Court, indicated that four prosecution witnesses were required including Dr Wall and the forensic scientist Mr Robinson. We were informed that the reports and statements of those witnesses were not served upon the defence. The trial commenced on 16 May 2002 and the justices heard evidence from Police Constable Lee, Dr Wall and Mr Robinson, the forensic scientist. Mr Robinson was cross-examined on the possible effects of preservative in the phials and the contents of a recent academic article the details of which are not relevant to this appeal. Mr Robinson was not asked any questions about Miss Kirkham's part in the analysis and we were told by Miss Calder that the first time that she was aware of Miss Kirkham's involvement in the matter was when Mr Robinson gave evidence. Miss Calder told us that Mr Robinson confirmed that the only information he had as to whether the blood that he analysed was that of the Appellant, was the label which stated "Dr Wall, PC 276B Lee, Snow Hill, 13.11.01 00.15hrs KHATIBI". No submission was made at that stage and the Appellant was called to give evidence. She confirmed that she was driving home from a charity event when she was stopped by PC Lee who administered a breath test which was positive. She told PC Lee that she had had two glasses of wine in the evening. She was arrested, taken to Snow Hill Police Station, provided two samples of breath and Dr Wall later took a sample of blood. There was therefore no substantial dispute of the prosecution evidence save for that of Mr Robinson. At the conclusion of the evidence of both parties the Appellant submitted to the justices that the prosecution evidence about the blood sample lacked continuity, that Mr Robinson's evidence was inadmissible in that it relied in part on the evidence of another person of whose results Mr Robinson could not give evidence, that Mr Robinson was not an authorised analyst, and that in any event the amount of preservative used meant that the analysis could have varied by up to a further 4 points which would have meant that the offence had not been committed. As to continuity it was submitted that no evidence had been given as to what happened to the second sample after PS Moggeridge had sealed the container. There was no evidence before the Court as to how the label was produced so that Mr Robinson's evidence that he examined a phial with the label on it giving the Defendant's details was hearsay. The case of Paterson v DPP [1990] RTR 329 was relied upon. In the Appellant's case it was not even known who attached the label to the specimen analysed or who wrote on it. As no evidence had been given by any of the prosecution witnesses as to what had happened to the Appellant's blood sample after it had been sealed, no inferences could be drawn that the blood analysed was the Appellant's blood. In relation to the submission that Mr Robinson's evidence was inadmissible because it relied in part on Miss Kirkham's evidence the Appellant relied on R v Jackson [1996] 2 Cr App Rep 175. In that case an adjournment had been allowed so that the assistant analyst could be called but it was submitted to the justices that such an order could not be made by them because the pre-trial procedure was different in the Crown Court, where Jackson had been heard. The prosecution addressed the continuity submission and in so far as Mr Robinson's evidence was concerned referred to the case of R v Tate [1997] RTR 17. The Bench asked counsel to produce this report 'before we proceeded to consider the case'. (Paragraph 19 of the Case Stated). The magistrates then record in the Case Stated that 'we then retired to make our decision on the 'Continuity Submission' this being the Appellant's main submission'. They later returned and gave the following decision:- "Having listened carefully to the evidence we are satisfied that the correct procedure for testing blood has been followed. We accept the evidence from Dr Wall that the blood sample was divided and sealed in the presence of the Defendant. It is not disputed that Mrs Khatibi, the Defendant, had been driving on the night of 12 November 2001. She failed a roadside breath test and agreed to go to Snow Hill Police Station for a second breath test, which she also failed. She then consented to have a blood test. We are also satisfied that the phial labelled with Mrs Khatibi's name and analysed at the forensic science laboratory at Chorley, contained a sample of her blood. We have been referred to the case of Paterson v DPP. We are able to distinguish this case because the facts show clear discrepancies in the evidence, which gave rise to doubts about the blood samples. In this case (the Appellant's case), however, the details on the label of the phial support the evidence of PC Lee and Dr Wall. We therefore accept that the sample analysed was that of Mrs Khatibi." Prosecuting counsel then produced the case of R v Tate to which he had made reference earlier and submitted that it showed that the evidence of one analyst was not weakened by the fact that he had had an assistant working with him, as R v Tate showed that scientific analysis nowadays was too complex for one person to carry out every part of it. He applied to recall Mr Robinson so that he could be asked about the steps taken to supervise the assistant. Miss Calder on behalf of the Appellant objected to the application on the grounds that the judge's comments in Tate were obiter, that Mr Robinson had been present in court and heard the submissions and it was too late to call any further evidence. The prosecutor then applied to reopen the prosecution case and adjourn so as to enable Miss Kirkham the assistant, to be called. The Appellant objected to this on the grounds that the prosecution should have anticipated the point. The magistrates retired to make their decision, granted the application to reopen the case and adjourned it part heard. The case was adjourned until 12 June 2002 to obtain the dates to avoid for Miss Kirkham. It was by that time 6.10 p.m. and too late to contact her. On 12 June 2002 a second pre-trial review took place. Miss Calder indicated that the statement of Debbie Kirkham would not be accepted under section 9 of the Criminal Justice Act 1967 as she contended that the magistrates had erred in law by granting the adjournment because it was too late. The adjourned hearing was fixed for the 7th October 2002 which was the earliest date available for all parties to the proceedings. The length of the adjournment was commented on by Miss Calder but no allegation of a breach of the Appellant's article 6 ECHR rights was then made. At the resumed hearing on 7 October 2002 the Appellant submitted that the case should be dismissed, as it clearly would be in breach of article 6. The memories of the bench would have faded over the five-month delay. The magistrates rejected this submission and in doing so noted that they had taken full contemporaneous notes of the evidence on 16 May 02 as had their clerk, and that they had spent 40 minutes refreshing their memories from their respective notes. No case had been cited to them which had in their view prevented them from proceeding with the trial. They then heard the evidence of Debbie Kirkham. She confirmed that the sample labelled "Dr Wall, PC 276B Lee, Snow Hill, 13.11.01, 00.15 hrs, KHATIBI" had been received at the laboratory on 15 November 2001. She said that she had analysed the sample under the direct supervision of Mr Robinson and confirmed her results. She was not cross-examined and the Appellant did not address the bench further. They found the case proved. The questions posed for the High Court, as amended by the Divisional Court are:- "(i) After retiring to consider our verdict, were we right to adjourn the case for the purpose of hearing further evidence and then doing so? (ii) Were we right to continue with the trial after adjourning it for five months? (iii) Was there evidence upon which a reasonable bench, properly directing itself, could have found that the blood analysed by Mr Robinson was that of the Appellant." (i). The adjournment to hear further evidence. There is a general discretion to admit evidence after the close of the prosecution case which is not confined to the two well established exceptions of rebuttal and mere formality. The discretion must be exercised with great caution and the strictly adversarial nature of the English criminal process, whereby the cases for the prosecution and the defence are presented consecutively in their entirety, should be borne in mind and the normal order of events not departed from substantially unless justice really demands. A Defendant may demand that the prosecution proves its case and keeps silent at any prosecution shortcomings until the time when it can take advantage of them. Tactics, as Lord Justice Mustill said in Munnery and Lord Justice Pill in effect said in R v Aylesbury Crown Court ex parte Lait Divisional Court 13 March 1998, are a legitimate part of the adversarial process. But Lord Justice Mustill continued, 'Justice is what matters: justice to the public, represented by the prosecution as well as to the Defendant.' In similar vein Lord Justice Simon Brown (as he then was) said in the case of Antonio Leeson Divisional Court unreported 26 July 1999:- "..this is a case in which the defence stood by watching the point develop, carefully avoiding any hint in the defence, yet alone any challenge, which might conceivably have alerted the prosecution to their failure to comply strictly with all the niceties of those proceedings. I do not say that the defence are bound to remind the prosecution of all matters that require to be proved, but I do say that they can hardly complain if, in the result, Justices exercise their discretion so as to secure justice rather than allow a totally unmeritorious acquittal." Lord Justice Kennedy in Christopher James Jolly and Director of Public Prosecution Divisional Court 31st March 2000 reviewed the authorities before concluding that there was a general discretion to permit the calling of evidence at a stage later than the closing of the prosecution case but prior to the moment the justices retire and said that before exercising that discretion the court will look carefully at the interests of justice overall and in particular the risk of any prejudice whatsoever to the Defendant. Each case must be looked at on its own facts and these will determine the outcome. As Miss Calder rightly says the later the stage in the proceedings when the application to call further evidence is made the more difficult the task of the prosecution becomes. The nature of the evidence to be called and its affect upon the proceedings must also be considered. Thus in R v Aylesbury Crown Court ex parte Lait Divisional Court 13 March 1998 it was held that the Recorder was wrong in allowing an adjournment for a witness to be called to fill a gap in the evidence where such an adjournment appeared likely to necessitate a complete rehearing. There must be finality in proceedings. Thus it has generally been accepted that an application to call further evidence cannot succeed after the bench has retired to consider its verdict. Webb v Leadbetter [1996] 1 WLR 245 and Jolly v DPP. In Webb Lord Parker CJ said that in the magistrates court:- "As a general rule and in the absence of some special circumstances, it would certainly be wholly wrong for the Justices to purport to exercise their discretion to allow evidence to be called once they had retired, and, indeed probably after the defence had closed their case." Miss Calder submits that the Justices had clearly retired to consider their verdict on the facts of this particular case. A verdict is a verdict, and once they had retired they had embarked upon it. They were not able to consider effectively one third of their decision separately from the rest. Furthermore she submits, when she obtained from the court the manuscript copy of their reasons after their first retirement that manuscript copy did not contain the heading Continuity which the typed copy and the Case Stated did. This addition did not reflect what occurred, which was the retirement to consider their verdicts not simply one issue, namely continuity. This Court must however accept, as I do accept, that the account given by the Justices in the Case Stated accurately records what occurred. During the course of the submission, whether through the clerk or the prosecuting counsel himself, the case of R v Tate [1997] RTR 17 was referred to in relation to the admissibility of the forensic evidence. This was an entirely separate point to the continuity submission. In the case of Tate, where the facts were very similar to the present case the Court of Appeal held that the trial judge had a discretion to allow the prosecution to call further evidence, namely an assistant forensic scientist, after closing their case. Paragraph 19 of the Case Stated makes it abundantly plain that counsel was asked to produce a copy of the authority of Tate before the bench proceeded to consider the case. Counsel then, it appears, sought to obtain a copy of the report from chambers which he did, and whilst he was doing so, the bench, as they state in paragraph 21 of the Case Stated, 'retired to make our decision on the 'Continuity Submission''. The text of their decision at paragraph 23 of the Case Stated demonstrates that their decision related solely to this issue. When the bench retired to consider the Continuity Submission, a matter which it was in the circumstances appropriate for them to consider discretely, they had expressly stated that they would not proceed to consider the case of Tate, and hence the admissibility arguments based upon it, until prosecuting counsel produced a copy of that decision. In my judgment it is clear from the Case Stated and the sequence of events that the bench had retired to consider one specific issue, namely the continuity issue and had not retired to consider the case generally. Furthermore they had specifically reserved their consideration of the admissibility issue until it was seen whether a copy of the decision in Tate could be obtained. If it was, no doubt, as indeed occurred, further argument would take place upon it. As the issue of inadmissibility of the forensic evidence had expressly been left open for further argument there was therefore nothing to prevent an application being made once that further argument took place, for an adjournment so that further evidence on that issue could be called. What do the interests of justice overall require in this particular case? Is there any risk of prejudice whatsoever to the Defendant? The facts are not essentially in dispute; if the sample is the Appellant's, she was driving with excess alcohol in her blood; the evidence of Mr Robinson and indeed Miss Kirkham was neither unusual nor complex and the evidence of Miss Kirkham, whether or not it would have been cross-examined had she been called in the first place, was not challenged when she was called. It would have been open to Miss Calder to have accepted her evidence under section 9 whilst reserving all rights to her arguments on admissibility. She did not choose to do so. Miss Calder did not raise the question of admissibility or seek to allege that there were any gaps or deficiencies in the prosecution account until she made her final speech. She had given no notice of any of the legal arguments which she saw arising as the case developed. She was entitled to take that course but having done so, as Lord Justice Simon Brown said in the case of Leeson, 'can hardly complain, if in the result, Justices exercise their discretion so as to secure justice rather than allow a totally unmeritorious acquittal.' The evidence to be called was straightforward. It was the second part of the analysis of which Mr Robinson had already given evidence, and of which the Appellant was fully aware. This evidence was short and already available. It did not therefore require any 'scouting around' to obtain as envisaged by the court in Royal v Prescott Clarke [1966] 2 AER 366. I can see no prejudice in these circumstances to the Appellant in adjourning the hearing so that the evidence of the forensic assistant could be sought. She may have lost the benefit of a technical point, but as Lord Justice Mustill said justice is what matters. Had the bench not adjourned the matter to call Miss Kirkham, justice, that is justice to the public, would have been denied. I am satisfied that after retiring to consider their decision on the continuity submission the Justices were right to hear further argument based upon the case of Tate on the admissibility of the forensic science evidence, and in view of the submissions being made on behalf of the Appellant were right to adjourn the case for the purpose of hearing further evidence and then doing so. On these particular facts the first question should therefore be answered 'yes'. (ii). Delay. Miss Calder submits that a delay of 5 months before the matter could be reheard was in breach of the Appellant's entitlement to a fair trial under Article 6 of ECHR and Wednesbury unreasonable. An adjournment should only be granted where evidence is reasonably available (R v Francis [1991] 1 AER 226 and ex parte Lait). The matter was hanging over the Appellant, undecided, for a long time and counsel and the Court could not be expected to remember everything over the period in question. Finality in proceedings was also ignored. Hence the proceedings were unfair. Miss Calder said that the reason for the length of the delay was not to do with the availability of Miss Kirkham or her refusal to agree a section 9 statement but because of the lack of availability of the Justices. She did object to the delay though did not raise the question of article 6 until the 7th October. For my part I regard the point on delay to be without merit. The adjournment was brought about by the failure of the prosecution to see that they had all proper evidence available for the hearing and by the Appellant's response to that lack of evidence. The only evidence to be called was that of Miss Kirkham whose evidence was already known and indeed not in the event challenged. Miss Calder made no further submissions to the bench. The submission that fading memories in these circumstances is relevant is without merit. The bench had been able to refresh their memories their notes as indeed had Miss Calder and the fact that she was not able to take a note of her own cross-examination would in the circumstances in no way prejudice either her ability to deal with the proceedings or the magistrates ability to deal with them. In the circumstances the bench were right to continue with the trial after adjourning it for five months and the answer to the second question is 'yes'. (iii). The continuity point. It is submitted on behalf of the Appellant that there is no evidence that the blood analysed was hers. The prosecution called no evidence to show who, how or in what circumstances the label was put on the container which reached the laboratory and was analysed. In such circumstances it was simply unknown whether one of the police officers had filled in the label and put it on, whether a civilian at the police station had done so or whether it had not been filled in at the laboratory. This was a fundamental flaw in the prosecution case. It could not be cured by any inferences to be drawn from the details on the label because those were inadmissible. In Patel v Comptroller of Customs & Excise [1966] AC 356 it was held that markings on packing crates were no evidence of their contents and that the list of exceptions to the hearsay rule cannot be extended judicially to include such things as markings on labels. There was no basis upon which the Justices could be sure that the label was attached to the right specimen. The specimens could have been mixed up. Miss Calder submitted that the case of Paterson v DPP [1970] RTR 329 was a similar but less strong case on its facts concerning the labelling of specimens and in that case Lord Justice Neill sitting in the Divisional Court had said that the police should have followed the correct method of proof but had failed to do so. The gap in the Crown evidence, by virtue of the fact that there was no direct evidence to show a link between the container which was sent from the police station and that which was examined at the laboratory could not be filled by inference. The case of Paterson however, as the Justices found, can clearly be distinguished from the facts of this case. In Paterson there was an inconsistency as to where the sample had been taken. The label recorded one police station whereas the evidence noted another. This conflicting evidence undermined any attempt to close the gap in the prosecution case by the drawing of inferences Mr Kennedy on behalf of the prosecution accepted that there was a gap in the prosecution case in that there was no evidence as to who had written the details on the label but submitted that the contents on the label were sufficient for the magistrates to infer that the blood in the container analysed was the Appellant's. The contents of the label were admissible under sections 24 and 26 of the Criminal Justice Act 1988 and could therefore have been ruled admissible by the bench had the question of admissibility been raised by the Appellant. Miss Calder submits that the submission is misconceived. Sections 24 and 26 were not put before the magistrates and cannot now be used to correct the omission in the Crown's case. It should be noted, Mr Kennedy submits, that the label gives details of the exact time, at which the sample was taken, namely 0015hrs on 13 November 2001, which is entirely consistent with the evidence of Dr Wall that he took the sample between 1210 and 1220 a.m. on that date. In addition the name of the arresting officer, PC Lee is also correctly stated as is the name of the doctor who took the sample, namely Dr Wall, and where he took it, namely, Snow Hill. I would add that Miss Kirkham's evidence confirmed that that sample so labelled had been received at the laboratory on 15 November 2001. 'Document' and 'statement' under the 1988 Act are widely defined in schedule 2 paragraph 5. 'Document' means anything in which information of any description is recorded and 'statement' means any representation of fact however made. In these circumstances it is submitted that it is a reasonable inference that the label was created contemporaneously with the taking of the sample. To suggest that it could have been filled in at the laboratory by the FSS on a blank label is no more than an intellectual construct. The evidence of Miss Kirkham indicates that the sample was labelled when it was received at the laboratory. It is, Mr Kennedy submits, an irresistible inference on the facts that the label was created by a police officer in the course of his work and that therefore the information contained in the label was supplied by a person who had personal knowledge of the matters dealt with. Any other inference would be unreasonable. Hence section 24(1)(i) and (ii) are satisfied. If, as Mr Kennedy eventually accepted the label was prepared for the purpose of a criminal investigation, he submitted that section 24(4)(iii) was satisfied in that no police officer could reasonably be expected to recall the details of the matters set out on the label months later. No note of the details on the label would have been taken. As PC Lee was asked no questions about this matter in cross-examination the court could only draw the appropriate inferences. As to section 26, the prosecution submit that it was in the interests of justice to admit the statement which resulted in no unfairness to the accused other than establishing the true facts. I am satisfied that the inferences which the prosecution invite the court to draw are sound, that the statement is one which was admissible under section 24 and, under section 26 of the Criminal Justice Act 1988. The magistrates did not rule upon sections 24 and 26 because they were not invited to do so by the Crown but the evidence was admissible by virtue of that section. Had Miss Calder raised the question of the admissibility of the contents of the label in the customary manner, when the evidence was given or so soon as she was able to do so, an application could have been made under section 24 and 26 by the Crown, and the magistrates would have dealt with it. Had that occurred it would have been perfectly proper for the magistrates to have found the contents of the label admissible. Miss Calder is entitled to put the Crown to proof on every aspect of the case against her client but if she chooses to take that course she cannot complain subsequently if this Court looks to the interests of justice in determining what would have occurred had a timely objection to admissibility been made. In those circumstances the Justices were entitled to conclude on the evidence of PC Lee, Dr Wall, Mrs Khatibi and the details on the label, including the presence of Mrs Khatibi's name, that there was evidence upon which, properly directing itself, the bench could have found that the blood analysed by Mr Robinson was that of the Appellant. The answer to the third question is therefore 'yes'. For these reasons I would dismiss the appeal. Lord Justice May: I agree.

Lord Justice Scott Baker Dwaine Turner, who is aged 29, appeals with the leave of the single judge against his conviction for wounding with intent to cause grievous bodily harm contrary to section 18 of the Offences Against the Person Act 1861. He was convicted before Judge Campbell and a jury in the Crown Court at Inner London on 27 February 2003. He was subsequently sentenced to 32 months imprisonment and an additional three months for driving whilst disqualified. There is no appeal against sentence. Two other defendants also received 32 months sentences for the same offence. Maurice Brooks pleaded guilty at the start of the trial. Calvin Coley was convicted on the same occasion as the appellant. In outline the background to the case was this. In August 2002 Mrs Margaret Morin, who lived in a block of flats in Clapham, London, was in a sexual relationship with two men. The first was Brooks, by whom she had had four children and the second was Ramsey, the complainant, whom she had met the previous autumn. According to Ramsey, Brooks resented his relationship with Mrs Morin. The appellant and Coley were cousins, both being nephews of Brooks. The prosecution case was that Brooks, Coley and the appellant jointly intended to cause grievous bodily harm to Ramsey and that the appellant and Coley assisted their uncle, Brooks, in a revenge attack on Ramsey. The appellant's active role was confined to a fight in Mrs Morin's flat. The appellant's and Coley's defences were essentially the same namely that neither intended that Ramsey be injured nor did he take any part in the infliction of the injuries. Rather, each of them sought to break up the Brooks/Ramsey fight. Ramsey's evidence was that on 19 August 2002 Brooks called at Mrs Morin's block of flats and became abusive and threatening when she told him that Ramsey was in the flat. Brooks then left. Later, about 3.30 pm, Ramsey was in the flat's sitting room when Coley, Brooks and the appellant came in. Coley hit him with a golf club and Brooks hit him with a crowbar. Ramsey dropped into a chair and wrestled with the appellant who hit him with something heavy wrapped in a plastic bag. Ramsey bled heavily. His three attackers then ran out of the flat. He pursued them down the stairs and caught up with Brooks outside. As they fought together, Coley came back and hit him with the golf club. The appellant also came back and tried to pull him (Ramsey) off Brooks. The three then left in a car. By then, he had the crowbar and, as the car left, he hit the rear windscreen with it. In cross-examination by counsel for the appellant, Ramsey said that the appellant did not try and separate him and Brooks in the flat or get between them, but he agreed that the appellant took no part in events outside the flat. Mrs Morin said that it was the appellant who had the golf club and hit Ramsey with it in the bedroom of the flat. Coley hit him with a hammer. Brooks did not do anything. She denied that Ramsey had been held in a headlock. She did not remember events outside. Four eye witnesses of events outside gave evidence that two men had attacked a third. Shortly after the car had left the block of flats it was stopped by the police. The golf club was in it, in pieces. Brooks was excited and said that he had done "him" with an iron bar. Coley said he had dragged Brooks away from Ramsey. The appellant (who denied being the driver) said that Coley and he had tried to separate them. Both he and Coley said Ramsey had broken the windscreen. Ramsey was the only one of the four to sustain serious injury. There was heavy blood staining of the appellant's clothing. Expert evidence was given by Miss Bridget March about the blood-staining. She interpreted the staining to be consistent with the appellant having held Ramsey in a headlock; and that was the only interpretation that she was able to give. This was not challenged by the prosecution. Both the appellant and Coley were interviewed. Coley described the events and what he said in interview was largely repeated by him in evidence at the trial. The appellant answered nearly all the questions in interview with the words "No comment" on the advice of his solicitor. During the course of the interview his solicitor read out a pre-prepared statement on behalf of the appellant in which he described the events. He denied any fault on his part. Neither Brooks nor Coley had mentioned anything beforehand about committing a crime. He saw Ramsey attack Brooks. He, the appellant, broke up the fight, which accounted for the blood on his clothes. He made no comment on supplementary questions that the police put to him. At the trial Coley, a man of previous good character, said that Brooks had been in an aggressive mood towards Mrs Morin, so he, Coley, decided to go and see her at her flat. The appellant agreed to drive him there. Brooks decided to go too. Because of his own presence, Coley expected no trouble from him. In the flat, Ramsey attacked them with a golf club and Brooks (to Coley's surprise) attacked Ramsey with a crowbar. The appellant hit nobody. The appellant and Coley got Brooks out of the flat and downstairs, whereupon the appellant left the immediate scene and Ramsey attacked Brooks. Coley pushed Ramsey away and they all left by car. The appellant gave evidence and accepted that he had been the driver and that he was at the time disqualified from driving due to a conviction for excess alcohol. While he knew Brooks to be emotional, he had never known him to be violent. Under pressure from Brooks, he agreed to take him and Coley down to Mrs Morin's flat – as he thought, to pick up Brooks' youngest child. Having parked the car on arrival, he was the last into the flat and in the sitting - room saw Ramsey and Brooks fighting, with Ramsey bleeding. He tried to part them; he put Ramsey into a headlock (which produced the heavy blood-staining on his own clothing) and all three of them fell onto the sofa. Coley was also trying to part Ramsey and Brooks. They pushed Ramsey into the bedroom beyond. The appellant then said, "Let's go" and he left. While briefly waiting at the car, he heard a scream and saw Ramsey with a crowbar. The other two arrived and they left in the car, the rear windscreen having been broken as they drove off. He accepted that he had lied to the police when he said he was not the driver; he had understood that Brooks would say he (Brooks) had been driving. There are two grounds of appeal. The first is the judge's treatment of the appellant's failure to answer questions in interview, the second the judge's treatment of the blood-staining evidence. Before the judge summed up, counsel, entirely correctly and in the absence of the jury, raised the question of appropriate directions to the jury and in particular a direction relating to the appellant's failure to answer questions in interview. Prosecuting counsel said: "I am perhaps just being super-careful. The principal matter will be the direction, perhaps, that your Honour must give in relation to Mr Turner and his failure to respond to the questions in interview. There is also the Section 36 special warning. I believe it to be the case that where there is a Section 36 warning in the context of a Section 34 interview, that the Section 36 is wrapped up and covered by, in effect, the Section 34 direction." Judge Campbell: "Yes". After some further discussion Judge Campbell said: "Obviously I shall have to give a Section 34 direction. It will be tailored to include, of course, the fact that he was advised, and the usual direction that the choice is his, but the fact that he was acting on legal advice is one factor that the jury must take into account when they decide whether to draw an adverse inference. Of course, it is a situation – not that he gave no explanation – when the jury will need some explanation as to the fact that he provided a prepared statement, and I will be telling the jury of the difference between a prepared statement and not answering questions on it, as opposed to giving a full interview. Mr Hardie then said: Your Honour, obviously the mischief is not so much a failure to answer questions, but a failure to mention facts. So, I would ask your Honour to have that in mind and that facts were obviously mentioned in the prepared statement so that- Judge Campbell said: Some facts were mentioned at the scene, of course." This passage in the discussion shows that counsel flagged up to the judge that the mischief aimed at by the sections was not failure to answer questions per se, but failing mention facts subsequently relied upon at the trial. The circumstances of this particular case had to be considered in the context that the appellant had handed in the prepared statement. The statement ran as follows: "I, Dwaine Turner, make this statement for my Solicitor to read out for me. I did not assault anyone or help anyone do so yesterday. I did not participate in any crime. I did not have any metal object or weapon in my possession. I am not aware if my uncle/cousin had anything. I am short sighted and I didn't have my glasses on. I did not drive the others anywhere yesterday. I understand that my uncle was to visit Margaret Morin – neither he nor my cousin mentioned anything about committing a crime. They left the car and went to the flat before me. I followed them. When I got there the door was open – I was shocked to see blood. I saw Mr Ramsey whom I don't know, assault my uncle with something. I saw them fight. I broke up the fight as I didn't want anyone to get hurt, that's why I had blood on my clothes. I did not assault anyone. I got out of the flat expecting the others to follow. I went and sat in the passenger seat of the car. My cousin came out later, my uncle was chased out by Mr Ramsey who had a metal object. He threw this at the car. My fingerprints will not be on any of the objects found in the car as they don't belong to me and I did not touch them - and its signed by my client and dated today's date the 20th of August." When the judge came to sum up he said: "Mr Turner, unlike Mr Coley, did not answer questions when he was interviewed. He was asked questions about the incident but he said, "No comment", to virtually every question put. How do you assess the relevance of that? Well, at the start of every interview a person is cautioned. Mr Turner was told and you have heard the words that he did not need to answer questions, but he was further told that it may harm his defence if he did not mention when questioned something which he later relies on in court, and anything he did say would be taken down in evidence. Those are the words of the caution at the start of the interview, and during the course of the interview he was given a special caution. He was asked about the blood and to account for that, and again he made no comment in interview. In this case, having declined to answer questions Mr Turner has given evidence and he has put forward his full version of what he said. The prosecution say that his failure to answer questions in interview is because, at the time he did not believe when questioned that his account would stand up to scrutiny. Because, say the prosecution, it is a false account. If you are sure that this is the case then his silence in interview is a factor which you may feel will count against him. If you did draw such a conclusion, you must not convict him solely on the fact that he did not answer questions in interview, but it can be something that you feel gives additional support to the prosecution case when you are deciding whether his account is, or may be, true. It is for you to decide whether to hold his silence in interview against him. You will do so only if you think it is fair and just. Ask yourselves, perhaps, three things. Firstly, would you have expected Mr Turner reasonably to have been prepared to answer questions in interview about this account. Indeed, perhaps you would have thought that he would have been keen to do so. Secondly, do you think that the only common sense conclusion you can draw is that the reason Mr Turner did not answer questions is that his account was untrue and he is not willing to have it tested by questioning. Thirdly, are you satisfied that the prosecution evidence, putting his silence in interview to one side, was strong enough to give rise to a case to answer, justifying questioning. The defence say to you do not draw an adverse conclusion from his silence in interview because he was following, as indeed is clear, the advice of his legal advisor. You will of course take into account the fact that his solicitor advised him to say nothing, but it does not automatically prevent you from reaching an adverse conclusion from his silence. The choice of whether or not to answer questions is his choice. He can listen to his solicitor's advice, but ultimately the choice is his, and of course you do not know what he told his solicitor, or why the advice was given. In this case he gave a prepared statement and you will look at that statement and ask yourselves why he made the choice, on his solicitor's advice, not to answer questions about details of what apparently he was saying was his account. The prepared statement that you will look at is not a substitute for answering questions in interview, it is a factor you will take into account. If, having weighed up all these matters, you do decide that Mr Turner could reasonably have been expected to answer questions then, if you think it fair, you can add this to the prosecution case against him. If you think, however, that it may be the case that he may have been acting reasonably to follow the advice of his solicitor and remain silent, then you do not have to hold his silence against him and you decide the case on the other evidence" The relevant terms of the Criminal Justice and Public Order Act 1994 are as follows: "(1) Where, in any proceedings against a person for an offence, evidence is given that the accused – a) at any time before he was charged with the offence, on being questioned under caution by a constable trying to discover whether or by whom the offence had been committed, failed to mention any fact relied on in his defence in those proceedings; or b) on being charged with the offence or officially informed that he may be prosecuted for it, failed to mention any such fact, being a fact which in the circumstances existing at the time the accused could reasonably have been expected to mention when so questioned, charged or informed, as the case may be, subsection (2) below applies. (2) where this subsection applies- ……….. d) the court or jury, in determining whether the accused is guilty of the offence charged, may draw such inferences from the failure as appear proper." Section 36 permits an adverse inference to be drawn when an arrested person fails or refuses to explain, in this case, blood on his clothing. The two sections overlap but there are significant differences. For present purposes the relevant differences are: a) s.36 only applies after the appellant has been arrested; b) the appellant has to be told the police believe the blood on his clothing is attributable to his involvement in the assault and be asked to account for it; c) the appellant has to be told in ordinary language the effect of the section if he does not respond to the question; d) s.36 contains no qualifying provision of reasonableness. The authorities make clear the need to identity the specific facts not mentioned but subsequently relied on. In R v Gill C.A (unreported) 21 July 2000 Bracewell J said at para 10: "The Court of Appeal has repeatedly emphasised the importance of accurate directions in the face of the defendant's silence and the specimen direction of the Judicial Studies Board……draws attention to the problems caused by the operation of (s.34), and the desirability, before a direction is given, to discuss the matter with counsel before final speeches." And a little later: "It was incumbent on the judge to identify the fact which the appellant was relying on in his defence…….." In R v Reader C.A (unreported) 7 April 1998 Buxton L.J. drew attention to the need for the judge to identify to the jury the facts concerned and that the section only permitted the drawing of inferences from the failure to mention those facts, rather than from a general failure to answer questions. Then in R v Lewis [2003] EWCA Crim 233 Longmore L.J. referred to the judge's failure to specify to the jury what the precise fact or facts were about which the defendant had been asked in interview, which he did not mention, which he could have been expected to mention and which he had mentioned in his evidence. He said the s.34 direction was a matter that needed considerable care and thought, preferably by counsel and certainly by the judge when he came to sum up. He said the court was reluctantly compelled to hold that there was a misdirection because the jury was not informed of what the facts were from which it would be legitimate for them to draw an inference. He added that it would not be in many cases that a court could be satisfied a conviction was safe if there was a misdirection on an important matter like s.34. The present case is concerned with a slightly difference aspect of the same problem namely the situation when a defendant hands in a pre-prepared statement to the police and refuses to answer questions. In our experience this is becoming an increasingly common practice. It was considered recently by this court in R v Knight [2003] EWCA Crim 1977. Laws L.J. said the court had come to the clear conclusion that the aim of s.34(1)(a) did not include police cross-examination of a suspect on his account over and above the disclosure of that account. The aim of the section was to encourage a suspect to disclose his factual defence. The court in that case made a number of observations about the handing in of pre-prepared statements. First, the law as described in R v Pearce (1979) 69 Cr App R 365 still applies. The prosecution cannot be required to adduce as part of their evidence a pre-prepared wholly self-serving statement. As the Lord Chief Justice said in Pearce at 370: "Although in practice most statements are given in evidence even when they are largely self-serving, there may be a rare occasion when an accused produces a carefully prepared written statement to the police, with a view to it being a part of the prosecution evidence. The trial judge would plainly exclude such a statement as inadmissible." Secondly, of itself the making of a pre-prepared statement gives no automatic immunity against adverse inferences under s.34. Laws L.J emphasised this point noting that such a statement is not an inevitable antidote to later adverse inferences. It may be incomplete in comparison with the defendant's later account at trial or it may be inconsistent with that account. This court notes a growing practice, no doubt on advice, to submit a pre-prepared statement and decline to answer any questions. This, in our view, may prove to be a dangerous course for an innocent person who subsequently discovers at the trial that something significant has been omitted. No such problems would arise following an interview where the suspect gives appropriate answers to the questions. Third, the mere receipt of advice to remain silent does not without more, immunise the suspect from adverse inferences under s.34. Such advice does not mean that it is in principle not reasonable to expect the suspect to mention the facts in question. What is reasonable depends on all the circumstance. There must always be soundly based objective reasons for silence, sufficiently cogent and telling to weigh in the balance against the clear public interest in an account being given by the suspect to the police. As Laws L.J. said: "Solicitors bearing the important responsibility of giving advice to suspects at police stations must always have that in mind." The main thrust of the appeal advanced by Mr Hardie, who has appeared for the appellant before us as he did at the trial, is that the judge failed to identify the unmentioned facts and to make it clear to the jury that it was the failure to mention these facts rather than simply answering no comment that could give rise to the drawing of an inference. Mr Paton, for the Crown, accepts that the judge's direction on s.34 did not conform to the Judicial Studies Board model direction and that it was incomplete, imprecise and deficient. Slavish adherence to JSB model directions is neither required nor, necessarily, appropriate. Directions have always to be tailored to the facts of the particular case. However, particularly in a difficult area such as s.34, they are an important starting point for ensuring that everything is covered that ought to be covered and that the general approach is correct. Mr Paton's submission is that there was a wealth of evidence against the appellant and that the defective direction does not render the conviction unsafe. In our view the basic deficiency in the direction is that it gave the jury the message that it was the failure to answer questions that could justify the drawing of an inference. The judge emphasised this by saying that the prepared statement was not a substitute for answering questions in interview whereas the crucial issue was whether the appellant relied on matters at trial that he had not mentioned in the statement when he could reasonably to be expected to have done so. Unfortunately, the judge repeatedly directed the jury that they could hold the fact against him that he had answered "no comment". In our judgment there is a real risk that the jury drew an adverse inference from the fact of a failure to answer questions alone. What the judge should have done was to compare the evidence that the appellant had given at the trial to see if there was any fact relied on that he had not mentioned in his pre-prepared statement. Only if there was, was there something on which the jury was entitled to draw an adverse inference and the judge should have given the jury a specific direction about it. Such a comparison was conducted in submissions before us. Mr Hardie's argument was that the statement was essentially the same as the appellant's evidence at the trial. It should be noted that inconsistencies between the appellant's statement and his evidence do not necessarily amount to relying on a fact not previously mentioned. Broadly, the appellant's statement did accord with his evidence. Two areas were identified where it did not. Ordinarily, where the Crown is proposing to invite the jury to draw an inference under s.34 the alleged discrepancy should be ventilated in cross-examination so that the defendant has an opportunity to deal with it. We do not have a transcript of the evidence in the present case so the precise evidence remains somewhat unclear. The first area was the purpose of the visit. In his statement the appellant said he understood his uncle was to visit Margaret Morin. In evidence he said he thought the purpose was to pick up the youngest of the children from Mrs Morin, she being mother of Mr Brooks' children. The second was that he was unaware whether either of the other two defendants had a weapon; he was short sighted and did not have his glasses on. At the trial he said he saw Coley with a stick in his hand. The judge did not pinpoint either of these points as providing the basis for a possible s.34 inference, nor indeed was he invited to do so. Where there are differences between what a defendant says in a pre-prepared statement and the evidence he gives at the trial it may be that the jury would be better directed to consider a difference as constituting a previous lie rather than as the foundation for a s.34 inference. It will depend on the precise circumstances. What matters in the present case is that the judge failed to identify any unmentioned facts that might give rise to a s.34 inference but instead left it open to the jury to conclude it was the failure to answer questions generally that might trigger an inference. Mr Hardie points out that even if the judge had identified a failure by the appellant to mention a fact relied on in his defence, it was also necessary for the jury to consider whether the appellant could reasonably have been expected to mention that fact. See R v Argent [1997] 2Cr App R 27 at 32-33. Mr Hardie's next complaint is of the judge's treatment of the solicitor's advice. The law is in our view accurately summarised in the 2003 edn of Archibold at para 15-329 and it is unnecessary to repeat it here. Mr Hardie's submission is that the judge failed to tell the jury that the fact that the appellant was acting on legal advice (an he plainly was) was an important consideration per para 5 of the J.S.B. direction. He submits the judge was wrong to refer to the failure to call the solicitor to explain the reason for the advice. This is a delicate area in which care has to be taken to avoid crossing the boundary of professional privilege. We do not think the judge can be criticised for the way in which he put it to the jury. He told the jury, appropriately, that following the solicitor's advice did not automatically prevent the drawing of an adverse inference and as far as we are aware there was no evidence either from the appellant or elsewhere, which the judge did not draw to the jury's attention, that might have been relevant to the question. The second ground of appeal concerns the judge's treatment of the evidence of blood on the appellant's clothing. The judge summed up as follows: "You have heard evidence from the forensic scientist about the blood. Again, this went on for some time, but where does it leave you? It's a matter for you. There was blood on the clothing, there was some heavy blood staining in the case of Mr Turner, particularly heavy bleeding on the right hand side. The defence say that is consistent with the account that he gave you of restraining Mr Ramsey but, again you may feel it could be consistent also with the version put forward by the prosecution." The appellant was asked when they were stopped by the police near the scene about the blood on his clothing. He said he was not injured and the "blood was from his uncle and the man when I pulled them off". Later when interviewed he was given an appropriate s.36 warning before answering "no comment". He said in his pre-prepared statement that he got the blood on his clothes when breaking up the fight. His account has therefore been consistent throughout. Mr Hardie's complaint, however relates not to any s.36 point but to the impact of Miss March, the expert's, evidence. The Crown's case is that the blood staining evidence was ambivalent or neutral and that the judge correctly so summarised it in the passage to which we have just referred. Mr Hardie's submission is that Miss March's only explanation for the very extensive heavy contact staining on the side and back of the appellant's jeans was that he had Mr Ramsey in a headlock which was the account given by the appellant. The blood-staining was simply not consistent with the evidence of the prosecution witnesses that the appellant was at arms length raining down blows overarm on Mr Ramsey. We feel to an extent hampered by the absence of a transcript of the relevant evidence. An important question is who first mentioned the description 'headlock'. Mr Paton says it first came from the expert. Mr Hardie suggested it was put to the expert in cross-examination, being part of the appellant's case. What is clear is that there was no mention before the trial of Mr Ramsey having been held in a headlock. Suffice it to say that we have some concern about this second ground of appeal because it is difficult to see how, on the Crown's case, the appellant could have come by such extensive blood-staining. In the event the outcome of the appeal turns on the first ground rather than the second. Mr Paton made a valiant attempt to hold the conviction on the basis that there was a strong case against the appellant. Regardless of the deficient s.34 direction the evidence showed a joint attack by three people in which three weapons were used and that the appellant admittedly lied about being the driver of the vehicle when apprehended by the police soon after the offence. We are however unable to conclude that the conviction is safe. The appeal will accordingly be allowed and the conviction quashed.

Judgment of the Court of 7 May 1987. - Commission of the European Communities v Federal Republic of Germany. - Family allowances payable bya Member State granted to persons eligible for family allowances payable by the Community institutions - National rule against the overlapping of benefits. - Case 189/85. European Court reports 1987 Page 02061 Summary Parties Grounds Decision on costs Operative part Keywords ++++ 1 . OFFICIALS - STAFF REGULATIONS OF OFFICIALS AND CONDITIONS OF EMPLOYMENT OF OTHER SERVANTS - LEGAL NATURE - REGULATION - OBLIGATIONS OF THE MEMBER STATES - COMPLIANCE WITH THE SUPPLEMENTARY EFFECT OF ALLOWANCES PAYABLE UNDER THE STAFF REGULATIONS ( EEC TREATY, ARTICLE 189, SECOND PARAGRAPH; COUNCIL REGULATION NO 259/68 ) 2 . OFFICIALS - REMUNERATION - FAMILY ALLOWANCES - DEDUCTION OF ALLOWANCES PAID UNDER A NATIONAL SCHEME - EXCEPTION - NATIONAL RULES AGAINST THE OVERLAPPING OF BENEFITS - PROHIBITION - SCOPE ( STAFF REGULATIONS OF OFFICIALS, ARTS 62, 67*(2 ) AND 68, SECOND PARAGRAPH; CONDITIONS OF EMPLOYMENT OF OTHER SERVANTS, ART . 20 ) Summary 1 . BY VIRTUE OF THE SECOND PARAGRAPH OF ARTICLE 189 OF THE EEC TREATY, THE STAFF REGULATIONS OF OFFICIALS AND THE CONDITIONS OF EMPLOYMENT OF OTHER SERVANTS, ADOPTED BY MEANS OF COUNCIL REGULATION NO 259/68, HAVE GENERAL APPLICATION, ARE BINDING IN THEIR ENTIRETY AND ARE DIRECTLY APPLICABLE IN ALL MEMBER STATES . IT FOLLOWS THAT, IN ADDITION TO HAVING EFFECTS WITHIN THE COMMUNITY ADMINISTRATION, THEY ARE ALSO BINDING ON MEMBER STATES IN SO FAR AS THEIR COOPERATION IS NECESSARY IN ORDER TO GIVE EFFECT TO THOSE MEASURES . SINCE IT IS BASED ON A PROVISION CONTAINED IN A REGULATION, NAMELY ARTICLE 67*(2 ) OF THE STAFF REGULATIONS, THE SUPPLEMENTARY EFFECT OF FAMILY ALLOWANCES PAYABLE UNDER THE STAFF REGULATIONS, BY COMPARISON WITH ALLOWANCES OF LIKE NATURE PAID FROM OTHER SOURCES, IS BINDING ON THE MEMBER STATES AND CANNOT BE DISREGARDED BY NATIONAL LEGISLATION . 2 . PURSUANT TO ARTICLE 62 OF THE STAFF REGULATIONS, FAMILY ALLOWANCES FORM PART OF THE REMUNERATION WHICH THE COMMUNITIES ARE REQUIRED TO PAY THEIR OFFICIALS . ARTICLE 67*(2 ), IN SO FAR AS IT PROVIDES THAT ALLOWANCES OF LIKE NATURE PAID FROM OTHER SOURCES ARE TO BE DEDUCTED FROM THOSE PAYABLE UNDER THE STAFF REGULATIONS, CONSTITUTES AN EXCEPTION TO ARTICLE 62 AND CANNOT HAVE THE EFFECT OF REMOVING THE COMMUNITY INSTITUTIONS' OBLIGATION TO PAY FAMILY ALLOWANCES WHERE A MEMBER STATE CONFERS ENTITLEMENT TO SUCH ALLOWANCES ON ALL PERSONS WITH DEPENDENT CHILDREN SOLELY ON THE BASIS OF THE CRITERION THAT THEY ARE DOMICILED OR HABITUALLY RESIDENT WITHIN ITS TERRITORY . FOR ARTICLE 67*(2 ) OF THE STAFF REGULATIONS TO BE APPLICABLE, THERE MUST BE, IN RELATION TO THAT MEMBER STATE, A COMPARABLE LINK WITH CIRCUMSTANCES CONFERRING ENTITLEMENT TO THE AWARD OF ALLOWANCES UNDER THE STAFF REGULATIONS . THAT IS WHY ARTICLE 67*(2 ) AND THE OTHER PROVISIONS RELATED THERETO IN THE STAFF REGULATIONS AND THE CONDITIONS OF EMPLOYMENT PRECLUDE A MEMBER STATE FROM WITHHOLDING PAYMENT OF THE FAMILY ALLOWANCES FOR DEPENDENT CHILDREN PROVIDED FOR BY ITS OWN LEGISLATION ON THE GROUND THAT ENTITLEMENT MAY EXIST TO ALLOWANCES UNDER THE STAFF REGULATIONS IN RESPECT OF THE SAME CHILD WHERE THE PERSON ENTITLED TO SUCH ALLOWANCES IS MARRIED TO A SERVING OFFICIAL, A RETIRED OFFICIAL OR ANOTHER SERVANT OF THE EUROPEAN COMMUNITIES AND IS OR HAS BEEN EMPLOYED WITHIN THE TERRITORY OF THAT STATE . Parties IN CASE 189/85 COMMISSION OF THE EUROPEAN COMMUNITIES, REPRESENTED BY ITS PRINCIPAL LEGAL ADVISER, HENRI ETIENNE, AND BY MARIE WOLFCARIUS, A MEMBER OF THE COMMISSION' S LEGAL DEPARTMENT, ACTING AS AGENTS, WITH AN ADDRESS FOR SERVICE IN LUXEMBOURG AT THE OFFICE OF G . KREMLIS, A MEMBER OF THE COMMISSION' S LEGAL DEPARTMENT, JEAN MONNET BUILDING, KIRCHBERG, APPLICANT, V FEDERAL REPUBLIC OF GERMANY, REPRESENTED BY MARTIN SEIDEL, MINISTERIALRAT AT THE FEDERAL MINISTRY OF ECONOMIC AFFAIRS, AND BY MANFRED ZULEEG, PROFESSOR AT THE JOHANN WOLFGANG GOETHE-UNIVERSITAET, FRANKFURT-AM-MAIN, ACTING AS AGENTS, WITH AN ADDRESS FOR SERVICE IN LUXEMBOURG AT THE EMBASSY OF THE FEDERAL REPUBLIC OF GERMANY, 20-22 AVENUE EMILE REUTER, DEFENDANT, APPLICATION FOR A DECLARATION THAT THE FEDERAL REPUBLIC OF GERMANY HAS FAILED TO FULFIL ITS OBLIGATIONS UNDER ARTICLE 67*(2 ) AND THE SECOND PARAGRAPH OF ARTICLE 68 OF THE STAFF REGULATIONS OF OFFICIALS OF THE EUROPEAN COMMUNITIES AND ARTICLE 20 OF THE CONDITIONS OF EMPLOYMENT OF OTHER SERVANTS OF THE EUROPEAN COMMUNITIES, THE COURT COMPOSED OF : LORD MACKENZIE STUART, PRESIDENT, C . KAKOURIS AND F . SCHOCKWEILER ( PRESIDENTS OF CHAMBERS ), G . BOSCO, T . KOOPMANS, U . EVERLING AND J . C . MOITINHO DE ALMEIDA, JUDGES, ADVOCATE GENERAL : J . MISCHO REGISTRAR : D . LOUTERMAN, ADMINISTRATOR HAVING REGARD TO THE REPORT FOR THE HEARING AND FURTHER TO THE HEARING ON 20 NOVEMBER 1986, AFTER HEARING THE OPINION OF THE ADVOCATE GENERAL DELIVERED AT THE SITTING ON 29 JANUARY 1987, GIVES THE FOLLOWING JUDGMENT Grounds 1 BY AN APPLICATION LODGED AT THE COURT REGISTRY ON 19 JUNE 1985, THE COMMISSION OF THE EUROPEAN COMMUNITIES BROUGHT AN ACTION UNDER ARTICLE 169 OF THE EEC TREATY FOR A DECLARATION THAT, BY BRINGING INTO FORCE PARAGRAPH 8*(1)*(4 ) OF THE BUNDESKINDERGELDGESETZ (( FEDERAL LAW ON FAMILY ALLOWANCES FOR DEPENDENT CHILDREN )), AS AMENDED ON 31 JANUARY 1975, ACCORDING TO WHICH A FAMILY ALLOWANCE PAYABLE UNDER GERMAN LEGISLATION IS NOT GRANTED FOR A CHILD IN RESPECT OF WHOM A PERSON IS ENTITLED TO COMPARABLE BENEFITS FROM "INTERNATIONAL OR SUPRANATIONAL INSTITUTIONS", THEREBY ALTERING THE SUPPLEMENTARY EFFECT OF THE FAMILY ALLOWANCES PROVIDED FOR BY THE STAFF REGULATIONS OF OFFICIALS OF THE EUROPEAN COMMUNITIES ( HEREINAFTER REFERRED TO AS "THE STAFF REGULATIONS ") AND THE CONDITIONS OF EMPLOYMENT OF OTHER SERVANTS OF THE EUROPEAN COMMUNITIES ( HEREINAFTER REFERRED TO AS "THE CONDITIONS OF EMPLOYMENT "), THE FEDERAL REPUBLIC OF GERMANY HAS FAILED TO FULFIL ITS OBLIGATIONS UNDER ARTICLE 67*(2 ) AND THE SECOND PARAGRAPH OF ARTICLE 68 OF THE STAFF REGULATIONS AND ARTICLE 20 OF THE CONDITIONS OF EMPLOYMENT . 2 REFERENCE IS MADE TO THE REPORT FOR THE HEARING FOR THE FACTS OF THE CASE, THE COURSE OF THE PROCEDURE AND THE SUBMISSIONS AND ARGUMENTS OF THE PARTIES, WHICH ARE MENTIONED OR DISCUSSED HEREINAFTER ONLY IN SO FAR AS IS NECESSARY FOR THE REASONING OF THE COURT . 3 IN THIS CASE IT IS NECESSARY TO STATE FIRST THE RELEVANT PROVISIONS OF COMMUNITY LAW AND THE PROVISION OF NATIONAL LAW CONTESTED BY THE COMMISSION . 4 ARTICLE 67*(2 ) OF THE STAFF REGULATIONS IS WORDED AS FOLLOWS : "OFFICIALS IN RECEIPT OF FAMILY ALLOWANCES SPECIFIED IN THIS ARTICLE SHALL DECLARE ALLOWANCES OF LIKE NATURE PAID FROM OTHER SOURCES; SUCH LATTER ALLOWANCES SHALL BE DEDUCTED FROM THOSE PAID UNDER ARTICLES 1, 2 AND 3 OF ANNEX VII ." THE ALLOWANCES REFERRED TO IN THAT ARTICLE ARE THE HOUSEHOLD ALLOWANCE, THE DEPENDENT CHILD ALLOWANCE AND THE EDUCATION ALLOWANCE . 5 THE SECOND PARAGRAPH OF ARTICLE 68 LAYS DOWN THE SAME RULE FOR OFFICIALS WHO HAVE NON-ACTIVE STATUS, WHO HAVE BEEN RETIRED IN THE INTERESTS OF THE SERVICE OR WHO ARE ENTITLED TO THE ALLOWANCE PROVIDED FOR IN ARTICLES 34 AND 42 OF THE FORMER STAFF REGULATIONS OF THE EUROPEAN COAL AND STEEL COMMUNITY . 6 ARTICLE 20 OF THE CONDITIONS OF EMPLOYMENT PROVIDES THAT THE RULE IN ARTICLE 67*(2 ) OF THE STAFF REGULATIONS IS TO APPLY BY ANALOGY TO OTHER COMMUNITY SERVANTS . 7 THAT RULE IS ALSO INTENDED TO APPLY BY ANALOGY TO RECIPIENTS OF A RETIREMENT PENSION, AN INVALIDITY PENSION OR A SURVIVOR' S PENSION PAYABLE BY THE COMMUNITIES, WHO BY VIRTUE OF ARTICLE 81 OF THE STAFF REGULATIONS ARE ENTITLED, UNDER THE CONDITIONS LAID DOWN IN ANNEX VII, TO THE FAMILY ALLOWANCES REFERRED TO IN ARTICLE 67 . 8 THE BUNDESKINDERGELDGESETZ, AS AMENDED ON 31 JANUARY 1975, PROVIDES IN PARAGRAPH 1*(1 ) THAT "ANY PERSONS DOMICILED OR HABITUALLY RESIDENT WITHIN THE AREA COVERED BY THIS LAW SHALL BE ENTITLED TO FAMILY ALLOWANCES IN RESPECT OF THEIR CHILDREN" AND IN PARAGRAPH 8*(1 ) THAT : "THE FAMILY ALLOWANCE SHALL NOT BE GRANTED FOR A CHILD IN RESPECT OF WHOM A PERSON IS ENTITLED, UNDER PARAGRAPH 2*(1 ), TO ONE OF THE FOLLOWING BENEFITS : 1 . ... 2 . ... 3 . ... 4 . BENEFITS WHICH ARE GRANTED IN RESPECT OF A CHILD BY AN INTERNATIONAL OR SUPRANATIONAL INSTITUTION AND WHICH ARE COMPARABLE TO THE FAMILY ALLOWANCE ." THAT PROVISION DEROGATES FROM THE AFORESAID GENERAL RULE . 9 THE COMMISSION STATES THAT ARTICLE 67*(2 ) OF THE STAFF REGULATIONS CONTAINS A PROVISION AGAINST THE OVERLAPPING OF FAMILY ALLOWANCES WHICH IS ALSO TO BE FOUND IN THE SECOND PARAGRAPH OF ARTICLE 68 OF THE STAFF REGULATIONS AND WHICH HAS BEEN EXTENDED TO OTHER COMMUNITY SERVANTS BY ARTICLE 20 OF THE CONDITIONS OF EMPLOYMENT . THAT RULE AGAINST THE OVERLAPPING OF BENEFITS REQUIRES OFFICIALS TO DECLARE ALLOWANCES OF LIKE NATURE PAID FROM OTHER SOURCES SO AS TO ENABLE THOSE ALLOWANCES TO BE DEDUCTED FROM THOSE PAYABLE UNDER THE STAFF REGULATIONS . IN ADOPTING ARTICLE 67*(2 ), THE COMMUNITY LEGISLATURE WISHED TO MAKE THE ALLOWANCES PROVIDED FOR BY THE STAFF REGULATIONS AND THE CONDITIONS OF EMPLOYMENT SUPPLEMENTARY TO THE BENEFITS OF LIKE NATURE PAYABLE UNDER THE VARIOUS NATIONAL SYSTEMS . ACCORDINGLY, THE PURPOSE OF THAT ARTICLE IS, INTER ALIA, TO LIMIT THE FINANCIAL BURDEN OF THE COMMUNITIES . 10 THE COMMISSION CONTENDS THAT THE PROVISION AGAINST THE OVERLAPPING OF BENEFITS WHICH WAS ADOPTED BY THE FEDERAL REPUBLIC OF GERMANY DISREGARDS THE SUPPLEMENTARY ROLE OF THE BENEFITS PROVIDED FOR BY THE STAFF REGULATIONS AND HAS THE EFFECT OF AUGMENTING THE FINANCIAL BURDEN OF THE COMMUNITIES IN THIS AREA . 11 IT IS CLEAR FROM THE COMMISSION' S APPLICATION, AS REGARDS THE SCOPE OF ITS CLAIMS, THAT IT SEEKS PRIMARILY THE APPLICATION IN FULL TO OFFICIALS, RETIRED OFFICIALS OR OTHER COMMUNITY SERVANTS "RESIDING OR DOMICILED" IN THE FEDERAL REPUBLIC OF GERMANY OF THE GENERAL SCHEME OF FAMILY ALLOWANCES PROVIDED FOR BY GERMAN LEGISLATION AND IT THEREFORE REQUIRES FAMILY ALLOWANCES TO BE PAID BY THE FEDERAL REPUBLIC OF GERMANY IN RESPECT OF ALL THE CHILDREN OF THOSE COMMUNITY OFFICIALS AND SERVANTS . 12 IN THE ALTERNATIVE, AND WHILST MAINTAINING ITS PRINCIPAL ARGUMENT, THE COMMISSION SEEKS A DECLARATION THAT THE FEDERAL REPUBLIC OF GERMANY IS REQUIRED, BY ARTICLE 67*(2 ) OF THE STAFF REGULATIONS AND THE "GENERAL PRINCIPLES" LAID DOWN BY THE STAFF REGULATIONS, TO PAY FAMILY ALLOWANCES IN RESPECT OF CHILDREN ONE OF WHOSE PARENTS IS AN OFFICIAL, A FORMER OFFICIAL IN RECEIPT OF A PENSION OR ANOTHER COMMUNITY SERVANT, IF THE OTHER PARENT CARRIES ON AN OCCUPATION ON GERMAN TERRITORY . 13 THE GOVERNMENT OF THE FEDERAL REPUBLIC OF GERMANY CONTENDS, FOR ITS PART, THAT ARTICLE 67*(2 ) AND THE OTHER PROVISIONS IN QUESTION ARE MERELY RULES AGAINST THE OVERLAPPING OF BENEFITS AND ARE IN NO WAY BINDING ON THE MEMBER STATES, WHICH ARE ENTIRELY AT LIBERTY TO ORGANIZE THEIR OWN SOCIAL SECURITY LEGISLATION . 14 IT MUST BE BORNE IN MIND, FIRST, THAT THE STAFF REGULATIONS AND THE CONDITIONS OF EMPLOYMENT WERE ADOPTED BY MEANS OF COUNCIL REGULATION ( EEC, EURATOM, ECSC ) NO 259/68 OF 29 FEBRUARY 1968 ( OFFICIAL JOURNAL, ENGLISH SPECIAL EDITION 1968 ( I ), P . 30 ) AND THAT, BY VIRTUE OF THE SECOND PARAGRAPH OF ARTICLE 189 OF THE EEC TREATY, THAT REGULATION HAS GENERAL APPLICATION, IS BINDING IN ITS ENTIRETY AND IS DIRECTLY APPLICABLE IN ALL MEMBER STATES . IT FOLLOWS THAT, AS THE COURT POINTED OUT IN PARTICULAR IN ITS JUDGMENT OF 20 OCTOBER 1981 IN CASE 137/80 COMMISSION V BELGIUM (( 1981 )) ECR 2393, IN ADDITION TO HAVING EFFECTS WITHIN THE COMMUNITY ADMINISTRATION, THE STAFF REGULATIONS AND THE CONDITIONS OF EMPLOYMENT ARE ALSO BINDING ON MEMBER STATES IN SO FAR AS THEIR COOPERATION IS NECESSARY IN ORDER TO GIVE EFFECT TO THOSE MEASURES . ACCORDINGLY, THE QUESTION ARISES WHETHER ARTICLE 67*(2 ) OF THE STAFF REGULATIONS IMPOSES BINDING OBLIGATIONS ON THE MEMBER STATES . 15 IT MUST BE POINTED OUT, FOR THOSE PURPOSES, THAT THE FAMILY ALLOWANCES AT ISSUE IN THIS CASE CONSTITUTE BENEFITS THE AWARD OF WHICH DEPENDS ON THE FAMILY CIRCUMSTANCES OF THE OFFICIAL CONCERNED . ACCORDINGLY, IN THE ABSENCE OF SPECIAL PROVISIONS, THE APPLICATION OF THE COMMUNITY SCHEME IN CONJUNCTION WITH A NATIONAL SCHEME COULD GIVE RISE TO CONFLICTS, INASMUCH AS ALLOWANCES COULD BE CLAIMED IN FULL UNDER BOTH SCHEMES IN RESPECT OF THE SAME SET OF FAMILY CIRCUMSTANCES . THE PURPOSE OF ARTICLE 67*(2 ) OF THE STAFF REGULATIONS IS PRECISELY TO RESOLVE CONFLICTS OF THAT KIND . 16 IF THE CONFLICTS IN QUESTION WERE GOVERNED BY PROVISIONS OF NATIONAL LAW, THEY MIGHT BE RESOLVED IN DIFFERENT WAYS ACCORDING TO THE MEMBER STATE WITHIN WHOSE TERRITORY THE OFFICIAL OR HIS SPOUSE CARRIED ON THEIR ACTIVITIES OR RESIDED . ARTICLE 67*(2 ) OF THE STAFF REGULATIONS MAKES IT POSSIBLE TO RESOLVE CONFLICTS BETWEEN THE COMMUNITY SCHEME AND THE VARIOUS NATIONAL SCHEMES, AS THE FAMILY ALLOWANCES PROVIDED FOR BY THE STAFF REGULATIONS ARE PAID TO THOSE ENTITLED TO THEM ONLY IN SO FAR AS THEY EXCEED THE AMOUNT OF THE COMPARABLE ALLOWANCES PAID UNDER A SCHEME ESTABLISHED BY THE LEGISLATION OF A MEMBER STATE . SINCE IT IS BASED ON ARTICLE 67*(2 ) ITSELF, THAT IS TO SAY ON A PROVISION CONTAINED IN A REGULATION ADOPTED PURSUANT TO THE SECOND PARAGRAPH OF ARTICLE 189 OF THE EEC TREATY, THE SUPPLEMENTARY EFFECT OF ALLOWANCES PAYABLE UNDER THE STAFF REGULATIONS IS BINDING ON THE MEMBER STATES AND CANNOT BE DISREGARDED BY NATIONAL LEGISLATION . 17 ONCE IT HAS BEEN ESTABLISHED THAT THE MEMBER STATES ARE BOUND BY THE OBLIGATIONS IMPOSED BY ARTICLE 67*(2 ) OF THE STAFF REGULATIONS AND THE OTHER PROVISIONS REFERRED TO ABOVE, THE NATURE OF THOSE OBLIGATIONS REMAINS TO BE DETERMINED . 18 IN THAT REGARD, ARTICLE 67*(2 ) MUST BE REGARDED AS FORMING PART OF THE GENERAL SYSTEM GOVERNING THE REMUNERATION WHICH THE COMMUNITIES ARE REQUIRED TO PAY THEIR OFFICIALS PURSUANT TO ARTICLE 62 OF THE STAFF REGULATIONS . THAT PROVISION INCLUDES FAMILY ALLOWANCES IN THE REMUNERATION TO WHICH THOSE OFFICIALS ARE ENTITLED . FOR THE SAME REASON, ARTICLE 67 IS INCLUDED IN SECTION 1, CHAPTER I, TITLE V OF THE STAFF REGULATIONS, WHICH IS HEADED "REMUNERATION ". ARTICLES 19 AND 61 OF THE CONDITIONS OF EMPLOYMENT ALSO TREAT THE FAMILY ALLOWANCES PAYABLE TO OTHER COMMUNITY SERVANTS AS REMUNERATION . 19 IN THE CONTEXT OF THE SYSTEM OF REMUNERATION, ARTICLE 67*(2 ), IN SO FAR AS IT PROVIDES THAT ALLOWANCES OF LIKE NATURE PAID FROM OTHER SOURCES ARE TO BE DEDUCTED FROM THOSE PAYABLE BY THE COMMUNITIES, CONSTITUTES AN EXCEPTION TO ARTICLE 62 OF THE STAFF REGULATIONS AND CANNOT THEREFORE BE GIVEN A BROAD INTERPRETATION . 20 EVEN IF THE EFFECT OF THAT PROVISION IS TO LIMIT THE FINANCIAL BURDEN OF THE COMMUNITIES, IT CANNOT REMOVE THE COMMUNITIES' OBLIGATION TO PAY FAMILY ALLOWANCES WHERE A MEMBER STATE CONFERS ENTITLEMENT TO FAMILY ALLOWANCES ON ALL PERSONS WITH DEPENDENT CHILDREN SOLELY ON THE BASIS OF THE CRITERION THAT THEY ARE DOMICILED OR HABITUALLY RESIDENT WITHIN ITS OWN TERRITORY . 21 THE SOLUTION TO WHICH SUCH AN INTERPRETATION WOULD LEAD IS MANIFESTLY DISCRIMINATORY, IN SO FAR AS IT WOULD BURDEN THE MEMBER STATES WHICH CONFER ENTITLEMENT TO FAMILY ALLOWANCES SOLELY BY REFERENCE TO THE CRITERION OF DOMICILE OR HABITUAL RESIDENCE WITH RESPONSIBILITY FOR PAYING THOSE ALLOWANCES IN RESPECT OF THE CHILDREN OF ANY OFFICIAL, RETIRED OFFICIAL OR OTHER COMMUNITY SERVANT DOMICILED OR HABITUALLY RESIDENT WITHIN THEIR TERRITORY, WHILST EXEMPTING FROM THAT BURDEN MEMBER STATES WHICH FINANCE FAMILY ALLOWANCES BY A SYSTEM OF CONTRIBUTIONS THAT IS NOT APPLICABLE TO COMMUNITY STAFF . 22 IN ITS APPLICATION THE COMMISSION ITSELF ACKNOWLEDGES, BY IMPLICATION, THAT THAT SOLUTION IS DISCRIMINATORY WHEN IT STATES THAT "IF A MEMBER STATE APPLIES FOR THE BENEFIT OF ITS INHABITANTS A GENERAL SCHEME OF BENEFITS FINANCED BY PUBLIC FUNDS, THAT SCHEME MUST ALSO APPLY TO COMMUNITY SERVANTS RESIDING IN THAT MEMBER STATE" BUT GOES ON TO CONCEDE THAT IT WOULD REQUIRE THAT STATE TO BEAR THE PRIMARY RESPONSIBILITY FOR FINANCING FAMILY ALLOWANCES IN RESPECT OF THE CHILDREN OF AN OFFICIAL ONLY WHERE THE OTHER SPOUSE IS WORKING . IN THAT REGARD, IT SHOULD BE NOTED THAT, IF THE SOLUTION WHICH IT ADVOCATES WERE TO BE ADOPTED, THE COMMISSION WOULD BE OBLIGED TO APPLY THE PROVISIONS OF THE STAFF REGULATIONS INFLEXIBLY AND WOULD BE UNABLE TO GRANT THE MEMBER STATES ANY REDUCTION IN THE FINANCIAL BURDENS IMPOSED ON EACH STATE BY ARTICLE 67*(2 ) OF THE STAFF REGULATIONS AND THE PROVISIONS RELATED THERETO . 23 IN ADDITION, THE SOLUTION ADVOCATED BY THE COMMISSION WOULD HAVE THE EFFECT OF REVERSING THE GENERAL RULE IN THE STAFF REGULATIONS, TO THE EFFECT THAT THE COMMUNITIES ARE REQUIRED TO PAY REMUNERATION TO THEIR OFFICIALS AND OTHER SERVANTS, AND ADOPTING AS THE GENERAL RULE THE EXCEPTIONS SUCH AS ARTICLE 67*(2 ) OF THE STAFF REGULATIONS AND THE OTHER PROVISIONS RELATED THERETO, AT ANY RATE IN CASES WHERE THE NATIONAL LEGISLATION OF A MEMBER STATE CONFERS ENTITLEMENT TO FAMILY ALLOWANCES SOLELY ON THE BASIS OF THE CRITERION OF DOMICILE OR HABITUAL RESIDENCE . 24 ACCORDINGLY, IN THE LIGHT OF THE FOREGOING CONSIDERATIONS, THE COMMISSION' S PRINCIPAL CLAIMS MUST BE REJECTED . 25 IT IS THEREFORE NECESSARY TO ASCERTAIN WHETHER THE COMMISSION' S ALTERNATIVE CLAIMS ARE COMPATIBLE WITH ARTICLE 67*(2 ) AND THE OTHER PROVISIONS IN QUESTION . 26 IN THAT REGARD, FAMILY ALLOWANCES, IN SO FAR AS THEY ARE COMPONENTS OF REMUNERATION, MUST BE REGARDED AS LINKED, IN THE SCHEME OF THE STAFF REGULATIONS, TO AN EMPLOYMENT RELATIONSHIP OR, IN GENERAL, TO A GAINFUL OCCUPATION . 27 HAVING REGARD TO THE FOREGOING CONSIDERATIONS, IT MUST BE ACKNOWLEDGED THAT ARTICLE 67*(2 ) APPLIES ONLY WHERE, IN RELATION TO A MEMBER STATE WHOSE LEGISLATION CONFERS ENTITLEMENT IN PRINCIPLE TO THE PAYMENT OF NATIONAL ALLOWANCES IN RESPECT OF A CHILD WHO IS ELIGIBLE FOR ALLOWANCES UNDER THE STAFF REGULATIONS, THERE IS A COMPARABLE LINK WITH CIRCUMSTANCES CONFERRING ENTITLEMENT TO THE AWARD OF ALLOWANCES UNDER THE STAFF REGULATIONS . 28 ACCORDINGLY, IT IS ONLY WHERE THE SPOUSE OF AN OFFICIAL, RETIRED OFFICIAL OR OTHER COMMUNITY SERVANT HAS OR HAS HAD PAID EMPLOYMENT IN A MEMBER STATE THAT ARTICLE 67*(2 ) OF THE STAFF REGULATIONS AND THE OTHER PROVISIONS RELATED THERETO PRECLUDE THAT STATE FROM WITHHOLDING PAYMENT OF THE FAMILY ALLOWANCES PROVIDED FOR BY ITS OWN LEGISLATION ON THE GROUND THAT THE SPOUSE MAY QUALIFY FOR ALLOWANCES UNDER THE STAFF REGULATIONS IN RESPECT OF THE SAME CHILD . 29 HAVING REGARD TO THAT INTERPRETATION OF ARTICLE 67*(2 ) AND THE SECOND PARAGRAPH OF ARTICLE 68 OF THE STAFF REGULATIONS, AND OF ARTICLE 20 OF THE CONDITIONS OF EMPLOYMENT, IT MUST BE HELD THAT THE COMMISSION' S ALTERNATIVE CLAIMS ARE WELL FOUNDED . 30 IT MUST THEREFORE BE HELD THAT THE FEDERAL REPUBLIC OF GERMANY HAS FAILED TO FULFIL ITS OBLIGATIONS UNDER ARTICLE 67*(2 ) AND THE SECOND PARAGRAPH OF ARTICLE 68 OF THE STAFF REGULATIONS AND ARTICLE 20 OF THE CONDITIONS OF EMPLOYMENT, IN SO FAR AS PARAGRAPH 8*(1)*(4 ) OF THE BUNDESKINDERGELDGESETZ, AS AMENDED ON 31 JANUARY 1985, PRECLUDES THE PAYMENT OF FAMILY ALLOWANCES FOR DEPENDENT CHILDREN UNDER NATIONAL LEGISLATION WHERE THE PERSON ENTITLED TO SUCH ALLOWANCES IS MARRIED TO A SERVING OFFICIAL, A RETIRED OFFICIAL OR ANOTHER SERVANT OF THE EUROPEAN COMMUNITIES AND IS EMPLOYED IN GERMANY . Decision on costs COSTS 31 UNDER ARTICLE 69*(2 ) OF THE RULES OF PROCEDURE, THE UNSUCCESSFUL PARTY IS TO BE ORDERED TO PAY THE COSTS . HOWEVER, UNDER THE FIRST SUBPARAGRAPH OF ARTICLE 69*(3 ), WHERE EACH PARTY SUCCEEDS ON SOME AND FAILS ON OTHER HEADS, THE COURT MAY ORDER THAT THE PARTIES BEAR THEIR OWN COSTS IN WHOLE OR IN PART . AS THE COMMISSION HAS SUCCEEDED IN ONLY SOME OF ITS CLAIMS, THE PARTIES MUST BE ORDERED TO BEAR THEIR OWN COSTS . Operative part ON THOSE GROUNDS, THE COURT HEREBY : ( 1 ) DECLARES THAT THE FEDERAL REPUBLIC OF GERMANY HAS FAILED TO FULFIL ITS OBLIGATIONS UNDER ARTICLE 67*(2 ) AND THE SECOND PARAGRAPH OF ARTICLE 68 OF THE STAFF REGULATIONS OF OFFICIALS OF THE EUROPEAN COMMUNITIES AND ARTICLE 20 OF THE CONDITIONS OF EMPLOYMENT OF OTHER SERVANTS OF THE EUROPEAN COMMUNITIES, IN SO FAR AS PARAGRAPH 8*(1)*(4 ) OF THE BUNDESKINDERGELDGESETZ (( FEDERAL LAW ON FAMILY ALLOWANCES FOR DEPENDENT CHILDREN )), AS AMENDED ON 31 JANUARY 1975, PRECLUDES THE PAYMENT OF FAMILY ALLOWANCES FOR DEPENDENT CHILDREN UNDER NATIONAL LEGISLATION WHERE THE PERSON ENTITLED TO SUCH ALLOWANCES IS MARRIED TO A SERVING OFFICIAL, A RETIRED OFFICIAL OR ANOTHER SERVANT OF THE EUROPEAN COMMUNITIES AND IS EMPLOYED IN GERMANY; ( 2 ) DISMISSES THE REMAINDER OF THE APPLICATION; ( 3 ) ORDERS THE PARTIES TO BEAR THEIR OWN COSTS .

Lord Justice Sullivan: Introduction This is an appeal against the Order dated 3rd February 2009 of Elias J. (as he then was) dismissing the Appellant's application for judicial review of the Defendant's decision made on 30th January 2008 to give approval in principle to the making of a compulsory purchase order ("CPO") under section 226 (1) (a) of the Town and Country Planning Act 1990 ("the 1990 Act") as amended by the Planning and Compensation Act 2004 ("the 2004 Act") in respect of land owned by the Appellant within a site known as the Raglan Street Site ("the site" or the "RSS"). Background The site is located immediately to the west of the dual carriageway ring road which encircles the Wolverhampton City Centre. The Appellant owns 86% of the site. The remaining 14% of the site is owned or controlled by the Interested Party. The background history prior to the events with which we are concerned is set out in paragraphs 3 – 5 of the judgment of Elias J. Originally, the Appellant intended to redevelop the site and the Defendant agreed that it would sell its land within the site (a small parcel of land and the subsoil beneath the roads on the site) to the Appellant to enable its redevelopment scheme to proceed. In early 2005 the Appellant wrote to the Defendant saying that it no longer wished to redevelop the site and was negotiating to sell its interest to the Interested Party to enable the Interested Party to pursue an alternative redevelopment scheme. On 3rd November 2005 the Defendant entered into a conditional sale agreement with the Interested Party for the sale of its land within the site to the Interested Party. The Defendant also committed itself in principle to using its CPO powers should that be necessary to facilitate the Interested Party's redevelopment. At that stage it was not anticipated that those powers would need to be used to acquire the Appellant's land within the site because it was envisaged that the Appellant would dispose of its land to the Interested Party by agreement. Subsequently the Appellant again changed its mind and notified the Defendant that it did after all wish to redevelop the site itself. The Defendant reconsidered the matter in December 2006. It noted that the Appellant and the Interested Party could not reach agreement as to which of them was to redevelop the site. Both had applied for outline planning permission for their respective redevelopment schemes. The Defendant agreed in principle to use its CPO powers to facilitate the redevelopment of the site should the need arise. At that stage the Defendant did not indicate which redevelopment scheme it would facilitate by the use of those powers. In March 2007 the Defendant resolved to grant outline planning permission for both redevelopment schemes. Section 226(1)(a) of the 1990 Act authorises the Defendant to make a CPO in respect of any land within its area if it thinks: "that the acquisition will facilitate the carrying out of development, redevelopment or improvement on or in relation to the land." All three parties were, and still are agreed that the site should be redeveloped. In the absence of any agreement between the Appellant and the Interested Party, and these proceedings are confirmation if it is needed that there is no realistic prospect of any such agreement, there can be no doubt that the Defendant will have to exercise its powers under section 226(1)(a) to acquire either the Appellant's or the Interested Party's land within the site if any redevelopment is to proceed. Faced with this dilemma, the Defendant held what was effectively a competition to decide which of the two redevelopment schemes it should facilitate by the use of its CPO powers. The process is described in detail in a report dated 30th January 2008 to the Defendant's Cabinet ("the Report"). Having described the background and the procedure adopted for the competition, the Report explained "The general approach to the making of compulsory purchase orders". The material provisions of section 226 of the 1990 Act, as amended by the 2004 Act were set out: "226(1) A local authority to whom this section applies shall, on being authorised to do so by the Secretary of State, have power to acquire compulsorily any land in their area - (a) if the authority think that the acquisition will facilitate the carrying out of development, re-development or improvement on or in relation to the land… (1A) But a local authority must not exercise the power under paragraph (a) of subsection (1) unless they think that the development, re-development or improvement is likely to contribute to the achievement of any one of more of the following objects - (a) the promotion or improvement of the economic well- being of their area; (b) the promotion or improvement of the social well-being of their area; (c) the promotion or improvement of the environmental well-being of their area." The Report drew Cabinet's attention to the (then) Office of the Deputy Prime Minister's (ODPM's) guidance on the use of section 226 powers in Circular 06/04 "Compulsory Purchase and The Crichel Down Rules", said that the advice in Appendix A to the Circular was of particular relevance, and set out the four factors listed in paragraph 16 of Appendix A to the Circular which the Secretary of State can be expected to consider when deciding whether or not to confirm a CPO made under section 226(1)(a). These four factors are: "(i) whether the purpose for which the land is being acquired fits in with the adopted planning framework for the area; (ii) the extent to which the proposed purpose will contribute to the promotion or improvement of the economic, social or environmental well-being of the area; (iii) the potential financial viability of the scheme for which the land is being acquired; (iv) whether the purpose for which the land is being acquired could be achieved by other means." This echoes the advice in paragraph 6 of Appendix A as to the ambit of "The well-being power". Having said that the "wide power" in section 226(1)(a) is subject to subsection (1A), paragraph 6 refers to the circumstances in which it might be of assistance, and says in the final sentence: "The benefit to be derived from exercising the power is also not restricted to the area subject to the compulsory purchase order, as the concept is applied to the well-being of the whole (or any part) of the acquiring authority's area." Returning to the Report, Cabinet was advised that: "There is no doubt that both the Tesco and Sainsbury's schemes would fulfil the statutory purpose of facilitating the carrying out of development, redevelopment or improvement on or in relation to the land." (4.4)[1] The Report also noted that both redevelopment schemes were acceptable in planning terms (5.7). Section 6 of the Report considered: "the extent to which the two schemes are likely to contribute to the promotion of the economic, social or environmental well-being of the area." (6.1). The only respect in which the Report is criticised by the Appellant, and the basis of the Appellant's challenge in these proceedings, is the fact that in its consideration of these "well-being" benefits the Report included the benefits which would result from the redevelopment of another site, the Royal Hospital site ("RHS"). The RHS is owned by the Interested Party. It is located on the other side of the City Centre, a little to the east of the ring road. As the crow flies the RHS is over 850m from the RSS. In a nutshell, the Report said that the implementation of the proposals for the redevelopment of the RHS: "would have a significant positive impact on the regeneration of this area of the city." (6.10). Within the RHS there are a number of listed buildings which are in need of restoration. Any scheme for the redevelopment of the RHS must incorporate the restoration of these listed buildings and the cost of such restoration has obvious implications for the viability of any scheme on the RHS. The Report explained that the "main cost/loss" associated with the RHS scheme was the refurbishment of the listed buildings for accommodation for a Primary Care Centre and as offices for the Primary Care Trust (PCT) (6.11 and 6.16). Having considered various economic appraisals the Report concluded in paragraph 6.20: "that development of the RHS site in accordance with the Council's aspirations is unlikely to take place for the foreseeable future unless Tesco's current proposals, which do meet those aspirations, are brought forward through a cross-subsidy from the development of the Ragland Street site." The Report continued in paragraph 6.21: "(a) there will be three phases; site clearance and demolition (phase 1), restoration of the main hospital building (phase 2) and residential, commercial and public realm (phase 3); (b) Phase 1 is expected to take 9 months and is not dependent on the Council making a CPO to support the Tesco Scheme; (c) They will commit to Phase 2 providing the Council make a CPO in support of the Tesco scheme and the PCT have signed an agreement to lease the space; (d) They will agree to a planning obligation prohibiting the occupation of the Raglan Street store until the works to the listed buildings are completed to the reasonable satisfaction of the Council subject to the council making a CPO for the Site to support the Tesco scheme and using its reasonable endeavours to secure its confirmation…" The Report's conclusion on this issue in para.6.23 was: "Whilst there is disagreement between Tesco and Sainsbury's about the viability of the RHS development, it is clear is that, for reasons they have explained, Tesco are unlikely to carry out their scheme unless they are selected as the operator of the store at Raglan Street and are thus able to cross-subsidise the RHS development in the manner described above. Tesco have also indicated that if they are not selected, they would not be prepared to sell the RHS and would seek a more commercially attractive planning permission. This would be unlikely to realise the same level of planning benefit to the city as their present proposals for the RHS. In these circumstances, the Council could consider making a CPO for the RHS, but the outcome would be uncertain and dependant to a large degree on finding another party willing to carry out a scheme to the Council's requirements when the viability of them is very much in question." The overall conclusions were contained in Section 11 of the Report. The advantages of both the Tesco scheme and the Sainsbury's scheme for the RSS were summarised. The former included the fact that it "would cross fund the RHS development and regeneration of the immediate area". Paragraph 11.3 drew the threads together: "In conclusion, both Schemes would bring appreciable planning benefits and would promote and improve the economic, social and environmental well-being of the city. However, the Tesco Scheme enjoys a decisive advantage in that it will enable the development of the RHS to be brought forward in a manner that is consistent with the Council's planning objectives for that site. Making a CPO for the Tesco Scheme will therefore result in a significantly greater contribution to the economic, social and environmental well-being of the Council's area than would making a CPO for the Sainsbury's Scheme. On this basis, and subject to the satisfactory resolution of the matters identified in the Recommendations set out at the beginning of this report, there is a compelling case in the public interest to make a CPO to enable the Tesco Scheme to proceed." The Minutes of the Meeting on 30th January 2008 record that: "The Director for Sustainable Communities introduced the report and highlighted the salient matters for consideration by the Cabinet. He reported that both Schemes would bring appreciable planning benefits and would promote and improve the economic, social and environmental well-being of the City. However, the Tesco scheme enjoyed a decisive advantage in that it would enable the development of the Royal Hospital Site to be brought forward in a manner that is consistent with the Council's planning objectives for that site." It was resolved: "(a) That approval in principle be given to the making of a compulsory purchase order for the land bounded by Raglan Street, St Mark's Road, Alexandra Street and Great Brickkiln Street within the Tesco application shown on the plan displayed at the meeting (the Raglan Street Site) to facilitate the carrying out of: (i) a mixed use development comprising 1,300 m² of A1 retail use, 1,102 m² of either A2, A3, A4 or A5 use, 145 flats including a minimum of 40 very sheltered flats, and a petrol filling station with car wash on that land and other land in the ownership of or controlled by Tesco Stores Ltd and the Council; and (ii) a mixed use retail, office and residential development of the Royal Hospital site Subject to Tesco Stores Ltd (Tesco) producing further satisfactory evidence of a commitment to the carrying out of the development referred to at (ii) above before consideration is given to a resolution to authorise the making of the compulsory purchase order…." The proceedings before Elias J. The Appellant contended that: i) The Defendant had no power to use its CPO powers for the second purpose set out in the resolution: viz. to facilitate the carrying out of a mixed use retail, office and residential development of the RHS. ii) In reaching its decision as to whose land, the Appellant's or the Interested Party's, should be acquired to facilitate the re-development of the site, the "decisive advantage" of securing the re-development of the RHS was an immaterial consideration. A third ground, that the Defendant had predetermined the decision and/or fettered its discretion was rejected by the Judge and is not pursued in this Court. The judge described grounds i) and ii) as the "formal issue" and the "substantive issue" respectively: see paragraphs 28 and 29 of the judgment. The Judge concluded that he would not be justified in quashing the resolution on the basis of the "formal issue" above. In paragraph 43 of the judgment he said: "I agree with Mr Katkowski that the resolution does not need to be altered. Perhaps serendipitously, it does not state in terms that the purpose is to promote both developments, even if that was the Council's understanding. It simply says that the CPO will facilitate the carrying out of both developments, and as a matter of fact, that is correct. The making of the CPO will in the unusual circumstances of this case, achieve precisely those results, and in my judgment it can do so lawfully. So I do not consider that it would be appropriate to quash the resolution." Whatever conclusion is reached on the substantive issue I have no doubt that the judge's decision that it would not be appropriate to quash the resolution on the basis of the formal issue was correct, and Mr Lockhart-Mummery QC fairly conceded that this was so during the course of his submissions on behalf of the Appellant. If the Appellant succeeds on the substantive issue the underlying basis for the resolution, whatever its precise terms, falls away. If, on the other hand, the appeal on the substantive issue is dismissed, because the Defendant was entitled to have regard to the benefits of securing the redevelopment of the RHS, quashing the resolution on the basis of its precise wording would be a pointless exercise in pedantry, because it would still be open to the Defendant, no CPO having yet been made, to pass another, more felicitously drafted resolution with precisely the same effect. The resolution is a response to the Report, which is referred to in the minutes, and it is clear that in substance the Defendant's Cabinet accepted the conclusion in the Report: that a CPO should be made to facilitate the Interested Party's redevelopment scheme for the RSS because that scheme would by reason of cross-subsidy enable the redevelopment of the RHS, and thus make a significantly greater contribution to the "well-being" of the Defendant's area than would the making of a CPO to facilitate the Appellant's redevelopment scheme for the RSS. The substantive issue was whether the Defendant was lawfully entitled to take into consideration the fact that facilitating the Interested Party's redevelopment scheme for the RSS would, by reason of cross-subsidy, enable the redevelopment of the RHS and thereby achieve the benefits that would result from the latter redevelopment ("the RHS benefits"). The Defendant and the Interested Party submitted that the Defendant was entitled to take the RHS benefits into account because either: i) They fell within subsection 226(1A) of the 1990 Act; or ii) Even if they did not fall within subsection 226(1A) the Defendant was required to have regard to all material considerations when deciding whether to make a CPO under subsection 226(1)(a), and was therefore entitled to have regard to all of the benefits which would flow from facilitating the carrying out of a proposed redevelopment scheme when deciding which of two rival redevelopment schemes it should facilitate by the making of a CPO. The judge rejected submission (a) and accepted submission (b). In their Respondent's Notices the Defendant and the Interested Party contend that the judge erred in concluding that the RHS benefits were not within subsection 226(1A). In its appeal the Appellant contends that the judge erred in accepting submission (b). It is sensible to consider subsection 226(1A) before considering the Defendant's and Interested Party's alternative submission (b). Subsection 226(1A) I have set out the relevant provisions of section 226 above (para.7). Although the proposed CPO would facilitate the carrying out of development and improvement as well as redevelopment on the RSS, the facilitation of its redevelopment is the principal purpose, and for convenience I will therefore omit any further reference to development and improvement when considering the relationship between the two subsections, 226(1)(a) and 226(1A). In paragraph 12 of his judgment Elias J. said that subsection 226(1A) was "a limitation on the power conferred by section 226(1)(a); it does not extend that power in any way". He added that in practice it was unlikely to provide any real limitation since it was almost inconceivable that a proposed redevelopment would not have at least some of the benefits identified in subsection 226(1A). It is true that subsection 226(1A) is negative in form – "must not exercise the power under paragraph (a) of subsection (1) unless…." – but in substance, as Mr Lockhart- Mummery fairly conceded, it positively requires local authorities, when deciding whether to exercise the power conferred by subsection 226 (1)(a) to consider whether the carrying out of redevelopment on the proposed CPO site "is likely to contribute to the achievement of….the objects" of the promotion or improvement of the economic/social/environmental well-being of their area. The statutory language may appear somewhat negative and convoluted, but in my view the underlying policy objective is clear. Subsection 226(1)(a) focuses the local authority's attention on what is proposed to take place on the CPO site itself. While the local authority must be satisfied that the CPO will facilitate the redevelopment of the CPO site, subsection 226(1A) requires it to look beyond the benefits that will accrue on the CPO site itself, and to consider whether, and if so to what extent, its redevelopment is likely to bring economic/social/environmental "well-being" benefits to a wider area. Although it is in form a limitation, in practice the purpose of sub-section 226(1A) is to broaden the issues that must be taken into account by a local authority when deciding whether to make a CPO under s.226(1)(a). This understanding of the practical effect of the subsection is entirely consistent with the policy advice in Circular 06/04 (see paragraphs 8 and 9 above). Though convoluted, subsection 226(1A) is expressed in deliberately broad terms: "likely to contribute to the achievement of…[the well-being]…objects". It is not prescriptive as to the manner in which the carrying out of redevelopment upon a CPO site might make a contribution to such wider benefits. Mr Lockhart-Mummery accepted that one of the more obvious ways in which the carrying out of redevelopment on a CPO site might, at least in principle, be capable of bringing economic/social/environmental benefits to a wider area would be if the redevelopment was likely to act as the catalyst for the development or redevelopment of some other site or sites within the authority's area. Such a catalytic effect might be direct, e.g. because redeveloping the CPO site would be likely to enable the occupier of another, run-down site in the authority's area to relocate onto the CPO site, thus enabling the run-down site to be redeveloped. Or it might be indirect, e.g. because the increased attractiveness after redevelopment of a hitherto run-down CPO site was likely to make other sites in the area more attractive for development or redevelopment. It was common ground that such catalytic effects were capable of falling within the scope of section 226(1A). In the present case the Report makes it plain that the Defendant was satisfied that facilitating the carrying out of the Interested Party's scheme for the redevelopment of the RSS would, by reason of the proposed cross-subsidy, act as the catalyst for the redevelopment of the RHS site in a manner which would contribute to the economic social and environmental well-being of its area. Mr Lockhart-Mummery submitted that the contribution to the achievement of the wider objects must be made by the redevelopment on the CPO site, and the proposed cross-subsidy was to be distinguished from, because it was not related to, that redevelopment. In my judgment subsection 226(1A) is concerned with all of the consequences that are likely to flow from the process of the carrying out of redevelopment on the CPO site, and these are not confined to what might be described as the impact of there being new "bricks and mortar" on the redeveloped site. Thus, disturbance during the redevelopment process and the need to relocate existing occupiers on the one hand, and the job opportunities that would be created during the carrying out of the redevelopment on the other, would both be capable of being relevant (the one negative, the other positive) for the purposes of s.226 (1A). Mr Lockhart-Mummery's principal submission was that the proposed cross-subsidy of the otherwise unviable RHS redevelopment was "not related" to the redevelopment of the RSS site. In support of this submission he relied on a statement in the Planning Committee report dealing with the Interested Party's planning application which said that there was no "linkage" between the development of the RHS and the grant of permission for the redevelopment of the RSS, and upon the well established line of authority for the proposition that, in order to be valid, a condition in a planning permission and an obligation under s.106 of the 1990 Act must "fairly and reasonably relate to the permitted development": see R v Plymouth City Council, exp. Plymouth and South Devon Co-Operative Society Ltd. (1993) 67 P. & C.R. 78, C.A.; and Tesco Stores Ltd. v Secretary of State for the Environment [1995] IWLR 759. Both the Plymouth and the Tesco cases were concerned with whether offers by developers to pay for off-site (and in the Plymouth case certain on-site) benefits to be secured by s.106 obligations were "material considerations" for the purpose of determining the developers' planning applications. In the Plymouth case the Court of Appeal concluded that all of the on-site and off-site benefits fairly and reasonably related to the permitted development and were, therefore, material considerations. Concern was expressed that by adopting this approach to materiality the Court: "was condoning the sale of planning permissions to the highest bidder." See per Lord Hoffmann at p.782 of the Tesco case. Lord Hoffmann's response to this concern was that the "bargain and sale" metaphor: "…is an uncertain guide to the legality of a grant or refusal of planning permission. It is easy enough to apply in a clear case in which the planning authority has demanded or taken account of benefits which are quite unconnected with the proposed development. But in such a case the phrase merely adds colour to the statutory duty to have regard only to material considerations. In cases in which there is a sufficient connection, the application of the metaphor or its relevance to the legality of the planning decision may be highly debatable. I have already explained how in a case of competition such as the Plymouth case, in which it is contemplated that the grant of permission to one developer will be a reason for refusing it to another, it may be perfectly rational to choose the proposal which offers the greatest public benefit in terms of both the development itself and related external benefits." It is clear from the passages in the Report referred to in paragraphs 13 and 14 (above) that the cross-funding of the redevelopment of the RHS was to be secured by way of a planning obligation. Mr Lockhart-Mummery emphasised the words "related external benefits", and submitted that the redevelopments of the RSS and the RHS were unrelated, and to treat them as related simply by reason of the cross-subsidy from the RSS to the RHS would be to enable the Interested Party to buy the CPO. In his Skeleton Argument he pointed to the danger of "an auction of the exercise of CPO powers by reference to factors unrelated to the purpose for which the [s.226 (1)(a)] power is given". While I readily accept the proposition that local authorities should not allow their CPO powers to be "bought and sold", I do not accept that it is appropriate to apply dicta in cases which are concerned with the lawfulness of planning conditions and s.106 agreements directly, and without any modification, to the power to make CPOs under s.226(1)(a). There are three principal reasons why "reading across" from subsection 70(2) to subsection 226(1A) is not appropriate. The starting point must be the statutory language. Subsection 70(2) of the 1990 Act requires local planning authorities when deciding whether to grant planning permission to: "have regard to the provisions of the development plan so far as material to the application, and to any other material considerations." While off-site, or "external" benefits are capable of being "other material considerations", there is no express obligation in subsection 70(2), such as is imposed by subsection 226(1A) to have regard to them. Local planning authorities are not required to refuse an application for planning permission unless granting it would be likely to contribute to off-site "well-being" benefits. If there is no policy or other planning objection to the development of a particular site, planning permission will be granted even though carrying out the development is unlikely to have any wider benefits. Secondly, the wider benefits which may fairly be said to be "related" to a CPO under subsections 226(1)(a) and (1A) are not necessarily the same as the off-site benefits which may "fairly and reasonably" relate to a grant of planning permission. Generally, the financial viability of an application for planning permission is unlikely to be a material consideration for the purposes of determining the application under s.70(2). In some circumstances financial viability may be material, e.g. if there is a dispute as to how much "affordable housing" should be included in a residential development, but usually, the financial viability of carrying out a proposed development will be a matter for the applicant, and not the local planning authority. The position is quite different in CPO cases under subsection 226(1)(a). Circular 06/04 makes it clear that the financial viability of the proposed redevelopment scheme is a highly material factor in the Secretary of State's consideration of the merits of authorising compulsory acquisition: see the third factor in para.16 of Appendix A (para.8 above). Paras. 20 and 21 in the main body of the Circular advise acquiring authorities to: "provide as much information as possible about the resource implications of both acquiring the land and implementing the scheme for which the land is required." Paragraph 20 envisages that there may be cases where the proposed redevelopment of the CPO site will not be financially viable, and will need to be cross-subsidised by "financial contributions" from other bodies, including the private sector. Para.21 advises acquiring authorities that, in order to secure the Secretary of State's authorisation of a s.226(1)(a) CPO, they will have to demonstrate that the implementation of the redevelopment scheme on the CPO site is unlikely to be blocked by "potential financial impediments". The promotion or improvement of economic well-being is one of the "well-being" benefits under subsection 226(1A). Against this legislative and policy background it would be surprising if the potential financial implications of redeveloping the CPO site, including the possibility of cross-subsidy as a result of facilitating its redevelopment, were immaterial for the purposes of any consideration of the extent to which the carrying out of the redevelopment would be likely to contribute to wider, "well-being" benefits. The possibility of one development cross-subsidising another, highly desirable development is capable of being a material consideration in the determination of a planning application under s.70(2) of the 1990 Act: see R v Westminster City Council exp. Monahan [1990] I QB 87. In Monahan, which was cited with approval in the Plymouth case, it was proposed that an office development, which was a major departure from the development plan should be permitted because it would cross-subsidise the refurbishment of the listed Royal Opera House. The site on which the offices were proposed was physically separate from the site of the Royal Opera House, but both of the sites were included in the same application. The respondent planning authority granted permission. It was submitted on behalf of objectors to the grant of permission that the cross-subsidy was an immaterial consideration because the two sites were not otherwise related. If cross-subsidy was to be regarded as a material consideration, hypothetical examples were given of the prospect of financial contributions being used to justify the grant of permission for undesirable office blocks elsewhere in London, some distance from the Royal Opera House. Nicholls L.J. was not persuaded by this reductio ad absurdum argument: "Circumstances vary so widely that it may be unsatisfactory and unwise to attempt to state a formula which is intended to provide a definitive answer in all types of case. All that need be said to decide this appeal is that the sites of the commercial development, approved in principle, are sufficiently close to the Opera House for it to have been proper for the local planning authority to treat the proposed development of the office sites, in Russell Street and elsewhere, and the proposed improvements to the Opera House as forming part of one composite development project. As such it was open to the planning authority to balance the pros and cons of the various features of the scheme. It was open to the authority to treat the consequence, for the Opera House works, of granting or withholding permission for offices as a material consideration in considering the part of the application which related to offices." (p.121 D-F) Kerr L.J. said that an application for such widely separated sites: "would be unlikely to be properly entertained as a single planning application or as an application for one composite development, as in the present case. I therefore say no more about it save that all such cases would, in my view, involve considerations of fact and degree rather than of principle." (p.117C) Staughton L.J. agreed, saying that: "The building of office premises in close proximity, A, is necessary if development B is to occur. It can fairly and reasonably be said to relate to the proposed development which ought to be permitted. The whole is, to quote the words of Kerr L.J., a composite or related development. The offices are not ulterior or extraneous; they are part of the whole." (p.122F) The fact that the site for the office development and the Royal Opera House site were included in the same planning application was a relevant, but not the determining factor in the Court's decision. The contents of a planning application are for the applicant to decide: he may choose to include two wholly unrelated proposals in the same application. The Court regarded the question whether there was a "composite or related development" as one of fact and degree in each case. See also the judgment of Hoffman L.J. (as he then was) at page 88 of the Plymouth case, in which he referred to the Court's finding in Monahan that there was a nexus between the office development and the improvements to the Royal Opera House on the basis of (1) the financial dependency of the one part of the development on the other and (2) their physical proximity. When considering whether the proposed cross-subsidy from the Interested Party's proposed redevelopment of the RSS to the restoration of the listed buildings on the RHS was, as a matter of fact and degree, a material consideration which the Defendant was entitled to take into account when deciding whether to facilitate the carrying out of the Interested Party's redevelopment scheme, particular regard must be had to (a) the statutory obligation to take wider, off-site "well-being" benefits into account; and (b) the significance of financial viability and economic well-being in the CPO context. Bearing these two factors in mind, the Defendant was legally entitled to have regard to the proposed cross-subsidy under subsection 226(1A). The weight that it attributed to that factor, whether it was "a decisive advantage", or of little consequence, was for the Defendant to decide, subject to the question of Wednesbury reasonableness, which is not in issue in this appeal. That brings me to the third reason why a "read across" from the limitations upon the exercise of the subsection 70(2) power is not appropriate in the context of s.226. In part, the Court's concern in constraining the apparent breadth of the "material considerations" that may be taken into account by local planning authorities under subsection 70(2) has been the: "public interest is not allowing planning permissions to be sold in exchange for benefits which are not planning considerations or do not relate to the proposed development." See per Hoffmann L.J. at p.90 of the Plymouth case. Subject to the Secretary of State's power to "call in" any application for planning permission for determination by him, local planning authorities are free to grant any planning permission they wish. The concern that they might be improperly influenced to "sell" planning permissions does not apply to CPOs made under s.226. While local authorities may make such orders, they must be confirmed by the Secretary of State: see subsection 226(1). If there is an objection to the CPO from a landowner, such as the Appellant, whose interests would be adversely affected by the proposed compulsory acquisition, the Secretary of State will appoint an independent Inspector to conduct a public inquiry at which witnesses appearing in support of the making of the CPO can be cross-examined by the objector. The Inspector's report and recommendation will be considered by the Secretary of State when he decides whether or not to confirm the CPO. If the Secretary of State concludes, as a matter of fact and degree, that there is no genuine nexus between the proposed redevelopment of the CPO site and an alleged off-site "well-being" benefit, and that what is proposed is, in reality, the sale of the acquiring authority's compulsory acquisition powers to the highest bidder, then he will give that alleged benefit no weight. Thus, the procedures for authorising compulsory acquisition contain sufficient safeguards to prevent "the auction of CPO powers". Elias J. explained why he did not consider that the RHS benefits fell within subsection 226(1A) in para.35 of his judgment: "I accept the submission of Mr Lockhart-Mummery that in order to fall within subsection (1A) in relation to the RSS development, these benefits must flow from the RSS development alone, since that is the site covered by the CPO. The justification for the CPO is that it facilitates that development, not some other development at a different site. I do not accept that the fact that a link between the two developments can be achieved by a section 106 agreement (or some other linking device) entitles the Council to treat what are in reality well-being benefits resulting from the RHS development as if they were generated by the RSS development…." I am in complete agreement with the proposition that, in order to fall within subsection 226(A) the benefits in question must flow from the redevelopment of the CPO site (the RSS). However, for the reasons set out above I do not accept that the cross-subsidy of the redevelopment of the RHS must be excluded from consideration as one of those benefits. The likelihood of the redevelopment of a CPO site leading, whether because of cross-subsidy or for any other reason, to the development or redevelopment of other sites in the authority's area is precisely the kind of wider benefit that subsection (1A) requires the authority to consider. Conclusions For these reasons I would uphold the Order of Elias J. and dismiss the appeal on the basis that the Defendant was entitled to take the RHS benefits into account because they fell within subsection 226(1A). In view of this conclusion it is unnecessary to deal with the alternative submission that the RHS benefits were material considerations under subsection 226(1)(a) in any event. I would merely add that the prohibition in subsection 226(1A) does not purport to cut down the considerations that are capable of being material under subsection 226(1)(a); it merely ensures that wider "well-being" benefits are not ignored, but are always treated as material considerations by requiring acquiring authorities to be satisfied that they are likely to flow from the redevelopment of the CPO site, as a precondition for making the CPO. I would therefore dismiss the appeal. Lord Justice Mummery I agree. Lord Justice Ward I also agree.   Note 1   References in parenthesis are references to the paragraph numbers in the Report.    [Back]

Conclusions OPINION OF ADVOCATE GENERAL KOKOTT delivered on 20 January 2005(1) Case C-467/03 Ikegami Electronics (Europe) GmbH v Oberfinanzdirektion Nürnberg (Reference for a preliminary ruling from the Finanzgericht Munich (Germany)) (Common Customs Tariff – Tariff headings – Classification in the Combined Nomenclature of digital recording apparatus developed for video monitoring purposes – Note 5(E) to Chapter 84 of the Combined Nomenclature) I – ntroduction 1. By means of a reference for a preliminary ruling the Finanzgericht München (Finance Court, Munich) has submitted a question to the Court as to how a computer-based video monitoring system should be classified in the Combined Nomenclature (CN). The apparatus at issue stores for video monitoring purposes signals from several video cameras compressed as data on hard disks and which may be reproduced on monitors. 2. The plaintiff in the main proceedings, Ikegami Electronics (Europe) GmbH (hereinafter: ‘Ikegami’), takes the view that the digital recording apparatus should be classified on account of the data-processing characteristics of its components and of its mode of operation as an ‘automatic data-processing machine’ under CN subheading 8471 50 90. The defendant in the main proceedings, the Oberfinanzdirektion Nürnberg (Principal Revenue Office, Nuremberg), on the other hand, takes the view that according to Note 5(E) to Chapter 84 of the CN account must be taken of the function of the machine as a whole and that therefore the apparatus should be classified as ‘video recording or reproducing apparatus’ under CN subheading 8521 90 00. 3. The Finanzgericht Munich, uncertain as to the correct interpretation of Note 5(E) to Chapter 84 of the CN, wishes to know from the Court whether that note is to be interpreted as meaning that video monitoring apparatus which stores signals from several video cameras compressed on hard disks for reproduction on monitors performs a function other than that of data processing. II – Legal framework 4. The version of the Combined Nomenclature – first provided for in Annex I to Council Regulation (EEC) No 2658/87 of 23 July 1987 on the tariff and statistical nomenclature and on the Common Customs Tariff (2) – in force at the time the events at issue in the main proceedings occurred is provided for in Annex I to Commission Regulation (EC) No 2031/2001 of 6 August 2001. (3) 5. The second part of that Annex includes a Section XVI entitled: ‘Machinery and mechanical appliances; electrical equipment; parts thereof; sound recorders and reproducers, television image and sound recorders and reproducers, and parts and accessories of such articles.’ 6. That section contains two chapters, Chapter 84 entitled: ‘Nuclear reactors, boilers, machinery and mechanical appliances; parts thereof’ and Chapter 85 entitled: ‘Electrical machinery and equipment and parts thereof; sound recorders and reproducers, television image and sound recorders and reproducers, and parts and accessories of such articles.’ 7. Chapter 84 includes heading 8471, ‘Automatic data-processing machines and units thereof; magnetic or optical readers, machines for transcribing data onto data media in coded form and machines for processing such data, not elsewhere specified or included.’ 8. Subheading 8471 50 concerns ‘digital processing units other than those of subheading 8471 41 or 8471 49, whether or not containing in the same housing one or two of the following types of unit: storage units, input units, output units.’ Subheading 8471 50 90 relates to those goods which are not intended for use in civil aircraft. Regulation No 2031/2001 exempts those goods from conventional duties. 9. Chapter 85 includes the heading 8521, ‘Video recording or reproducing apparatus, whether or not incorporating a video tuner.’ Subheading 8521 90 00 relates to those apparatus without magnetic tape. Under Regulation No 2031/2001, the conventional rate of duty on those goods is fixed at 14%. 10. Notes 3 to 5 to Section XVI provide: ‘3. Unless the context otherwise requires, composite machines consisting of two or more machines fitted together to form a whole and other machines designed for the purpose of performing two or more complementary or alternative functions are to be classified as if consisting only of that component or as being that machine which performs the principal function. 4. Where a machine (including a combination of machines) consists of individual components (whether separate or interconnected by piping, by transmission devices, by electric cables or by other devices) intended to contribute together to a clearly defined function covered by one of the headings in Chapter 84 or 85, then the whole falls to be classified in the heading appropriate to that function. 5. For the purposes of these notes, the expression “machine” means any machine, machinery, plant, equipment, apparatus or appliance cited in the headings of Chapter 84 or 85.’ 11. Note 5 to Chapter 84 of the CN provides inter alia the following explanations: ‘(A) For the purposes of heading 8471, the expression ‘automatic data-processing machines’ means: (a) digital machines, capable of (1) storing the processing program or programs and at least the data immediately necessary for the execution of the program; (2) being freely programmed in accordance with the requirements of the user; (3) performing arithmetical computations specified by the user; and (4) executing, without human intervention, a processing program which requires them to modify their execution, by logical decision during the processing run; ... (E) Machines performing a specific function other than data processing and incorporating or working in conjunction with an automatic data-processing machine are to be classified in the headings appropriate to their respective functions or, failing that, in residual headings.’ III – Facts and main proceedings 12. On 6 December 2001 Ikegami applied to the Zolltechnische Prüfungs- und Lehranstalt (Customs Laboratory and Training College) in Munich for a binding tariff information concerning apparatus designated as a ‘Digital Recorder SDR G 8000 8.’ 13. In addition to a keyboard and a built-in glide mouse, the apparatus has a video digitizer board for four video cards with connector ports for up to eight television cameras, image movement control, a main board with a processor and three hard disk slots, a video storage device, sound, LAN, graphics and modem cards, a hard disk, and a CDRW drive in the same housing. The Windows ME operating system, software for the digital recorder, and the software for the CDRW drive are pre-installed on the hard disk. 14. Whereas Ikegami requested that the apparatus be classified as an ‘automatic data-processing machine’ under CN subheading 8471 50 90, by Binding Customs Tariff Information No DE M/119/02-1 of 14 January 2002 the Zolltechnische Prüfungs- und Lehranstalt in Munich classified it as ‘video recording or reproducing apparatus’ under CN subheading 8521 90 00. 15. Following an unsuccessful challenge to the classification Ikegami brought an action before the Finanzgericht München contesting the binding customs tariff information. In that action it argued that the apparatus in question must be regarded as a data-processing machine on account of its individual components and its mode of operation, both of which are exclusively concerned with data processing. Taken individually, all the components of the apparatus must be classified under CN heading 8471 and not a single one under CN heading 8521, and in addition to the pre-installed functional user software it is possible at any time to install other user programs so that the apparatus can be used in the same way as a completely ordinary PC. Furthermore, for Note 5(E) to Chapter 84 of the CN to be applicable at least two functions must be present, that is to say a data-processing one and one other; such a characteristic is lacking in the present case, however, since the apparatus is only for data processing. 16. The Oberfinanzdirektion Nürnberg applied for the action to be dismissed. It argued that having regard to Note 5(E) to Chapter 84 of the CN, a machine which operates with the aid of a computer should not be classified according to the function of the individual components, but according to the actual function of the machine as a whole. On account of its special equipment the apparatus in this case possesses the sole function of digital recording and reproduction of images and sound for video monitoring purposes, so that it must be classified under CN heading 8521. 17. In its order seeking a preliminary ruling the Finanzgericht München observes that whilst the apparatus at issue satisfies the requirements of an ‘automatic data-processing machine’ within the meaning of Note 5(A)(a) to Chapter 84 of the CN and can be used as a common ordinary personal computer, it is on account of its special equipment designated, treated and used as a digital video recorder. The data processing serves exclusively the purpose of recording and reproducing video signals and the hardware and software equipment of the apparatus are configured solely for that purpose. In the absence of other software no use other than that as a video recorder is intended. In the view of the Finanzgericht München, therefore, the apparatus has a video recording function as referred to by CN heading 8521 and which, in accordance with the case-law, can constitute a function other than data processing within the meaning of Note 5(E) to Chapter 84. IV – Reference for a preliminary ruling and procedure before the Court 18. By order of 24 June 2003 the Finanzgericht München therefore stayed the proceedings and submitted a reference to the Court for a preliminary ruling on the following question: ‘Is Note 5(E) of the Combined Nomenclature, in the version of Annex I to Regulation (EC) No 2031/2001 amending Annex I to Council Regulation (EEC) No 2658/87 on the tariff and statistical nomenclature and on the Common Customs Tariff (OJ 2001 L 279, p. 1), to be interpreted as meaning that video monitoring apparatus which stores signals from several video cameras compressed on hard disks for reproduction on monitors performs a function other than that of data processing?’ 19. The reference for a preliminary ruling was lodged at the Court Registry on 6 November 2003. Under Article 23(2) of the Statute of the Court, Ikegami and the Commission of the European Communities submitted written observations. V – Observations of the parties A – Observations of Ikegami 20. Ikegami emphasises that in the present case the Court – unlike in its previous judgments on the matter (4) – does not have to decide on the tariff classification of individual elements of a data-processing machine but on that of a complete personal computer equipped with several additional components. 21. According to the Court’s case-law (5) the decisive criteria for tariff classification of apparatus are its objective characteristics and properties as set out in the terms of the headings of the CN and the Common Customs Tariff and in the provisions concerning their sections and chapters, but under no circumstances variable characteristics. In any event, in Ikegami’s view, the possible uses for an apparatus cannot be decisive when classifying it for tariff purposes since, contrary to case-law and to the requirement of legal certainty, that would permit purely subjective criteria to be taken into account. The only objective characteristic referred to by Note 5 to Chapter 84 of the CN is that of data processing and thus that characteristic alone is decisive, as is similarly any function independent of data processing for the purposes of distinguishing that characteristic from the former. Such a function ‘other than’ data processing must be a different technical process such as may be found, for example, in a welding machine which is merely computer controlled, not however in a machine which performs nothing other than data processing. 22. Since no single element of the apparatus in question is capable of performing its data-processing function without a data-processing machine so as to be classified individually in accordance with Note 5(E) to Chapter 84 of the CN on the basis of its own functions, it must be considered in those circumstances whether the entirety constituted by those elements performs a function additional to that of data processing. According to Ikegami, however, that is not the case: whilst the combination of the elements permits more technically complex functions, even those more complex functions do not go beyond that of data processing and neither through its individual components nor as a whole can the apparatus perform functions other than that of data processing. 23. Having regard to paragraphs 83.0 and 83.5 of the Explanatory Notes to the Harmonised System (HS) concerning Note 4 to Section XVI in the version in force when compiling its observations, Ikegami argues that the apparatus in question has no such other function and that it should be separately classified for tariff purposes even though when it is combined with television cameras it is capable of constituting an element of a monitoring system. In that regard Ikegami indicates that the apparatus in question does not permit the parallel recording of images and sound. 24. For those reasons Ikegami proposes that the Court answer the question referred for a preliminary ruling as follows: ‘Note 5(E) of the Combined Nomenclature in the version of Annex I to Regulation (EC) No 2031/2001 amending Annex I to Council Regulation (EEC) No 2658/87 on the tariff and statistical nomenclature and on the Common Customs Tariff (OJ 2001 L 279, p. 1) is not to be interpreted as meaning that video monitoring apparatus which stores signals from several video cameras compressed on hard disks for reproduction on monitors performs a function other than that of data processing.’ B – Observations of the Commission 25. The Commission refers firstly to the information concerning heading 8521 in the Explanatory Notes to the Harmonised System, third edition (2002), as amended in accordance with the decisions adopted by the Harmonised System Committee at its 32nd session (November 2003). 26. According to Rule 1 of the General rules for the interpretation of the CN (hereinafter: ‘the general rules’) classification is to be determined according to the terms of the headings and any relative section or chapter notes. It thus follows that classification must be determined initially according to the terms of the headings, and then according to the relative section or chapter notes, before the remaining general rules may be taken into account. In so doing, in accordance with Rule 3(a) of the general rules it must be ensured that the heading which provides the most specific description is preferred to headings providing a more general description. 27. In the Commission’s view the decisive characteristic for classification purposes in the present case is the expression ‘function’, which must be understood in a teleological sense and which refers to the purpose or use of an article. Thus in the absence of a definition for an article, its purpose can be treated as one of its objective characteristics. In those circumstances it is of no regard that that ‘other function’ of video recording and reproduction is achieved by means of data processing since in any event that constitutes a separate function which can be achieved without data processing, albeit ‘more laboriously’. Since the very purpose or function of the apparatus in question can be found under CN heading 8521, which is a more specific description of the function or purpose than that available under CN heading 8471, any reference to Note 5(E) to Chapter 84 of the CN is superfluous. 28. According to the Commission, its analysis is supported by the judgment of the Court of First Instance in Sony Computer Entertainment Europe, in which it held that the mere fact that an apparatus fulfils the conditions of Note 5(A) to Chapter 84 and does not perform any specific function other than data processing for the purposes of Note 5(E) to that chapter does not by itself preclude such an apparatus from being classified under another heading. (6) Furthermore, the argument advanced by the plaintiff renders several of the tariff headings in Chapters 85 and 90 redundant, since even at the present time as a result of technical advances the only function performed by most of the apparatus listed in those chapters is that of data processing in the broader sense; thus only certain apparatus based on wholly outdated technology could still be classified under those headings. 29. For those reasons the Commission proposes that the Court answer the question referred for a preliminary ruling as follows: ‘In order to classify an article for tariff purposes, even before the notes to the sections and chapters (including in the present case Note 5(E) to Chapter 84 of the CN) are examined it is necessary to consider at the outset the terms of the headings and the general rules on the interpretation of the Combined Nomenclature. In accordance with both Rule 1 and Rule 3(a) of the General rules on the interpretation of the Combined Nomenclature, classification must be determined according to the terms of the headings, with the heading which provides the most specific description being preferred to headings providing a more general description. Where the function or purpose of an article is contained within the terms of a heading, then that heading is more specific than another heading whose terms provide a more general description of the article or its function. In the light of these conclusions it is for the national court to determine whether the terms of CN heading 8521 provide a more specific description of the article in question than those of heading 8471.’ VI – Legal appraisal 30. In order to classify the apparatus in question within the Combined Nomenclature the national court essentially wishes to know how Note 5(E) to Chapter 84 is to be interpreted. The Commission correctly observes, however, that classification does not depend solely on that note: the terms of the headings and other notes must also be taken into account. I will therefore set out below first the legal test for determining classification and then guidance as to how it is to be applied to the present case. In so doing I will propose an answer to the question referred. A – Legal tests and provisions 31. The Combined Nomenclature is based upon the ‘Harmonised System’ concluded as an international agreement within the framework of the World Customs Organisation. Since the Community is a party to that agreement it is bound by its provisions. Under Article 300(7) EC, international law obligations of the Community enjoy an ‘intermediate status’, that is to say, they take effect subject to primary law, but take precedence over Community secondary law. Community secondary law, including the Combined Nomenclature which is based upon a regulation, must therefore be interpreted in line with the requirements of the Harmonised System. 32. The Harmonised System is a multi-functional nomenclature which is constructed so as to be able to take all internationally traded goods into account. The Combined Nomenclature has adopted the structure of the Harmonised System but contains further subdivisions for Community tariff and statistical purposes. The general rules, sections and their notes, chapters and their notes, headings and the first subheadings up to the sixth digit of the 11-digit code number of the customs tariff are based upon the Harmonised System. (7) Subsequent subdivisions are based solely upon Community secondary law. 33. Rule 1 of the general rules contains the basic rule for performing every classification in the Combined Nomenclature. It provides that classification shall be performed first and foremost according to the terms of the headings and the notes to the sections and chapters. The terms of the headings and the notes carry equal weight for that purpose. The terms of the heading provide as it were the core concept, which is supplemented and clarified by the notes to the sections and chapters. Only to the extent that those provisions do not otherwise so require may in a subsidiary manner the subsequent general rules 2 to 5 be applied. Consequently, before recourse may be had to general rules 2 to 5 it must be determined whether the article in question is described by the terms of a heading or whether a note contains special instructions for its classification. In contrast thereto the titles of sections, chapters and sub-chapters are provided for ease of reference only and may be relied upon only as an aid. The same is true for explanatory notes and classification opinions on the Harmonised System and on the Combined Nomenclature which similarly do not have binding force, but which constitute merely additional sources, albeit often important, in particular when interpreting the terms of headings. 34. Rule 1 relates however only to headings and as such is only applicable to the first four digits of the code number. In respect of further subdivisions arising from subheadings,Rule 6 applies: essentially it provides for a process of classification analogous to that undertaken under the headings. It becomes thereby apparent that the Combined Nomenclature is constructed in a strictly hierarchical manner and that classification must proceed step by step from the general to the particular taking each level in turn, starting with the heading, then the subheading of the Harmonised System and finally the subheading of the Combined Nomenclature. 35. The two relevant criteria for classification of an article are its material composition and its intended use. The intended use of an article is to be determined by recourse to objective criteria. 36. In classifying an article in the Combined Nomenclature the following steps must therefore be taken: (1) the intended use and material composition of the article must be precisely determined; (2) in the light of the wording of the headings of the relevant sections and chapters a provisional classification must be undertaken (a) according to its intended use and (b) according to its material composition; (3) it must then be considered whether on a combined examination of the wording of the headings and the explanatory notes to the relevant sections and chapters a definitive classification may be reached; if that is not possible then (4) in order to resolve the conflict between the competing provisions recourse must be had to Rules 2 to 5 of the general rules (in the present case in particular Rule 3); (5) lastly, classification must be made under (a) a subheading of the Harmonised System and (b) a subheading of the Combined Nomenclature. For the purposes of the question referred the third step is particularly significant. B – Application to the present case 37. In the light of this test and the known facts the national court should examine therefore the following points. 1. Determining the article’s characteristics 38. The apparatus at issue is a combination of individual components which are connected with one another by wires, transmission devices, electrical cables or other devices and which are intended to work together, forming a whole. It consists mainly of standard components for personal computers but in addition it has several components which are specially designed for the processing of video data. 39. Under the standard components for personal computers the following may be mentioned: the main board (Asus CUV4x-E) with a standard processor (Intel Pentium III with a frequency of 866 Megahertz), the standard main memory (128 Megabyte), a hard disk and three hard disk slots, a graphics card (for connecting standard monitors), a sound card, a network card, a modem card, a CDRW drive, a keyboard and a built-in glide mouse. The Windows ME operating system and the software for the CDRW drive are pre-installed on the hard disk, which is a standard feature of personal computers. As the national court concludes, the apparatus at issue thus possesses all the components which permit it to be used as a normal everyday personal computer. 40. The following features can be categorised as distinctive for the processing of video data: the video digitizer board for four video cards with connector ports for up to eight television cameras, the image movement control and the software for the digital recorder. Each of these items also constitutes a component or software for personal computers. 41. As regards the operation of the apparatus, it is indisputable that both the individual components and also the apparatus as a whole perform exclusively data-processing tasks. It is no different as regards the particular processing of video data: the video cards first convert the incoming analogue data from television cameras into digital data and transmit them to the video digitizer board which coordinates the data from the different video cards. The video digitizer board then forwards the coordinated data to the main circuit board which ensures that it is saved in a highly compressed form on the hard disk. From there the data can be displayed on monitors, transferred or processed. The features present do not permit the apparatus, however, simultaneously to record images and sound or to record ‘moving images’, but only to record ‘snapshots’ at a frequency of 2 to 15 images per second. (8) 42. In addition to its use as a stand-alone system the apparatus is designed for use in a network, permitting the installation of hundreds of cameras and allowing up to 32 users simultaneously to view both live and recorded images across the network. In so doing the apparatus may function as a ‘client’, permitting images to be displayed which are stored not within the apparatus itself but elsewhere in the network. Furthermore the apparatus includes the feature of an image movement detector which on detecting movement in an image can increase image quality and recording frequency, can display a warning and can even automatically send warnings to mobile phones and similar apparatus. Finally the image movement control of the apparatus permits the enlargement and reduction of image sections and, where necessary, the panning of the relevant cameras. (9) 43. On account of its special features for recording image data without sound data the apparatus is designed for use as an element within a video monitoring system. Both the objective characteristics of the apparatus and the product description (10) according to which it is marketed support this view. An alternative or additional use is possible at any time: however, in certain cases this requires further software. In addition to storing encoded, compressed video data on hard disks and the display thereof on monitors the apparatus on account of its characteristics directly or easily permits the following to be performed: use of the standard functions of a personal computer equipped with Windows ME, copying of data or its transfer to CDs, sending data across a network and processing and conversion of (image) data into other formats. It is therefore easily possible, for example, at the same time as images are being recorded to keep a log by means of word processing or spreadsheet calculations of persons entering or leaving a building. 44. Thus the primary intended use of the apparatus is as an element of a video monitoring system. It can be used in that function to control the camera system, to make space-saving recordings, to save, forward, display and transfer single image data and to analyse the image data in order to issue warnings and to detect responses thereto; additionally it enables further functions to be utilised for monitoring purposes, such as the keeping of (visitor) logs. As for the material composition of the apparatus it is that of a classical data-processing machine with additional features for processing image data. 2. Wording of the headings (a) Provisional classification according to its intended use 45. If one focuses on the intended use of the apparatus at issue then at first both CN heading 8521 ‘Video recording or reproducing apparatus ...’ and CN heading 8471 ‘Automatic data-processing machines ... machines for transcribing data onto data media in coded form and machines for processing such data ...’ call to be considered since the apparatus is intended firstly for the transcription of images as data onto data media in coded form and in addition permits such data to be processed. 46. However, CN heading 8521 concerns ‘video recording or reproducing’ apparatus and in so far as it can be discerned inter alia from the Explanatory Notes to the Harmonised System (11) and to the Combined Nomenclature (12) this means that an apparatus for recording and reproducing must be capable of recording and reproducing simultaneously images and sound. Furthermore the expression ‘video apparatus’ suggests that it must at least also be possible to record moving images. That would require a recording and reproducing frequency of around 23 to 25 frames per second, as in cinemas is also usually the case (24 frames per second). 47. In the present case the characteristics of the apparatus with its single sound card do not permit the simultaneous recording of sound alongside the images from up to eight video cameras, which tends to preclude its classification as a video recorder under heading 8521. However, according to the facts available, the possibility cannot be excluded that images and sound may at least be simultaneously reproduced, which could permit classification as reproducing apparatus under CN heading 8521. Nevertheless doubts persist as to the aptness of this heading since the apparatus is not in fact intended to be a mere reproduction device but can record, process and reproduce. Those doubts are reinforced by the fact that the maximum image frequency of 15 frames per second, which in addition should only be achieved in exceptional cases, does not permit moving images to be shown. As a consequence we are not concerned with what would be normally described as video recordings but only with the recordings of snapshots. Finally, the functionality of the apparatus is not limited to the recording of images but also it analyses the image data, for example as regards changes in the picture frame, in order to be able to raise an alarm, and it permits the operation of the monitoring system cameras to be controlled. This goes considerably beyond the functions of ‘video recording or reproducing apparatus.’ Having regard to the intended use of the apparatus and its functionality in recording and reproducing images CN heading 8521 should not, however, be excluded from the outset. 48. An intended use which falls within the meaning of CN heading 8471 is nevertheless also possible, since the apparatus is intended to transcribe image data onto data media in coded form and simultaneously permits the further processing of such data. (b) Provisional classification according to its material composition 49. In the light of its components and mode of operation the material composition of the apparatus permits consideration only of CN heading 8471: ‘Automatic data-processing machines ... machines for transcribing data onto data media in coded form and machines for processing such data ...’. 3. Wording of the headings and explanatory notes 50. As regards the two possible CN headings 8471 and 8521, Note 3 to Section XVI and Notes 5(A) and (E) to Chapter 84 of the CN are relevant to the present case. On the other hand Note 4 to Section XVI is not applicable, since whilst the apparatus at issue is a combination of interconnected individual components an unambiguous, clearly defined function which is covered by one of the headings in Chapter 84 or 85 of the CN is not to be discerned from its intended use, which calls for two headings to be considered. 51. Under Note 3 to Section XVI, the apparatus as a composite machine should be classified according to the principal function of the machine as a whole. In this case that would be its use as an element in a video monitoring system for recording and analysing soundless single image data and for controlling the system’s operation. This suggests classification under CN heading 8471. 52. Under Note 5(A) to Chapter 84 of the CN, the apparatus should also be classified under CN heading 8471 since as a digital machine it is capable of storing the processing programs and the data necessary for the execution of the programs, of being freely programmed in accordance with the requirements of the user, of performing arithmetical computations specified by the user, and of executing, without human intervention, a processing program which requires it to modify its execution, by logical decision during the processing run. 53. As the national court correctly observes, a different conclusion could be reached on application of Note 5(E) to Chapter 84 of the CN, however if the apparatus in fact performs a specific function other than data processing and merely incorporates or works in conjunction with an automatic data-processing machine in order to achieve that purpose. 54. Ikegami takes the view that the expression ‘other function’ within the meaning of Note 5(E) to Chapter 84 of the CN must relate to a technical process other than that of data processing, as is the case, for example, in a welding machine which is merely controlled by a computer, but not in the case of a machine which performs nothing but data processing. In contrast, the Commission and the national court take the view that the ‘other function’ can be achieved by means of data processing since in any event it concerns a separate function which can also be achieved without data processing. 55. In line with the Commission’s view and that of the national court it must be assumed that the ‘other function’ in Note 5(E) to Chapter 84 of the CN can also be achieved by means of data processing, as the following arguments demonstrate. There cannot be any doubt that, for example, a classical video recorder of the magnetic-tape type (‘VCR’) operating principally under the VHS system should be classified under CN heading 8521. In more recent times that ageing technology is increasingly being replaced by digital DVD recorders which digitally process images and sound by means of an integrated data-processing machine and store them as data bundles either directly on DVDs or initially on integrated hard disks from which they can then be played back or transferred to DVD. All the functions of such apparatus are configured for the recording and reproducing of image and sound data and the incorporation of a data-processing machine merely permits that to be achieved digitally, as was also previously possible on an analogue basis with a classical video recorder, even if in a poorer quality. The integral data-processing machine is specifically configured for the other purpose of the apparatus and cannot be put to an alternative use. In particular it is not usually possible to programme it freely. Since on that basis alone the requirements of Note 5(A) to Chapter 84 of the CN are not satisfied, the classification of such a DVD recorder under CN heading 8471 despite the ‘innards’ of the apparatus performing exclusively data-processing tasks would be incorrect. The correct heading in that case would be CN heading 8521. (13) 56. The position appears to be different, however, as regards the apparatus at issue in this case. First, having regard to its components it is essentially a personal computer with additional features for video processing, the latter also consisting of data-processing components taken from the field of personal computing. In particular, unlike a standard DVD recorder it satisfies thereby all the requirements of Note 5(A) to Chapter 84 of the CN. Secondly, according to the available information it does not in fact fulfil the classic function of a video recorder, that is, the recording and reproduction of sound and images simultaneously, but is configured specifically for use in a video monitoring system which imposes other requirements. Thirdly, in so far as it can be ascertained, its use is after all not limited to the function of recording and displaying image data, but it additionally analyses that data for monitoring purposes and permits the operation of the monitoring system to be controlled. These are data-processing functions which go beyond the function description under CN heading 8521. 57. In the light of the foregoing the combined examination of the relevant elements suggests classification of the apparatus at issue under CN heading 8471, since it performs principally the function of data processing for monitoring purposes. Nevertheless, it is a matter for the national court to define precisely the functions of the apparatus and to classify it on that basis. 4. General rules 2 to 5 58. In the light of my conclusions above it is not necessary to have recourse to general rules 2 to 5 of the CN. The precise definition of the functions of the apparatus in the light of the wording of the headings and explanatory notes will permit the national court to classify it decisively either under CN heading 8471 or under CN heading 8521. 5. Subheading 59. For subheading classification within the Harmonised System under CN heading 8471 the following subheadings are available: 10 (‘analogue or hybrid automatic data-processing machines’), 30 (‘portable digital automatic data-processing machines, weighing not more than 10 kg, consisting of at least a central processing unit, a keyboard and a display’), 41 (‘other digital automatic data-processing machines comprising in the same housing at least a central processing unit and an input and output unit, whether or not combined’), 49 (‘other digital automatic data-processing machines: other, presented in the form of systems’), 50 (‘digital processing units other than those of subheading 8471 41 or 8471 49, whether or not containing in the same housing one or two of the following types of unit: storage units, input units, output units’), 60 (‘input or output units, whether or not containing storage units in the same housing’), 70 (‘storage units’), 80 (‘other units of automatic data-processing machines’), 90 (‘other’). 60. Subheadings 10, 30, 60 and 70 can be excluded simply on the basis of their wording. In so far as it can be ascertained, subheadings 41 and 49 must also be eliminated since the apparatus is evidently not supplied with an output unit (for example, a monitor) nor as a system, but as an independent item. Subheadings 50, 80 and 90 remain. Since in this case the Explanatory Notes do not provide clarification general rule 6 must be used to justify recourse to general rule 3(a), according to which the most specific subheading should be chosen. In this case, that is subheading 50 since it does not refer in a general manner to all types of ‘automatic data-processing machines’ but specifically relates to ‘digital processing units’, which clearly includes the apparatus in question. 61. For the purposes of classification under a subheading of the Combined Nomenclature the available subheadings would then be 10 (‘for use in civil aircraft’) and 90 (‘other’). In this case subheading 90 would therefore be appropriate. 62. In the light of the foregoing the combined examination of the relevant elements suggests a classification of the apparatus at issue under CN heading 8471 50 90. Nevertheless, it is a matter for the national court to define precisely the functions of the apparatus and to classify it on that basis. VII – Conclusion 63. In the light of the above analysis I propose that the Court answer the question as follows: ‘In order to classify an article in the Combined Nomenclature, first the intended use and material composition of the article to be classified must be precisely determined and then, having regard to those characteristics, to the terms of the relevant headings and to the notes to the corresponding sections and chapters it must where possible be decisively classified. In so doing, Note 5(E) of the Combined Nomenclature in the version of Annex I to Regulation (EC) No 2031/2001 amending Annex I to Council Regulation (EEC) No 2658/87 on the tariff and statistical nomenclature and on the Common Customs Tariff (OJ 2001 L 279, p. 1) is to be interpreted as meaning that the expression ‘a function other than that of data processing’ also includes a function which can be achieved by means of data processing. It is for the national court to determine whether in the light of its characteristics the article to be classified performs the function of data processing or some other function.’ 1 – Original language: German. 2 – OJ 1987 L 256, p. 1. 3 – OJ 2001 L 279, p. 1. 4 – Ikegami refers to Case C-11/93 Siemens Nixdorf [1994] ECR I-1945, Case C-382/95 Techex [1997] ECR I-7363, Case C-339/98 Peacock [2000] ECR I-8947, Case C-463/98 Cabletron [2001] ECR I-3495 and Case C-479/99 CBA Computer [2001] ECR I-4391. 5 – Ikegami refers to Case 36/71 Henck [1972] ECR 187, paragraph 4, Case 145/81 Wünsche [1982] ECR 2493, paragraph 12, Case C-328/97 Glob-Sped [1998] ECR I-8357, paragraph 26 and Case 114/80 Ritter [1981] ECR 895, paragraph 8. 6 – Case T-243/01 Sony Computer Entertainment Europe v Commission [2003] ECR II-0000, paragraph 118. 7 – The first two digits of the 11-digit code indicate the chapter, the third and fourth digit the heading, the fifth and sixth digit the subheading of the Harmonised System, the seventh and eighth digit the subheading of the Combined Nomenclature, the ninth and tenth digit the TARIC code and the eleventh digit the national code. 8 – According to the product description of the apparatus. It is available at http://www.ikegami.com/cb/products/sdrg8000.html (last accessed on 14 December 2004). 9 – See footnote 8. 10 – See footnote 8. 11 – See World Customs Organisation, Harmonized Commodity Description and Coding System — Explanatory Notes, Section XVI, Position 85.21, pp. 1662-1663 (February 2004 version). 12 – See Bundesministerium der Finanzen, Erläuterungen zur Kombinierten Nomenklatur, heading 8521 (version in force as at 17 May 2004). On the other hand no relevant information could be gleaned from: Commission of the European Communities, Explanatory Notes to the Combined Nomenclature of the European Communities, OJ 1998 C 287, p.1 et seq. 13 – See also the relevant classification of the World Customs Organisation, Harmonised Commodity Description and Coding System – Compendium of Classification Opinions, Section XVI, Position 8521.90, p. XVI/20 E (February 2004 version).

FIRST SECTION CASE OF MARINA ALEKSEYEVA v. RUSSIA (Application no. 22490/05) JUDGMENT STRASBOURG 19 December 2013 FINAL 19/03/2014 This judgment has become final under Article 44 § 2 of the Convention. It may be subject to editorial revision. In the case of Marina Alekseyeva v. Russia, ITMarkIntroductionThe European Court of Human Rights (First Section), sitting as a Chamber composed of: Isabelle Berro-Lefèvre, President,Elisabeth Steiner,Khanlar Hajiyev,Mirjana Lazarova Trajkovska,Julia Laffranque,Ksenija Turković,Dmitry Dedov, judges,and André Wampach, Deputy Section Registrar, Having deliberated in private on 26 November 2013, Delivers the following judgment, which was adopted on that date: PROCEDURE 1. The case originated in an application (no. 22490/05) against the Russian Federation lodged with the Court under Article 34 of the Convention for the Protection of Human Rights and Fundamental Freedoms (“the Convention”) by a Russian national, Ms Marina Yuryevna Alekseyeva (“the applicant”), on 31 May 2005. 2. The applicant was represented by Mr A. Yakovenko, a lawyer practising in Moscow. The Russian Government (“the Government”) were represented by their Agent, Mr G. Matyushkin, the Representative of the Russian Federation at the European Court of Human Rights. 3. The applicant alleged that the investigation into her son’s death during his military service had not been effective. 4. On 26 March 2010 the application was communicated to the Government. THE FACTSITMarkFactsComplaintsStart I. THE CIRCUMSTANCES OF THE CASE 5. The applicant was born in 1960 and lives in Norilsk. A. Death of the applicant’s son 6. On 1 August 2002 the applicant’s son, Georgiy Alekseyev, became a student at the Irkutsk Military College of Aviation Engineering (Иркутский военный авиационный инженерный институт – “the College”). Studies formed part of his military service, and the applicant’s son served as a private. 7. On 1 March 2004 the applicant’s son was on duty for twenty-four hours at the checkpoint to the training aerodrome’s parking lot. He was provided with a bayonet while on duty. Upon Private Alekseyev reporting for sentry duty Captain L., who was on duty at the aerodrome, reprimanded him for his untidy appearance and ordered him to rectify this. Captain I., Private Alekseyev’s hierarchical superior, who was present when the sentries reported for duty, warned him that he would be subjected to disciplinary measures for being unprepared for duty. 8. On 2 March 2004 at 7 a.m., in the course of the twenty-four-hour duty shift, Private Alekseyev let a stranger who had no permission to enter into the aerodrome’s parking lot. Then he let this man freely leave the parking lot in a Toyota Camry car. At the same time, the officer on duty at the aerodrome noticed that a fastener used to attach a glass cover was missing from a lamp, whereas it had been there the day before. He then ordered Private Alekseyev to provide a written explanation concerning the breach of the parking lot’s access control policy and to either find the missing fastener or reimburse its value, as without the fastener it was impossible to use the lamp. 9. At around 11 a.m. on 2 March 2004 Captains L. and Sh. heard a noise coming from the day room of the aerodrome checkpoint. Upon entering the room they found Private Alekseyev lying on the floor, unconscious and with a knife wound to his chest. The bayonet given to him the day before was near him with traces of blood on it. Private Alekseyev was taken to a military hospital where he was pronounced dead. 10. In the day room a note written by Private Alekseyev was also found. The note read as follows: “I have ended my life because I had too many problems today. (1) I owe $30,000 for the Toyota Camry. (2) [I owe] 900 roubles for the shitty ring from the lamp that the officer on duty has [another one of] anyway and (3) [Captain I.] promised to beat the shit out of me after my duty [was over]. I can’t live this way. Mother, father, sister, forgive me please. 2 March 2004, 11 a.m. Alekseyev” B. Criminal investigation 11. On 2 March 2004 the Irkutsk Garrison Military Prosecutor’s Office (“the Garrison Prosecutor’s Office”) instituted a criminal investigation into the death of the applicant’s son under Article 110 of the Russian Criminal Code (incitement to suicide). The case file was given number 11/23/0012-04. 12. On the same date the investigating authorities conducted an inspection of the scene of the events, including the checkpoint and the day room; seized certain objects, including the bayonet, the note found near Private Alekseyev’s body, his clothes and personal property; and ordered a forensic examination of his body. 13. Later on the same date the investigating authorities questioned Captain L. According to his statement, on 1 March 2004 he was on duty at the training aerodrome together with four second year students: Privates Alekseyev, Kol., G. and Kob. Upon their reporting for sentry duty he reprimanded Privates Alekseyev and Kob. for their untidy appearance, as their collars were dirty, and ordered them to rectify this. They left and returned shortly afterwards with clean collars. The aerodrome has a parking lot for the officers’ private vehicles. The parking lot is only accessible through the aerodrome gates until 10 p.m. and by vehicles indicated in a list approved by the commander of the aerodrome. At night the gates are closed and there is no access to the parking lot. If a car trying to enter the parking lot is not on the list, the sentry on duty must report this to Captain L., who must request permission from the commander to let the vehicle in. At around 7 a.m. on 2 March 2004 Private Alekseyev, having learned that someone wanted to enter the aerodrome, went to the gates. Once there he let in a man and a woman who had no passes. At the time, Captain L. was having breakfast at the checkpoint. At around 8 a.m. Lieutenant Colonel Zh., the deputy head of the College, called him and asked why strangers had entered the aerodrome grounds and taken away a car. He also asked why the access control policy had not been complied with. Twenty or thirty minutes later Major P., Captain Sh. and Private Alekseyev arrived at the checkpoint. Captain L. and Major P. reprimanded Private Alekseyev for having let strangers, who had taken a car, into the aerodrome without having checked their passes. They spoke to him calmly as, in any event, Captain L. knew that the car in question had been parked there on Lieutenant Colonel Zh.’s request and that it had not been stolen. Captain L. ordered Private Alekseyev to provide a written explanation by the end of the day. Private Alekseyev did not seem to be particularly upset. Captain L. later noticed that a fastener was missing from a lamp that the sentries had been provided with for night duty and ordered Privates Alekseyev and G. to search for it. At around 10:30 a.m. Private Alekseyev returned to the checkpoint. Captain L. asked him whether they had found the fastener. He answered “no”, and took a registration journal to the aerodrome so that the officers on duty could sign it in accordance with standard procedure. At 10:50 a.m. he returned to the checkpoint. Captain L. asked him whether the registration journal had been signed, which was confirmed by Private Alekseyev. Captain L. did not notice that Private Alekseyev was particularly upset about something. Afterwards Private Alekseyev had to take up duties at a control panel. However, later on Captains L. and Sh., who were in the same room, heard noise coming from the adjacent day room. It sounded as if something had fallen on the floor. Captain L. went to see what had happened and saw Private Alekseyev lying on the floor of the day room with a knife covered with blood near his head. He was still breathing but could not answer Captain L.’s questions. Captain L. then shouted to Captain Sh. to come over and call an ambulance. Captain Sh. entered, saw what had happened and rushed to get his car. At the same time Captain L. reported what had happened to Major P. and Lieutenant Colonel Zh. and they instructed him to take Private Alekseyev to the hospital immediately. Several officers took him from the room and placed him in a minivan. He was breathing and moaning but could not explain anything. Captain L. could not understand why Private Alekseyev had done what he had, as during his duty shift he had neither threatened nor otherwise pressured him. 14. Private Kob. was questioned that same day (2 March 2004). According to him, Private Alekseyev was a sociable person and had not been having any problems with his studies. On 1 March 2004 when they reported for sentry duty Captain L. reprimanded him and Private Alekseyev for the untidy appearance of their collars and sent them away to attach new ones. As they only had ten minutes to do it they had to be quick, and so they did not talk to each other much. When they returned, Captain I. said that they would be in big trouble after the duty shift was over for breaching the uniform rules. However, Private Kob. was not too upset about it, and Private Alekseyev did not appear to be upset either. During the night shift Private Alekseyev and Private Kob. kept replacing each other. Around 8 a.m. Private Kob., who was in the day room, heard Captain L. shouting at Private Alekseyev in the adjacent room because he had let a car leave the parking lot, which he should not have done. Captain L. said, in particular, that it was an expensive car and that if it had been stolen this would be considered Private Alekseyev’s fault. Later on at around 9:30 a.m. he heard Captain L. berating Private Alekseyev for having lost a fastener from a lamp. Privates Alekseyev and G. left to search for the fastener, and Captain L. came in and ordered Private Kob. to clean the grounds. While he was clearing away snow, Private Alekseyev came over and told him to put the garbage in the garbage truck and he left to do that. While he was loading the garbage together with three other servicemen, an officer came and said that Private Alekseyev had committed suicide. 15. Private Kol., questioned on the same date, submitted that he could not provide any information concerning the death of Private Alekseyev. He stated that Private Alekseyev had not been subjected to harassment. 16. Private G. was also questioned on 2 March 2004. According to him, he was friends with Private Alekseyev. Private Alekseyev was a friendly person, he had no issues with either his studies or money and was not taking drugs. Upon reporting for sentry duty on 1 March 2004 Captain L. ordered Privates Alekseyev and Kob. to change their collars but did so in a respectful manner. At around 9:40 a.m. on 2 March 2004 Captain L. told Private G. that Private Alekseyev had let a car leave the parking lot without having established the identity of the driver and also that they had lost a fastener from a lamp. He said that if they did not find it they would have to pay for the fastener and ordered Privates G. and Alekseyev to search for it. Private Alekseyev seemed upset and told Private G. that he had let a car leave the parking lot even though it had not been driven by its owner and that he would be liable for it. According to Private G., Private Alekseyev seemed to believe that he would have to pay for the car if it appeared that it had been stolen. They returned to the checkpoint without having found the fastener. A couple of officers there told them that if the car had been stolen everyone who had been on duty would have to pay for it, and they would have to pay for the fastener too. Sometime later Private Alekseyev picked up a registration journal from the checkpoint and told Private G. that he had suffered too many misfortunes in one day. At around 11:20 a.m. Private G. again went to the checkpoint where he saw about five people and Private Alekseyev lying on the floor of the day room. Private G. helped to put him in the minivan. 17. On the same date Lieutenant Colonel Zh. was questioned. According to him, around 20 February 2004 a relative of his, Mr X., came to visit him. X. asked whether it would be possible to leave his car with him as he was going to another town for a few days. Lieutenant Colonel Zh. offered to let X. use his parking place, having obtained the consent of the commander of the aerodrome. Ever since the day he had parked his relative’s car at the aerodrome’s parking lot he had continued to inform all the officers on duty that the parking of this vehicle there had been agreed with the commander. Between 6:30 and 7 a.m. on 2 March 2004 X. and his wife arrived at Lieutenant Colonel Zh.’s home. He offered them to go and collect their car, but X. said that he had already picked it up. Lieutenant Colonel Zh. was very surprised and, after X. had left, called Captain L. and asked how a stranger could have picked up a car from the parking lot without having provided a pass. He did not ask for any specific checks to be conducted in this respect, but explained that he felt embarrassed as he had told X. that they had a very strict access control policy at the parking lot, but, as it happened, X. had tested it and proved that it was lacking. 18. Also on 2 March 2004 the investigating authorities questioned Major P., deputy commander of the aerodrome. According to his statement, at 8 a.m. on 2 March 2004 he had reported for duty at the checkpoint. The officer on duty reported that during the night shift there had been no incidents, apart from a reprimand from Lieutenant Colonel Zh. concerning the breach of the access control policy in respect of the parking lot. It appeared that a stranger had been let into the parking lot and had later left in a car. Private Alekseyev, who had been on duty that night, failed to give a comprehensible explanation of how this could have happened and was ordered to provide a written explanation of the incident by the end of the day. Officers talked to Private Alekseyev in a respectful manner, nobody raised his voice. At around 11 a.m. Captain L. called him and said that Private Alekseyev had committed suicide. Major P. rushed to the checkpoint, where he saw Private Alekseyev lying on the floor in the day room with a bayonet near his head. Major P. helped to take him to the hospital. 19. On the same date Captain Sh. was questioned. His statement was consistent with that of Captain L. 20. Again on 2 March 2004 the investigating authorities questioned Officer B., who had taken Private Alekseyev’s body and his clothes from the hospital. He could not provide any information regarding the incident. According to him, Private Alekseyev was calm, sociable and had a lot of friends among the students, who treated him with respect. He neither took drugs nor abused alcohol. 21. On 3 March 2004 Captain I. was questioned. He was a physical training instructor and knew Private Alekseyev as his student. Private Alekseyev had satisfactory grades and seemed to be sociable. Upon reporting for sentry duty on 1 March 2004 Privates Alekseyev and Kob. were sent to change their collars. When they came back, Lieutenant Colonel B. asked whose students they were and said to “sort it out”. Captain I. answered that they were his students and that they would do so after the duty shift. He did not speak to either Private Alekseyev or Private Kob. personally. 22. On the same date Captains L. and Sh. and Major P. were questioned again. They confirmed their earlier statements and gave further details concerning the position of Private Alekseyev’s body when they saw him lying on the floor. 23. The applicant was also questioned on 3 March 2004. According to her, Private Alekseyev used to say that he was enjoying his studies but found military discipline rather tough. However, he never complained – either in this respect or in respect of his superiors. On the contrary, he said they were helping him. According to Private Alekseyev, he had never been subjected to harassment of any kind at the College. In the applicant’s view, her son was incapable of committing suicide. 24. On the same date Private Alekseyev’s father was questioned. As far as he could tell, Private Alekseyev had not been having any problems with his studies at the College and quite enjoyed them. 25. Between 3 and 30 March 2004 a forensic examination of Private Alekseyev’s body was conducted by experts B., G. and A.. According to the results of the examination, his death was caused by one sharp stab wound to the left side of the chest, penetrating into the left pleural cavity causing a perforating wound of the right ventricle of the heart and a penetrating wound of the superior vena cava, followed by massive blood loss. 26. Between 3 and 31 March 2004 a forensic biological expert examination of Private Alekseyev’s body and the bayonet was conducted by expert T. The blood on the bayonet was confirmed to be that of Private Alekseyev. 27. Between 4 and 5 March 2004 a fingerprint identification test was carried out, which established that the bayonet had no fingerprints on it. 28. On 5 March 2004 a number of items were seized for a handwriting examination. 29. On the same date expert B. conducted an inspection of Private Alekseyev’s clothes and personal effects. 30. Between 9 and 11 March 2004 Privates D., P., K-r, M-n, S-n, A-v, N., K-z, K-v, B-v, M., G-v, K-n, P-v, G-a, Sh-t, S., G-o and S-v, second-year students at the College, were questioned. As they had not been on duty on the relevant dates they could not provide any specific information concerning the incident. According to them, Private Alekseyev did not have any particular problems; his parents regularly sent him money; he neither took drugs nor abused alcohol; he never expressed suicidal thoughts; he neither had conflicts at the College nor was subjected to harassment; and it was hard to imagine that someone could wish him dead. Some of them added that in some cases for a breach of the uniform rules privates could be subjected to a penalty. However, there had been no incidents of harassment at the College. 31. On 10 March 2004 X., the owner of the Toyota Camry, was questioned. He stated that he lived in Ulan-Ude and on 19 February 2004 he had gone to Irkutsk in his car together with his wife. Upon arriving in Irkutsk he contacted his relative, Lieutenant Colonel Zh., and asked him where he could leave the car for eleven days, as he was leaving to go on holiday with his wife. At 9 p.m. on 19 February 2004 they went to the training aerodrome parking lot with Lieutenant Colonel Zh. and parked the car there. Upon returning from holiday, X. and his wife went to the parking lot at 7.15 a.m. on 2 March 2004. The private at the checkpoint asked them why they were there. X. replied that they had come to collect his car from the parking lot, and they were let in. They were not asked to present any documents and went straight to the car. The car was not damaged. X. started the engine and let it run for about twenty-five minutes so as to “warm up” the car as it was -25 centigrade outside. Then he drove the car out of the parking lot through the open gates. Afterwards X. stopped off at Lieutenant Colonel Zh.’s home, left a few books there and drove to Ulan-Ude. 32. On the same date the headmaster of the school that Private Alekseyev had attended provided the investigator, upon the latter’s request, with a reference concerning Private Alekseyev. According to the reference, at school he had been very communicative and had never had a psychological breakdown. 33. On 11 March 2004 the Norilsk Neuropsychology Clinic informed the investigator, upon the latter’s request, that Private Alekseyev had not been under the supervision of either a psychiatrist or an addiction specialist (narcologist). 34. On 12 March 2004 S-a, Private Alekseyev’s aunt who lived in Irkutsk, was questioned. She stated that she had regularly talked to Private Alekseyev. He had never expressed suicidal thoughts and she did not know whether he had been subjected to any form of pressure at the College. She did not know whether he had had any serious problems either. 35. On 15 March 2004 several schoolteachers and a former classmate of Private Alekseyev were questioned. According to them, at school he had had good relations with his teachers and classmates and had not tended to act rashly. 36. From 21 March 2004 onwards the applicant repeatedly asked the investigating authorities to grant her and her husband victim status, to carry out a variety of expert examinations and other investigative measures with a view to establishing the circumstances of her son’s death, to inform her of the course of the investigation and to provide her with copies of documents from the case file. 37. By a decision of 25 March 2004 the investigator in charge refused to grant victim status to the applicant and her husband and to provide her with copies of the requested documents from the case file. The decision stated that the investigation had not yet established whether the applicant’s son had committed suicide or whether a crime had taken place and that it had not therefore been established whether the applicant and her husband had suffered any pecuniary or non-pecuniary damage. In addition, in her capacity as a witness in the case the applicant had no right to be provided with copies of documents from the case file. 38. On 3 April 2004 the investigator in charge partly granted the applicant’s request that a number of expert examinations and investigative measures be carried out. 39. On the same date the investigator in charge, relying on the same reasons as those stated in his decision of 25 March 2004, refused another request from the applicant for her and her husband to be granted victim status in the case. The applicant’s request to be provided with her son’s suicide note and copies of documents from the case file and to be issued with a detailed report on the steps taken during the investigation were refused with reference to the absence of any obligation on the investigator in charge to provide such information to third parties. 40. On 6 April 2004 the Garrison Prosecutor’s Office forwarded the investigator’s decisions of 25 March and 3 April 2004 to the applicant. 41. On 5, 13 and 23 April 2004 the Main Military Prosecutor’s Office forwarded the applicant’s complaints about the investigator’s actions to the Military Prosecutor’s Office for the Siberian Military Circuit (“the Circuit Military Prosecutor’s Office”) for examination, which in turn sent them to the Garrison Prosecutor’s Office on 15 and 27 April 2004. 42. On 13 April 2004 Captains L. and Sh. underwent a polygraph test. According to the investigator’s findings, they were not involved in Private Alekseyev’s death. 43. On 14 April 2004 the investigative authorities took blood tests from Captains L. and Sh. and also seized their uniforms. On 15 April 2004 they conducted an inspection of the uniforms. 44. On the same date M., the College’s flight instructor, was questioned. He submitted that during the morning on 2 March 2004 he had entered the checkpoint. Captains L. and Sh. and a private whom he did not know personally had been present at the checkpoint. Captain L. had then ordered the private to search for a ring from a lamp and the private had left. M. had later learned what had happened to Private Alekseyev. 45. Between 15 and 26 April 2004 a handwriting examination of Private Alekseyev’s suicide note was conducted. The expert determined that the note had been written by Private Alekseyev. 46. On 15 April 2004 B-y and A-v, instructors at the College, were questioned. They were not direct witnesses to the events of 2 March 2004. 47. On 19 April 2004 Private Alekseyev’s clothes that he had been wearing on 2 March 2004 and his personal effects were inspected. 48. On 20 April 2004 B-v, an instructor at the College, and M-y, an aircraft mechanic, were questioned. They were not direct witnesses to the events of 2 March 2004. 49. On the same date the investigator ordered that a posthumous psychological/psychiatric examination of Private Alekseyev be conducted on the basis of the case materials. 50. On 26 April 2004 the examination was conducted. According to the conclusions of the six professionals involved, Private Alekseyev had not been suffering from any chronic disorder, and had been able to understand the meaning of his actions and control them. His suicidal intent had suddenly appeared at some point during the morning on 2 March 2004 as a result of the tension and anxiety he had felt following that morning’s events. At the time he committed suicide Private Alekseyev had been in a state of psychological distress which had lowered his ability to control himself. 51. Between 21 and 27 April 2004 a forensic examination of Private Alekseyev’s clothes and personal belongings, as well as of the clothes of Captains L. and Sh., was conducted. 52. Between 22 and 28 April 2004 Officer D., an instructor at the College, Major L-n. and Captain V-n., who were responsible for different activities at the aerodrome, were questioned. They were not direct witnesses to the events of 2 March 2004. 53. On 30 April 2004 Privates G-a and G-v were again questioned. They provided certain additional details. 54. On the same date Colonel Kh., deputy head of military training, was questioned. He stated that after Private Alekseyev’s death he had talked to a number of students trying to establish what might have pushed him towards suicide. However, he had failed to identify any reasons for the suicide. He had also told the students to only tell the truth to the investigative authorities, but he had never threatened them. 55. Also on 30 April 2004 Captain L. was questioned again. He stated that traces of Private Alekseyev’s blood had been found on his coat because on 2 March 2004 he had helped to get Private Alekseyev out of the checkpoint and transport him to the military hospital. 56. Lieutenant Colonel Zh., questioned again on 30 April 2004, provided certain additional details. 57. On the same date B., who had conducted the forensic expert examination of Private Alekseyev’s body on 30 March 2004, was questioned. He made a number of comments concerning the examination. He also noted that no fingerprints had been found on the bayonet because the surface of its blade and shaft had been rugged, and thus contact with a person’s skin would not leave an imprint. Therefore, even though the bayonet might have fingerprints on it, it was not possible to detect them. 58. On the same date Surgeon G. from the military hospital was questioned. He provided details concerning Private Alekseyev’s condition when he was brought to the hospital. 59. On 30 April 2004 the Garrison Prosecutor’s Office discontinued the criminal proceedings, referring to the absence of any evidence of a crime in the incident. The applicant was informed of this in a letter of the same date. It does not appear that the applicant was provided with a copy of the decision. 60. By letters of 18 and 26 May 2004 the Circuit Military Prosecutor’s Office informed the applicant that the criminal proceedings in connection with her son’s death had been instituted on 2 March 2004 and discontinued on 30 April 2004 owing to the absence of any evidence of a crime in the incident. The letters stated that the investigation had been carried out fully and objectively by the office’s most experienced investigator, who had checked all possible reasons behind her son’s death but obtained no evidence that her son had been killed or incited to commit suicide by College personnel. One of the letters added that the evidence obtained during the investigation, including a report of a comprehensive psychological and psychiatric expert examination, had proven that the suicide of the applicant’s son could be explained by his psychological characteristics and unfavourable life circumstances – problems in his military service. The letters also stated that the investigation had been discontinued and that the applicant could therefore gain access to the case file. 61. Between 31 May and 3 June 2004 the applicant and her lawyer studied the materials of the investigation. 62. In a written request of 2 June 2004 the applicant asked the Garrison Prosecutor’s Office to set aside the decision of 30 April 2004, to grant her victim status in the case and to carry out a number of investigative measures. 63. On 3 June 2004 the applicant complained in writing to the Circuit Military Prosecutor’s Office about the decision of 30 April 2004 and alleged flaws in the investigation, asking it to resume the criminal proceedings and to carry out the investigation fully and thoroughly. 64. On 13 August 2004 the Circuit Military Prosecutor’s Office quashed the decision of 30 April 2004. It was pointed out that a number of investigative measures relevant for establishing the circumstances of the incident had not been carried out. In particular, the applicant had not been granted victim status. In addition, the decision of 13 August 2004 mentioned a number of discrepancies in reports concerning the examination of the applicant’s son’s body, as well as in other expert reports and witness statements, those discrepancies not having been resolved during the investigation. Moreover, a number of relevant witnesses, including a number of College officers and medical personnel from the hospital to which the applicant’s son had been admitted, had not been questioned. It was therefore ordered that the investigation be reopened. 65. It appears that at some point the applicant was notified of the decision of 13 August 2004, but was not provided with a copy. 66. On 11 September 2004 the applicant asked the investigator in charge to provide her with a copy of the decision of 13 August 2004. 67. By the investigator’s decision of 11 October 2004 the applicant was granted victim status in the case. 68. On the same date the investigator in charge refused her request of 11 September 2004, stating that the document in question did not belong to the list of documents which a victim of a crime was entitled to receive. The decision also stated that the applicant would be able to gain access to the case file upon completion of the preliminary investigation. 69. On 12 October 2004 B. was questioned again. He confirmed the findings of the forensic examination conducted between 3 and 30 March 2004. He also explained that after having inflicted the wound Private Alekseyev had remained conscious for a short period of time, during which he had been capable of performing certain actions. This did not rule out that he could have removed the bayonet from the wound himself, as it would have required a far lesser effort than to thrust it in. 70. Expert Sh. was also questioned on 12 October 2004. She confirmed the findings of the biological forensic examination conducted between 3 and 31 March 2004. 71. On 13 October 2004 expert G. was questioned. He confirmed the findings of the forensic examination conducted between 3 and 30 March 2004. 72. On the same date Major P., deputy commander of the aerodrome, was questioned again. In addition to confirming his earlier statement he provided further details concerning the operation of the parking lot on the aerodrome grounds. In particular, he explained that the servicemen on duty were not financially liable for the vehicles parked there. They were, however, responsible for ensuring compliance with the access control policy. He also confirmed that for several days a Toyota Camry had been parked in Lieutenant Colonel Zh.’s parking place at the aerodrome’s parking lot as per his instructions. After having been parked there the car was not removed until 2 March 2004. 73. Captain Sh. was also questioned again on 13 October 2004. In addition to confirming his earlier statement he provided additional details concerning Private Alekseyev’s transportation to the hospital. 74. Captain L., questioned again on the same date, emphasised that although he had reprimanded Private Alekseyev for the breach of the parking lot’s access control policy and the loss of the fastener for the lamp, he had never told Private Alekseyev that he would have to pay for the car. He also provided some additional details concerning Private Alekseyev’s transportation to the hospital. 75. At some point in October 2004 (the date is unreadable) Warrant Officer P., an aircraft mechanic, was questioned. According to him, on 2 March 2004 he was passing by the aerodrome’s checkpoint when Captain Sh. told him to come in. He then saw a student lying on the floor in the day room. His description of the position of Private Alekseyev’s body and his subsequent transportation to the hospital was consistent with that of the other officers. 76. On 14 October 2004 Lieutenant Colonel Zh. was questioned once again. He confirmed his earlier statement and added that he did not know Private Alekseyev personally and had never subjected him to either physical or psychological pressure. He also explained that servicemen on duty were not financially liable for cars parked at the aerodrome’s parking lot. However, they were responsible for ensuring the access control policy was adhered to and were not to let unauthorised persons enter the aerodrome grounds. In the event that an unauthorised person wanted to enter the grounds, the serviceman on duty was to make a report to his superior and wait for instructions. 77. On 14 and 15 October 2004 Privates S-v, Kob., Kol. and G. were questioned again. Private S-v provided additional details concerning the procedure by which servicemen on duty are issued with a bayonet. Private Kob. confirmed his earlier statement and stated that, although Captain L. had been talking to Private Alekseyev in a raised voice on 2 March 2004 having adopted a commanding tone of voice, he had not insulted him. Captain L.’s tone had been appropriate, as he had been reprimanding Private Alekseyev, and nothing improper had been said. Captain L. had not ordered him to pay for the car either. Private Kob. had not heard any other officers talking to Private Alekseyev on that date. Private Kol. confirmed his earlier statement and provided additional details concerning Private Alekseyev’s transportation to the hospital. Private G. confirmed his earlier statement and provided additional details. He stated, in particular, that on the morning of 3 March 2004 he and Privates Kob. and Kol. had been called to the office of Colonel Kh., deputy head of military training. Kh. Had asked them about what had happened. During their meeting Lieutenant Colonel Zh. had entered and informed them about the Toyota. Colonel Kh. had then ordered the privates not to speak about the Toyota to Private Alekseyev’s parents, as the car had had nothing to do with what had happened. However, later that day they had met with Private Alekseyev’s parents and had told them everything they knew about what had taken place, including the episode concerning the car. 78. On 14 and 23 October 2004 the investigator in charge took three decisions refusing in part repeated requests by the applicant dated 2 June, 11 September and 13 October 2004 respectively, in which she had requested that a number of investigative measures be carried out. The decision stated that some of the steps requested by the applicant would be performed during the investigation, whereas others had already been taken before and there was no need to carry them out once again. The applicant was notified of those decisions by letters of 14 and 25 October 2004. 79. On 16 October 2004 Colonel Kh. was questioned again. He confirmed that on 3 March 2004 he had called Privates Kob., Kol. and G. to his office and had asked them about the events surrounding the suicide of Private Alekseyev. He had also told them not to discuss their thoughts about what might have happened with Private Alekseyev’s parents until all the facts had been established. 80. On 18 October 2004 additional inspection of the scene of events was carried out. 81. On 19 October 2004 additional investigative operations were carried out at the training aerodrome grounds. 82. On the same date S., the head of the emergency department at the hospital, was questioned. She provided further details concerning the admittance of Private Alekseyev to the hospital on 2 March 2004. 83. Between 19 and 21 October 2004 five instructors from the College, G-v, Kh., Sh-r, B-y and A-v, were questioned. They did not provide any additional details concerning the events of 2 March 2004. 84. On 21 October 2004 an inspection of certain items seized as a result of the investigative operations carried out on 19 October 2004 was conducted. 85. Between 22 and 25 October 2004 the investigative authorities questioned six students at the College who had not directly witnessed the events of 2 March 2004. They did not provide any additional details. 86. On 26 October 2004 the investigative authorities seized two study journals kept by Private Alekseyev. 87. On the same date the investigative authorities refused to institute criminal proceedings against Captain L. on account of a lack of evidence that he had committed an offence. 88. Again on the same date the applicant lodged a complaint with the higher prosecutor’s office about the investigator’s refusal of 11 October 2004 to provide her with a copy of a procedural decision. 89. Between 27 October and 2 November 2004 the investigative authorities questioned several indirect witnesses, who did not provide any relevant information. 90. On 2 November 2004 the investigative authorities refused to institute criminal proceedings against Major P. on account of a lack of evidence that he had committed an offence. 91. On the same date the investigative authorities questioned Doctor S-v., who had pronounced Private Alekseyev dead at the hospital. 92. Also on 2 November 2004 a confrontation was held between one of the students, G-v, and Captain Sh. 93. Again on the same date the investigative authorities refused to institute criminal proceedings against Captain Sh. on account of a lack of evidence that he had committed an offence. 94. By letter of 2 November 2004 the Circuit Military Prosecutor’s Office notified the applicant once more that the criminal proceedings in connection with her son’s death had been reopened and the case file had been sent to the Garrison Prosecutor’s Office for investigation, where it had been received on 11 October 2004. The letter went on to say that the investigation was pending and that the applicant would be apprised of its results. 95. On 4 November 2004 the investigative authorities conducted an additional inspection of Private Alekseyev’s bayonet. 96. On 5 November 2004 the Garrison Prosecutor’s Office responded to the applicant’s complaint of 26 October 2004 concerning the investigator’s failure to address her requests of 2 June, 11 September and 13 October 2004, stating that these requests had been examined by the investigator in charge and that she had been informed of this in letters of 14 and 25 October 2004. The letter further stated that the investigator’s decision of 11 October 2004 by which he had refused to provide her with a copy of the decision of 13 August 2004 had been based on relevant provisions of criminal procedural law and had been well-founded. The letter added that the applicant would be able to gain access to the case file and obtain copies of any documents after the preliminary investigation was completed. 97. On 10 November 2004 the Garrison Prosecutor’s Office discontinued the criminal proceedings in case no. 11/23/0012-04, referring to the absence of any evidence of a crime in the incident. On the same date the applicant was notified of that decision and informed that the case file had been sent that day to the Norilsk Garrison Military Prosecutor’s Office. 98. By letter of 3 December 2004 the Circuit Military Prosecutor’s Office stated in response to the applicant’s complaint of 26 October 2004 that the actions of the investigator in charge as regards the handling of her requests revealed no breaches of national law. The letter further stated that the case file concerning her son’s death had been forwarded to the Norilsk Garrison Military Prosecutor’s Office on 22 November 2004 so that the relatives of the deceased could gain access to it, and that the applicant could study the file and make copies of any documents. 99. On 11 January 2005 the Circuit Military Prosecutor’s Office further informed the applicant that once she had studied the case file it would be forwarded to the Circuit Military Prosecutor’s Office so as to enable them to check whether the decision to discontinue the criminal proceedings had been lawful and well-founded. They also informed the applicant that she could appeal against that decision in court. 100. On 12 January 2005, after studying the case file, the applicant contacted the Garrison Prosecutor’s Office requesting that the decision of 10 November 2004 be quashed, the criminal proceedings be resumed and the investigation into her son’s death be conducted by another investigator. 101. By letter of 18 March 2005 the Garrison Prosecutor’s Office stated that the applicant’s request had been refused, that the decision to discontinue the criminal proceedings had been lawful and well-founded and that the investigation had been carried out fully and thoroughly with due regard to the instructions given by a higher prosecutor. 102. On 5 May 2005 the Circuit Military Prosecutor’s Office replied to a letter sent by the applicant to the President of Russia. The prosecutor’s office stated that the preliminary investigation had clearly established that the applicant’s son had committed suicide by inflicting a lethal stab wound on himself while in a disturbed psychological state caused by difficulties in his military service. According to the prosecutor’s office, that finding had been confirmed by a body of evidence obtained during the investigation, including: an expert report confirming that the suicide note had been authentic and written by the applicant’s son; an expert report confirming that it was possible to inflict a stab wound on oneself with a bayonet and then to extract the weapon from that wound; witness statements confirming the absence of any other individuals at the checkpoint at the time of the incident; and other pieces of evidence. The prosecutor’s office went on to say that the investigating authorities had taken all possible measures for ensuring a full, objective and thorough investigation and that the decision of 10 November 2004 had been lawful and well-founded. 103. By a decision of 21 March 2006 the Circuit Military Prosecutor’s Office rejected the applicant’s complaint about the decision of 10 November 2004, stating that: the decision had been lawful and well-founded, which had also been confirmed by court decisions of 12 July and 20 September 2005; all possible measures for establishing the circumstances of the death of the applicant’s son had been taken during the preliminary investigation; there had been no breaches of criminal procedural law during the investigation; and the applicant’s repeated complaints had already been examined on several occasions by the Garrison Prosecutor’s Office and the Circuit Military Prosecutor’s Office and she had been given detailed responses. C. Court proceedings 104. On 28 April 2004 the applicant challenged the investigator’s decisions of 25 March and 3 April 2004 before the Irkutsk Garrison Military Court (“the Garrison Court”). 105. In a decision of 6 May 2004 the Garrison Court found that the investigator’s refusal to declare the applicant and her husband victims in the case and to grant her other requests had been unlawful. However, since the investigation had been discontinued on 30 April 2004, the court was no longer in a position to order the investigating authorities to remedy those breaches of the applicant’s rights. The court also noted that the applicant had had the right to study the file of criminal case no. 11/23/0012-04 and to challenge decisions taken in the case. 106. On 17 November 2004 the applicant lodged a complaint with the Garrison Court against the investigator’s decisions of 11, 14 and 23 October 2004. 107. On 9 December 2004 the Garrison Court dismissed the applicant’s complaint. It found that the investigator’s refusal of the applicant’s request to provide her with a copy of the decision of 13 August 2004 by which the criminal proceedings in connection with her son’s death had been reopened had been lawful and well-founded. The court further stated that it was unable to examine the lawfulness of the investigator’s refusal to carry out certain investigative measures requested by the applicant, as the investigation had been discontinued on 10 November 2004 and the case file had been sent to the Norilsk Garrison Military Prosecutor’s Office so that the applicant could study it. The court also noted that the applicant had had the right to challenge the aforementioned investigator’s decisions after she had studied the file. 108. On 8 February 2005 the Eastern Siberian Circuit Military Court (“the Circuit Military Court”) upheld the decision of 9 December 2004 on appeal. 109. On 7 May 2005 the applicant applied to the Garrison Court seeking to have the decision of 10 November 2004 by which the criminal proceedings into her son’s death had been discontinued set aside and the proceedings resumed. 110. By a decision of 12 July 2005 the Garrison Court rejected the applicant’s complaint. It noted that the investigation had established that the applicant’s son had inflicted a lethal stab wound on himself triggered by his personal anxiety which could be explained by his personal characteristics, and that he had not been incited or influenced in any way by other persons. Those findings had been made on the basis of witness statements, the deceased’s suicide note, and reports of psychological and psychiatric expert examinations. The court opined that the investigating authorities had taken all possible measures with a view to establishing the circumstances of the incident, and that there had been no breaches of criminal procedural law during the investigation. The court thus concluded that the decision of 10 November 2004 had been lawful and reasoned. 111. On 20 September 2005 the Circuit Military Court upheld the decision of the first-instance court on appeal. 112. The applicant’s attempts to have the above decisions quashed in supervisory review proceedings were to no avail. II. RELEVANT DOMESTIC LAW 113. Article 125 of the Code of Criminal Procedure sets out the procedure for the judicial examination of complaints. The orders of an investigator or prosecutor refusing to institute criminal proceedings or terminating a case, and other orders and acts or omissions which are liable to infringe the constitutional rights and freedoms of the parties to criminal proceedings or to hinder citizens’ access to justice, may be appealed against to a local district court, which is competent to check the lawfulness and grounds of the impugned decisions. THE LAW ALLEGED VIOLATION OF ARTICLE 2 OF THE CONVENTION 114. The applicant complained that the authorities had failed to carry out an effective investigation into her son’s death. She claimed, in particular, that she had been excluded from the investigation at its initial stage as a result of the investigator’s refusal to grant her victim status, and that, even after the decision granting her victim status had been taken, her requests to be informed of the progress of the investigation had been refused. The applicant referred to Articles 6, 10 and 13 of the Convention in connection with her complaints. The Court shall examine the complaint under Article 2 of the Convention, which reads as follows: “1. Everyone’s right to life shall be protected by law. No one shall be deprived of his life intentionally save in the execution of a sentence of a court following his conviction of a crime for which this penalty is provided by law. 2. Deprivation of life shall not be regarded as inflicted in contravention of this article when it results from the use of force which is no more than absolutely necessary: (a) in defence of any person from unlawful violence; (b) in order to effect a lawful arrest or to prevent the escape of a person lawfully detained; (c) in action lawfully taken for the purpose of quelling a riot or insurrection.” A. The parties’ observations 115. The Government submitted that, as was clear from the results of the domestic investigation, Private Alekseyev had died of a stab wound that he had inflicted on himself with a bayonet, which had constituted suicide. At the same time, the materials obtained by the investigation, including statements of numerous witnesses, had contained no evidence that Private Alekseyev had been subjected to any form of pressure. In particular, it had not been shown that he had been asked to pay for the car. On the contrary, he had been aware that under the applicable regulations College students did not bear financial liability for the cars at the aerodrome parking lot. Hence, it had not been possible to hold someone responsible for Private Alekseyev’s suicide, and therefore, the State’s responsibility under Article 2 of the Convention had not been engaged. 116. As regards the subsequent investigation, it had been instituted on the day of Private Alekseyev’s death and had been prompt and thorough. A considerable number of investigative actions had been carried out and numerous witnesses had been questioned. Therefore, the investigation had been effective and thus in compliance with Article 2 of the Convention. The Government further noted that the applicant had fully exercised her right to an effective remedy. In particular, she had appealed to a court against a number of the investigator’s decisions. Furthermore, as Private Alekseyev had died while he was serving in the armed forces, the applicant had been entitled to an insurance payment, which she had received. She had also received an allowance to pay for her son’s burial. 117. The applicant made no observations in response. B. The Court’s assessment 1. Admissibility 118. The Court notes that the application is not manifestly ill-founded within the meaning of Article 35 § 3 (a) of the Convention. It further notes that it is not inadmissible on any other grounds. It must therefore be declared admissible. 2. Merits (a) General principles 119. The Court reiterates that Article 2, which safeguards the right to life, ranks as one of the most fundamental provisions in the Convention. Together with Article 3, it also enshrines one of the basic values of the democratic societies making up the Council of Europe. The object and purpose of the Convention as an instrument for the protection of individual human beings requires that Article 2 be interpreted and applied so as to make its safeguards practical and effective (see McCann and Others v. the United Kingdom, 27 September 1995, §§ 146-47, Series A no. 324). 120. The first sentence of Article 2 § 1 enjoins the State not only to refrain from the intentional and unlawful taking of life, but also to take appropriate steps to safeguard the lives of those within its jurisdiction (see L.C.B. v. the United Kingdom, 9 June 1998, § 36, Reports of Judgments and Decisions 1998-III). In the context of cases concerning prisoners, the Court has had previous occasion to emphasise that persons in custody are in a vulnerable position and that the authorities are under a duty to protect them. It is incumbent on the State to account for any injuries suffered in custody, an obligation which is particularly stringent when an individual dies (see, for example, Salman v. Turkey [GC], no. 21986/93, § 99, ECHR 2000-VII). 121. Similarly to persons in custody, conscripts are entirely in the hands of the State and any events involving the army lie wholly, or in large part, within the exclusive knowledge of the authorities. Therefore, the State is also under an obligation to account for any injuries or deaths occurring in the army (see Beker v. Turkey, no. 27866/03, §§ 41-42, 24 March 2009, and Mosendz v. Ukraine, no. 52013/08, § 98, 17 January 2013). 122. The Court further reiterates in this connection that, in all cases where it is unable to establish the exact circumstances of a case for reasons objectively attributable to the State authorities, it is for the respondent Government to explain, in a satisfactory and convincing manner, the sequence of events and to exhibit solid evidence that can refute the applicant’s allegations (see Mansuroğlu v. Turkey, no. 43443/98, § 80, 26 February 2008, with further references). 123. Where lives have been lost in circumstances potentially engaging the responsibility of the State, Article 2 entails a duty on the State to ensure, by all means at its disposal, an adequate response – judicial or otherwise – so that the legislative and administrative framework set up to protect the right to life is properly implemented and any breaches of that right are suppressed and punished (see Öneryıldız v. Turkey [GC], no. 48939/99, § 91, ECHR 2004-XII, and, mutatis mutandis, Paul and Audrey Edwards v. the United Kingdom, no. 46477/99, § 54, ECHR 2002‑II). 124. In that connection the Court has held that, if the infringement of the right to life or to physical integrity is not caused intentionally, the positive obligation to set up an “effective judicial system” does not necessarily require criminal proceedings to be brought in every case and may be satisfied if civil, administrative or even disciplinary remedies were available to the victims (see, for example, Mastromatteo v. Italy [GC], no. 37703/97, §§ 90, 94 and 95, ECHR 2002‑VIII, and Vo v. France [GC], no. 53924/00, § 90, ECHR 2004-VII). However, the minimum requirement for such a system is that the persons responsible for the investigation must be independent from those implicated in the events. This means hierarchical or institutional independence and also practical independence (see Paul and Audrey Edwards, cited above, § 70, and Mastromatteo, cited above, § 91). 125. The Court further reiterates that, in cases of homicide, the interpretation of Article 2 as entailing an obligation to conduct an official investigation is justified not only because any allegations of such an offence normally give rise to criminal liability, but also because often, in practice, the true circumstances of the death are, or may be, largely confined within the knowledge of State officials or authorities. Therefore the applicable principles which the Court has already had occasion to develop, notably in relation to the use of lethal force, lend themselves to application in other categories of cases (see Trubnikov v. Russia, no. 49790/99, § 87, 5 July 2005). 126. Accordingly, where a positive obligation to safeguard the life of persons in custody or in the army is at stake, the system required by Article 2 must provide for an independent and impartial official investigation that satisfies certain minimum standards as to effectiveness. In such cases, the competent authorities must act with exemplary diligence and promptness and must of their own motion initiate investigations capable of, firstly, ascertaining the circumstances in which the incident took place and any shortcomings in the operation of the regulatory system and, secondly, identifying the State officials or authorities involved. The requirement of public scrutiny is also relevant in this context (see, for example, Kelly and Others v. the United Kingdom, no. 30054/96, § 114, 4 May 2001; McCann and Others, cited above, § 161; İlhan v. Turkey [GC], no. 22277/93, § 63, ECHR 2000-VII; McKerr v. the United Kingdom, no. 28883/95, § 148, ECHR 2001-III; and Trubnikov, cited above, § 88). (b) Application to the present case 127. Turning to the present case and bearing in mind the above principles, the Court will examine the applicant’s complaint under Article 2 of the Convention from the following two perspectives. Firstly, it will assess whether the authorities gave a plausible explanation for the death of the applicant’s son. Secondly, the Court will assess whether under the circumstances the State can be regarded as having discharged its obligation to sufficiently protect his life (see Mosendz, cited above, § 96). 128. The question of whether the authorities gave a plausible explanation is, moreover, closely linked to the procedural obligation to conduct an effective investigation of the matter. Indeed, in order to establish whether the State satisfactorily accounted for the death of Private Alekseyev, the Court will have regard to the investigation carried out by the authorities and the conclusions reached by them. 129. The Court notes, firstly, that the investigation was opened on 2 March 2004, the date of Private Alekseyev’s death, immediately after the authorities became aware of the incident. Initial inquiries and investigative actions were carried out within days. That included an inspection of the scene of events; the seizure of certain items, including Private Alekseyev’s bayonet and suicide note; questioning of the main witnesses; and a forensic examination of Private Alekseyev’s body and his bayonet. Taking into account that, after certain additional investigative actions were taken, the final decision to discontinue the investigation was taken on 10 November 2004, the Court considers that the investigation was sufficiently prompt. 130. Although the applicant was initially refused victim status, it was eventually granted to her, as was access to the materials of the investigation, which she studied with her lawyer between 31 May and 3 June 2004 and in January 2005. Furthermore, the applicant had the right to challenge the decisions taken by the investigating authorities, which she used after having studied the investigation file (see paragraphs 106-12 above). The Court thus finds that the authorities complied with the requirement of public scrutiny. 131. The Court observes that overall the authorities made diligent efforts to establish the circumstances surrounding Private Alekseyev’s death. They took a significant number of investigative actions including questioning of numerous witnesses and conducting pertinent forensic examinations. Notably, the investigating authorities thoroughly examined various theories as to the reasons behind Private Alekseyev’s death, including the possibility of murder or incitement to suicide (cf. Mosendz, cited above, § 98). From the investigating authorities’ letters it is clear that different lines of inquiry were being pursued (see paragraphs 37 and 60 above). In order to establish whether Private Alekseyev’s death could have been the result of murder the authorities conducted a fingerprint identification test on the bayonet; a handwriting examination of the note found near Private Alekseyev’s body; and a forensic examination of Private Alekseyev’s clothes and personal items and the clothes of Captains L. and Sh., who claimed to have found his body in the day room with a stab wound. They also questioned Captains L. and Sh., including with the use of a polygraph test, and many other witnesses, who stated that they could not think of anybody having a motive to kill Private Alekseyev. They also questioned expert B. so as to establish whether, having supposedly inflicted the wound himself, Private Alekseyev could have removed the knife. Therefore, the investigating authorities’ dismissal of the possibility of a murder having taken place was based on sufficient evidence. 132. At the same time the authorities investigated the possibility of incitement to suicide. Numerous witnesses questioned stated that they had neither information nor reasons to believe that Private Alekseyev had been subjected to any form of pressure while at the College. As for the events of 2 March 2004, and in particular as regards the reprimand concerning having a dirty collar and losing the fastener for the lamp, it is clear from the witness statements that the reaction of Private Alekseyev’s superiors did not go beyond what constituted a legitimate reprimand for breaching the applicable rules. As for the incident with the car, the Court notes that whereas Private Kob. submitted that he had heard Captain L. saying to Private Alekseyev that it was an expensive car and if it had been stolen this would be his fault (see paragraph 14), Captain L. denied ever having told Private Alekseyev that he would have to pay for the car, which was confirmed by a number of the College’s students (see paragraphs 74 and 77). Furthermore, Major P. explained to the investigating authorities that servicemen on duty were not financially liable for cars in the parking lot (see paragraph 72), a fact of which, according to the Government, Private Alekseyev must have been aware. The Court thus cannot but share the domestic authorities’ conclusion that there was no evidence of Private Alekseyev’s having been asked to pay for the car. The Court concedes that Captain L. might have pointed out to Private Alekseyev that should it appear that the car had been stolen it would be his fault in order to raise his awareness of the importance of compliance with the internal rules and to make him feel responsible for their breach. However, this by no means could be considered to have constituted an order to pay the cost of the car’s replacement, especially when Captain L. was well aware that the car had been taken from the parking lot by its owner. The fact that Private Alekseyev believed himself to be financially liable for the car, which is evident from his suicide note and Private G.’s submissions (see paragraphs 10 and 16), appears to have been the result of him having misinterpreted the situation due to the state of anxiety which, according to the results of the psychological/psychiatric expert examination, he was in that morning (see paragraph 50). 133. The Court thus finds that the authorities conducted a prompt and thorough investigation into Private Alekseyev’s death and on the basis of numerous pieces of evidence reached a reasonable conclusion that it had been a suicide. Furthermore, in view of the finding of the psychological/psychiatric expert examination that Private Alekseyev had not been suffering from any chronic disorder, as well as taking into account numerous witness statements to the effect that he did not appear to have any psychological problems, the authorities could not have been aware of the risk of his suicide and thus cannot be found to have been under an obligation to take any measures in this regard. The Court thus cannot hold the State responsible for Private Alekseyev’s suicide. 134. Therefore, there has been no violation of Article 2 of the Convention, either in respect of the State’s positive obligation to protect the life of the applicant’s son while under its control and to adequately account for his death, or in respect of the procedural obligation to conduct an effective investigation. FOR THESE REASONS, THE COURT UNANIMOUSLY 1. Declares the application admissible; 2. Holds that there has been no violation of Article 2 of the Convention on account of the applicant’s son’s death and the subsequent investigation. Done in English, and notified in writing on 19 December 2013, pursuant to Rule 77 §§ 2 and 3 of the Rules of Court. André WampachIsabelle Berro-LefèvreDeputy RegistrarPresident

-------- B. MAJMUDAR, J. ---------------- Municipal Board, Saharanpur having obtained the certificate of fitness to appel to this Court under Article 133 of the Constitution of India on 12th August, 1976, has filed this appeal. While grating the certificate, the High Court has observed that the companycept and meaning of the words companymon companypound used in the Uttar Pradesh Municipalities Act, 1916 hereinafter referred to as the Act is required to be decided in this appeal. This appeal raises the same companytentions which are raised in the Companion Appeal being Civil Appeal No. 1218 of 1976 moved by the very same appellant - Municipal Board, Saharanpur against Imperial Tobacco of India Ltd. wherein the High Court has granted a similar certificate of fitness. Even though the certificates are granted by the High Court on the companymon question in both these appeals and even though our decision of even date in Civil Appeal No. 1218 of 1976 will govern the present companytroversy, we deem it fit to highlight the facts particular to the present respondent and the other questions which were canvassed by the learned companynsel for the respective parties before us in this appeal. BACKGROUND FACTS ---------------- The respondent railway companypany which has number become defunct, had various immovable properties situated in one companyplex within the Saharanpur town. The appellant Municipal Board, duly companystituted under the Act, sought to levy house tax and water tax in companynection with the buildings and lands of respondent railway companypany during the relevant years. The said taxes were sought to be levied under Section 128 1 i . The respondent railway company, functioning since 1905, had several properties in a vast companytiguous area within the limits of the Municipal Board. They included the railway station, a childerns park, a canteen, a dispensary, administrative offices, rest-houses, out-houses, officers bungalows etc. The appellant Board issued a numberice to the railway companypany in 1960, assessing the properties to tax on buildings and also to water-tax. The appellant Board determined the annual value with reference to clause a of Section 140 of the Act and in doing so it treated all the buildings as one unit and all the land in the area as appurtenant to the buildings. A number of objections were raised by the respondent railway companypany but they were rejected by the Executive Officer of the Municipal Board. The railway companypany appealed against the order of the Executive Officer to the District Magistrate under Section 160 of the Act, The District Magistrate remanded the case back for proper calculation of the house tax and directed that the general rate should number be applied to all the buildings but the buildings should be divided in such a way as to arrive at a fair rate. The respondent companypany, or remand, had again submitted to the Executive Officer that certain buildings and approach roads should be excluded in calculating the area. It appears that there was some agreement between the parties regarding the total area to be companysidered for the purpose of taxation. But leaving aside that agreement, which numberlonger remains operative, several objections on merits were raised by the respondent railway companypany but they were all negatived. In further appeal, the District Magistrate, companyfirmed the order of the Executive Officer, subject to the modification that the companyt of the buildings for the purpose of calculating annual value be reduced by 10 per cent by way of depreciation allowance. The tax on buildings was accordingly fixed at Rs. 3,957.75 paise. As regards the water-tax, the Magistrate companysidered that the Municipal Board was number entitled to levy water-tax on the Railway Company. This was on the basis that there was one hydrant within 600 feet from the railway area. But it appeared that between the hydrant and the railway area there lay some area of the Northern Railway surrounded by a wall. According to this interference therefore, the distance between the hydrant and the premises of the respondent was more than 600 feet in a zigzag manner and hence the water-tax companyld number be levied on this companyplex. Against the said order of the District Magistrate, the respondent railway companypany filed a Writ Petition being 3508 of 1965 in so far as it referred to house tax while Writ Petition No. 3415 of 1965 was filed by the appellant Municipal Board urging that the Railway Company was liable to water-tax. Both these writ petitions were heard together by a learned Single Judge of the Allahabad High Court, who took the view that the lands of the railway companypany were within the radius of 600 feet from the nearest water-stand point and hence they had to be companysidered for imposing water-tax on the buildings of the respondent railway companypany situated in these lands. To that extent, the learned Single Judge set aside the reasoning and finding of the District Magistrate. However, the learned Single Judge took the view that so far as the levy of water-tax was companycerned, only those buildings in the companyplex of the respondent which were within the radius of 600 feet were liable to pay water-tax. It was also held that the assessment of water-tax had to be done building-wise and all the buildings should number be treated as one unit for that purpose. The assessment also had to be made as per Section 140 a of the Act. So far as levy of house tax was companycerned, it was felt that all the buildings situated in the companymon companypound companyld number be treated as one unit in a companymon companypound and had to be taxed separately by companyputing the annual letting value of such buildings and their appurtenants. Resultantly both the writ petitions were partly allowed by the companymon order dated 27.2.1970. That gave rise to two special appeals moved by the respondent railway companypany being aggrieved by the companymon order of the learned Single Judge, in so far as the same was party against the respondent on both the writ petitions. While thee appellant Board also filed a cross special appeal being aggrieved by the decision of the learned Single Judge regarding water-tax. All the three appeals were heard together and were disposed of by a companymon judgment by a Division Bench of the High Court of Judicature at Allahabad dated 22nd July, 1974. Against the said dicision, as numbered earlier, on the grant of certificate of fitness under Article 133 of the Constitution of India, the present appeal is filed by the Board. RIVAL CONTENTIONS ----------------- Shri D.K. Garg, learned companynsel for the appellant Board submitted that so far as levy of water-tax was companycerned, the Division Bench of the High Court had companymitted a patent error in taking the view that even if the water stand pipe of the Board was at a distance of 600 feet from one of the building of the respondent companypany situated in the same companymon companypound all other buildings situated in the very same companymon companypound and belonging to the same respondent companyld number be subjected to water-tax if such buildings were more than 600 feet of radius from the nearest water stand pipe. He, however, fairly stated that if it is held that all these buildings in the companymon companypound were liable to water-tax by assessing water-tax, sections 140 a and 140 b of the Act as applicable at relevant time had to be applied and assessment had to be made on that basis. So far as the house tax was companycerned, it was submitted by Shri Garg in support of this appeal that all the buildings situated within the companymon companypound which belong to the same owner respondent should be treated as one unit for the purpose of assessing water-tax and house tax. It was next companytended that in any case the 10 per cent depreciation granted by the District Magistrate and as companyfirmed by the learned Single Judge and the Division Bench on the total assessable value of such buildings for the purpose of house tax was ultra vires and beyond the scope of the Act and companyld number have been sustained by the Division Bench. On the other hand, learned companynsel for the Liquidator, who is number in-charge of the property of the respondent defunct private railway companypany, which is in voluntary winding up, submitted that water-tax companyld number be levied on all those buildings belonging to the respondent companypany which were situated in the companymon companypound, if such buildings were beyond the distance of 600 feet radius from the nearest water stand pipe and, accordingly, the Division Bench of the High Court was right in taking this view. It was submitted that even assuming that for the levy of water-tax, radius of 600 feet from the water stand pipe for one of the buildings may attract the levy of water-tax for the entire companyplex. So far as the house tax is companycerned each individual house with appurtenant land was a unit by itself and all such buildings cannot be treated as one unit as tried to be submitted by learned companynsel for the appellant. He also submitted that the grant of 10 per cent depreciation of the assessment of annual letting value for the purpose of levy of water tax and house tax on all these buildings was legal and valid. We may mention that learned companynsel for the appellant also submitted that the special appeals were number maintainable against the decision of the learned Single Judge. However, this companytention cannot be companyntenanced for the simple reason that even the appellant, aggrieved by the order of the Single Judge, has also filed a special appeal and had sought the decision of the Division Bench of the High Court on merits. The Boards appeal was also heard with the companypanion appeals of the respondent. Hence, this companytention which is self-destructive cannot be entrained. Even otherwise if such companytention is entertained, it will number advance the case of the appellant, as the respondent would be well entitled to bring in challenge the main order of the learned Single Judge directly before us and the entire period till date will get excluded under Section 14 of the Limitation Act, Thus, this technical companytention cannot be companyntenanced. In view of the aforesaid rival companytentions on merits of the appeal, the following points arise for our companysideration Whether the Division Bench of the High Court was right when it held that only those buildings of the respondent, which were situated within the radius of 600 feet from the nearest water stand pipe of the appellant, companyld be subjected to water-tax. Whether for imposition of house tax, all the buildings of respondent situated in the companymon companypound and forming part of one companyplex companyld be treated as one unit for imposing house tax Whether 10 per cent depreciation allowed by the learned District Magistrate and as companyfirmed in the High Court both by learned Single Judge and the Division Bench on the assessable annual letting value of such buildings was justified in law and What final order? We will deal with these companytentions seriatim. Point No.1 ----------- So far as the companytention companycerning this point is companycerned, by a detailed Judgement in the companypanion Civil Appeal No.1218 of 1976 decided today we have negatived this companytention. For the reasons recorded therein, therefore, this companytention fails. Point No.1 is, therefore, answered in the negative in favour of the appellant and against the respondent. Point No.2 So far as this companytention of the appellant that all the buildings situated within the companymon companypound belonging to the respondent railway companypany should be treated as one unit for the purpose of house tax is companycerned, it becomes necessary for us to have a look at the relevant statutory scheme. Section 128 1 i of the Act provides as under Taxes which may be imposed 1 Subject to any general rules or special orders of the State Government in this behalf, the taxes which a municipality may impose in the whole or any part of a municipality are. a tax on the annual value of buildings or lands or of both. In view of the aforesaid provision, therefore, it has to be held that the appellant Board, subject to special orders of the State Government, is entitled to impose tax on the annual value of buildings or lands or of both. It, therefore, becomes clear that in the companyplex belonging to the respondent as number of buildings are situated in the companymon companypound, house tax can be levied by the appellant both on the buildings and also on the other open land in which such buildings are situated. These open lands surrounding the buildings if number appurtenant to such buildings would be a separate subject of house tax while buildings with their appurtenant land would form another subject of house tax. Charge of house tax will settle on all these buildings and lands number companyprised in these building. This becomes clear if we view Section 2 sub-section 2 of the Act which defines buildings. It reads as under Building means a house, outhouse, stable, shed, hut or other enclosure or structure whether of masonry bricks, wood, mud, metal or any other material whatsoever, whether used as a human dwelling or otherwise, and includes any verandah, platform, plinth, staircase, doorstep, wall including companypound wall other than a boundary wall of the garden or agricultural land number appurtenant to a house but does number include a tent or other such portable temporary shelter. The said definition has to be read with the definition of the term companypound under Section 2, sub-section 5 . The said term reads as under Compound means land, whether enclosed or number, which is the appurtenance of a building or the companymon appurtenance of several buildings. On a companyjoint reading of these provisions therefore, it becomes clear that before the appellant Board can impose house tax under Section 140 a on any property situated within its municipal limits if it is a building the unit of tax would be the building companycerned including its companypound wall and the companypound wall would also companyer within it the land situated in the said companypound provided it is appurtenant to the building or a companypound appurtenant to the several buildings. It is, therefore, obvious that if the companymon companypound in which the housing companyplex belonging to the companymon owner is situated is number an appurtenance to several buildings within that companyplex, then the said land cannot be said to be a part and parcel of the building for the purpose of house tax. For imposing house tax on buildings under Section 140 1 a it has to be shown that the buildings with their companymon appurtenant land or the land in companymon appurtenance to several buildings situated nearby are available for imposing such a tax thereon. It is only such appurtenant land which can form part of the buildings for attracting house tax assessment proceedings. But if the companymon companypound in which such buildings with appurtenant lands are situated also includes land which cannot be said to be a companymon appurtenance to several buildings situated therein or separately appurtenant to any given building, such land would be outside the sweep of the term building. Such land, however, on its own companyld be legitimately made the subject matter of separate levy of house tax as an independent unit being open land. As seen from Section 140 1 b itself as the Board can impose the tax on annual value of lands which may number be companyered by the sweep of the definition of the term building. Once that companyclusion is reached, it becomes obvious that all the buildings situated along with their appurtenant lands in one companymon companypound belonging to the same owner cannot be treated as one unit for the purpose of imposing house tax under Section 128 1 i . The reasoning of the High Court in this companynection cannot be found fault with on the scheme of the Act. It is pertinent to numbere that companymon companypound which is relevant for the water-tax as per Section 129 of the Act to which we have made a detailed reference while deciding the companypanion appeal No. 1218 of 1976 is companyspicuously absent in companynection with imposition of house tax on the annual value of buildings or lands or both as found in Section 128 1 i . We, therefore, endorse the reasoning of the Division Bench of the High Court which rejected this companytention of the appellant Board. Point No.2 is therefore answered in the negative against the appellant and in favour of the respondent. Point No.3 ---------- That takes us to the last main point for companysideration. It has to be kept in view that house tax is to be imposed under Section 128 1 i on the annual value of buildings or lands or of both. Assessment of annual value has to be done according to the requirement of Section 140 sub-section 1 which defines annual value as under Annual value means a in the case of railway stations, hotels, companyleges, schools, hospitals, factories and other such buildings, a proportion number exceeding five per centrum to be fixed by rule made in this behalf of the sum obtained by adding the estimated present companyt of exacting the building to the estimated value of the land appurtenant thereto, and b in the case of a building or land number falling within the provisions of clause a , the gross annual rent for which such building, exclusive of furniture or machinery therein, or such land is actually let, or where the building or land is number let, or in the opinion of the municipality is let for a sum less than its fair letting value, might reasonably be expected to let from year to year. It becomes obvious in the light of the aforesaid provision that up to the limit of 5 per cent of the annual value, the Board can impose house tax on immovable properties, like railway stations, hotels, companyleges, school, hospital etc. mentioned in the said provision but for doing so the estimated present companyt of erected buildings companycerned has to be kept in view and also the estimated value of the land appurtenant thereto is also to be taken into companysideration. Now, the phrase estimated present companyt of erecting the building is entirely differently worded as companypared to the phrase estimated value of the land appurtenant thereto. The value of the building as well as the land appurtenant once arrived at will have to be added for companyputing 5 per cent ceiling up to which by rules the Municipal Board can impose house tax on the buildings companycerned. It becomes at once clear that when appurtenant land is to be valued its valuation has to be made as per its market value obtaining at the time of assessment. But so far as the value of the building to which such land is appurtenant goes, the companyputation has to be made on the estimated present companyt of erecting the building to be subject to the tax. Meaning thereby, at the time of assessment the companyt of companystruction of such building in its existing state is to be kept in view. Hence such companyt must be arrived at by keeping in view the then existing state of the building and the companyt which would be incurred for erecting such a building. Consequently it becomes obvious that while estimating the present companyt of erecting the building companycerned, the assessing authority has to keep in view the life of the building and also the fact as to when it was earlier companystructed and in what present state the building is and what will be the companyt of erecting a new building so as to result into erection of such an old building keeping in view its life and wear and tear from which it has suffered since it was put up. It is obvious that if the building is an old one the present companyt of erecting such a building would necessary require further companysideration to what would be the depreciated value of such a buildings if a new building is erected at the time of assessment. Such companyt, obviously, has to be sliced down by giving due weight to the depreciation so as to make estimation of present companyt of the new building to ultimately become equal to the erection companyt of the building companycerned in its depreciated state. Consequently, it cannot be said that 10 per cent depreciation allowed by the District Magistrate and as companyfirmed by the High Court on the total estimated companyt of the building for bringing it within the assessable tax net of house tax was an exercise which was ultra vires provisions of the Act or beyond the jurisdiction of the assessing authority. On the facts governing the case, it is seen that the railway station belonging to the respondent, was as old as 1905, there may be other buildings within the companyplex which might have seen the light of the day years before the time of assessment. Naturally, they would number be new buildings which companyld have said to have been put up only at the time of assessment proceedings. They were obviously old buildings. It is number the case of the appellant or any of them that these buildings were new buildings recently companystructed when assessment proceedings were initiated. Consequently, a flat rate of 10 per cent depreciation as granted by the District Magistrate while companyputing the annual value for house tax purposes, in the present case, cannot said to be an unauthorised exercise. The third point for determination, therefore, has to be answered in the affirmative against the appellant and in favour of the respondent. Point No.4 ---------- As a result of the aforesaid discussion, this appeal succeeds so far as the first point is companycerned. However, it stands rejected so far as the last two companytentions are companycerned. The appeal is partly allowed accordingly and the Judgment and Order of the Division Bench will stand modified in terms of this judgment in favour of the appellant Board. Before parting with this appeal, we may mention that during the pendency of this appeal, by an interim order dated 20th January, 1977, a three Judge Bench of this Court, directed as under There will be stay of restitution pending the disposal of the appeal. The appellant undertakes number to press the demand for the recovery of the amount of Rs. 98,950/- and any future dues from the respondent during the pendency of the appeal in this Court. The hearing of the appeal is expedited and the same shall be listed for hearing along with A.1218/76. It is obvious that the aforesaid order in so far as the interim stay deals with the right of the appellant Board to impose water-tax on all the respondent is companycerned, number there will remain numberoccasion for the appellant Board to grant any restitution to the respondent so far as recovery of water-tax for the relevant time in dispute is companycerned.

JISCBAILII_CASES_FAMILY Judgments - Secretary of State for Work and Pensions (Respondent) ex parte Kehoe (FC) (Appellant) HOUSE OF LORDS SESSION 2005-06 [2005] UKHL 48 OPINIONS OF THE LORDS OF APPEAL FOR JUDGMENT IN THE CAUSE Regina v. Secretary of State for Work and Pensions (Respondent) ex parte Kehoe (FC) (Appellant) ON THURSDAY 14 JULY 2005 The Appellate Committee comprised: Lord Bingham Of Cornhill Lord Hope Of Craighead Lord Walker Of Gestingthorpe Baroness Hale Of Richmond Lord Brown Of Eaton-Under-Heywood [2005] UKHL 48 LORD BINGHAM OF CORNHILL My Lords,   The appellant (Mrs Kehoe) married Mr Kehoe in 1983. They had four children. The marriage broke down in May 1993, a petition for divorce was filed by Mrs Kehoe in December 1993 and Mr Kehoe left the family home at the beginning of 1994. The children remained with Mrs Kehoe, who invoked the services of the Child Support Agency ("the CSA") to obtain financial support for the upbringing of the children from Mr Kehoe. Over the next ten years significant sums of money for the support of the children were paid by Mr Kehoe in response to demands by the CSA, but the process of obtaining payment was protracted and difficult and substantial arrears built up from time to time. Mrs Kehoe strongly feels, perhaps rightly, that direct action by her against her former husband would have yielded more satisfactory results. She contends that, properly understood, the Child Support Act 1991 gives her a right to recover financial support for the children from Mr Kehoe and that the provisions of the Act purporting to deny her a power of direct enforcement against him are inconsistent with the right of access to a court guaranteed by article 6 of the European Convention on Human Rights. At issue in this appeal is the correctness of that contention.   The detailed facts of this case and the relevant statutory provisions have been clearly and comprehensively summarised by Wall J sitting in the Administrative Court at first instance ([2003] EWHC 1021 (Admin), [2003] 2 FLR 578), by the Court of Appeal (Ward, Latham and Keene LJJ) [2004] EWCA Civ 225, [2004] QB 1378) and by my noble and learned friend Lord Hope of Craighead in his opinion. I gratefully adopt and need not repeat their accounts.   It is necessary first to examine whether Mrs Kehoe has a right to recover financial support for the maintenance of the children (which I shall call "child maintenance") from Mr Kehoe under the domestic law of England and Wales: Matthews v Ministry of Defence [2003] UKHL 4, [2003] 1 AC 1163, para 3. Under the law as it stood before 1991 it was clear that she had such a right under the Matrimonial Causes Act 1973, the Domestic Proceedings and Magistrates' Courts Act 1978, the Matrimonial and Family Proceedings Act 1984 and the Children Act 1989: see the judgment of Ward LJ, paras 11-16 and section 8(11) of the 1991 Act. But these procedures were judged by the government of the day to be unsatisfactory, for reasons summarised in para 2 of the Summary in a White Paper "Children Come First" vol I (Cm 1264) presented to Parliament in October 1990: "2.  The present system of maintenance is unnecessarily fragmented, uncertain in its results, slow and ineffective. It is based largely on discretion. The system is operated through the High and county courts, the magistrates' courts, the Court of Session and the Sheriff Courts in Scotland and the offices of the Department of Social Security. The cumulative effect is uncertainty and inconsistent decisions about how much maintenance should be paid. In a great many instances, the maintenance awarded is not paid or the payments fall into arrears and take weeks to re-establish. Only 30 per cent of lone mothers and 3 per cent of lone fathers receive regular maintenance for their children. More than 750,000 lone parents depend on Income Support. Many lone mothers want to go to work but do not feel able to do so." It was proposed (Summary, para 6) to create a Child Support Agency which would have responsibilities for the assessment, review, collection and enforcement of maintenance payments, with powers to collect information on incomes and obligations, make a legally binding assessment of what was payable, determine methods of payment, monitor and (where necessary) collect maintenance and enforce payment where payments failed. Once the CSA was fully established, all claims for maintenance and reviews of maintenance would be handled by the CSA and not by the courts (Summary, para 8). The CSA was to have responsibility for the assessment, collection and enforcement of maintenance payments (chapter 2, para 2.2). It was regarded as important that, as far as possible, all the services relating to child maintenance provided to the public should be delivered by one single authority, the CSA, for which it should be a priority to secure payment to the caring parent as quickly and accurately as possible (chapter 5, para 5.2). It was to take appropriate enforcement action at an early date when payments were not made (chapter 5, para 5.3). The White Paper outlined the proposed means of enforcement, and stated (chapter 5, paras 5.20, 5.24): "Taking enforcement action 5.20  If enforcement action is to be effective, it has to be taken quickly. It is therefore proposed that, when a parent first commissions the Child Support Agency to take enforcement action on her behalf, that parent should give a standing authority for the Agency to take action if and when full payment is not made on time. If the Agency were required to seek specific authority to act in every instance, then that could only cause additional delay. 5.24  The final stage, and very much a last resort, would be for the Agency to apply to the court for the court to take action. It is to be expected that the other measures, already described, will be more effective and it should be necessary to apply to the courts only very rarely. In England and Wales, the courts have the power to impose deferred prison sentences, where the debtor is committed to prison if the debt has not been paid in a specified period of time, or immediate prison sentences." It was to be open to parents who were able to reach agreement to resolve the issue of child maintenance between themselves, whether or not in a sum assessed by the CSA, provided the caring parent was not in receipt of benefit from the state (chapter 5, para 5.26).   The Child Support Act 1991 gave effect to the scheme foreshadowed by the White Paper. It imposed a responsibility for maintaining a qualifying child on each parent (section 1(1)). It imposed a duty on the absent or non-resident parent to make payment of child maintenance in any periodical sums assessed (section 1(3)). It obliged the Secretary of State, on the application of either parent, to assess the child maintenance payable according to a statutory formula (sections 4, 11). It empowered the Secretary of State to take enforcement action if authorised to do so (sections 4, 6). It gave the Secretary of State significant powers (sections 14, 15, 30, 31, 33, 35, 36, 39A). While the role of the courts was preserved in relation to consensual settlements reached by parents not in receipt of state benefit (section 8), and there can be no doubt of the Secretary of State's duty to account to the caring parent for sums which he has received from the paying parent, subject to any appropriate deduction of benefit, the Act conferred no right of recovery or enforcement on a caring parent such as Mrs Kehoe against an absent or non-resident parent such as Mr Kehoe.   In Department of Social Security v Butler [1995] 1 WLR 1528 the issue was whether the court could grant a Mareva injunction to the Secretary of State against an absent or non-resident parent who had failed to make the payments assessed under the 1991 Act. Evans LJ, at pp 1531-1532 said: "The following observations may be made on these statutory provisions. (1) The Act of 1991 together with regulations made under it provide a detailed and apparently comprehensive code for the collection of payments due under maintenance assessments and the enforcement of liability orders made on the application of the Secretary of State. (2) The only method provided for enforced collection before a liability order is made is a deduction from earnings order made by the Secretary of State himself under section 31. (3) Although section 1(3) provides for a duty which arises when the maintenance assessment is made, this duty is not expressed as a civil debt. Mr Crampin accepts that the duty could not be directly enforced by action in any civil court, or by any means other than as provided in the Act. (4) There is no provision for precautionary or Mareva-style relief." Morritt LJ agreed at pp 1540-1541: "As I have indicated the Secretary of State claims in respect of the statutory right correlative with the obligation expressed in section 1(3) of the Act of 1991. But that obligation and right is not a civil debt in any ordinary sense. First, the obligation may only be enforced by the Secretary of State and not by any other person who may be stated to be the payee in the maintenance assessment. Secondly, the Secretary of State's powers of enforcement do not enable him to sue for the arrears in the ordinary way. In the first instance his choice lies between a deduction of earnings order directed to the employer or an application to justices for a liability order. In my judgment, neither of those rights is such as would entitle this court, consistently with the decision in The Veracruz I [1992] 1 Lloyd's Rep. 353 to grant Mareva relief. The Child Support Act 1991 introduced a wholly new framework for the assessment and collection of the sums required for the maintenance of children by their parents. There is no provision for the enforcement of any maintenance assessment except by the Secretary of State and his methods of enforcement are limited in the way I have mentioned. It seems to me that it would be inconsistent with the Act as a whole in general and with section 33 in particular if the Secretary of State were to be at liberty to apply for Mareva injunctions in the High Court. If the conditions in section 33(1) are satisfied then Parliament has clearly laid down that the Secretary of State should proceed first in the magistrates' court and then in the county court. If those conditions are not satisfied then Parliament has clearly ordained that the Secretary of State should not be entitled to enforce the maintenance assessment by court process at all. No doubt clear words or a necessary implication are required to exclude the jurisdiction of the court. The suggested exclusion in this case is of the High Court's ordinary civil jurisdiction which includes the power to grant injunctions. In my judgment, the detailed provisions contained in the Act of 1991 which I have described show clearly that Parliament intended that all questions concerning the enforcement of maintenance assessments should be determined exclusively by the Secretary of State, the magistrates' court or the county court. The civil jurisdiction of the High Court is, in my view, necessarily excluded. I agree with Evans LJ that the judge was right and that this application should be dismissed." Simon Brown LJ also agreed, at p 1541: "For my part I believe that the argument fails at both stages albeit for what in the last analysis may be thought essentially the selfsame reason. Put shortly my conclusions are, first, that Mareva relief is only obtainable where there is already available to the applicant a cause of action properly so called, viz. a right to litigate or arbitrate an existing monetary claim, and, secondly, that the Act of 1991 affords to the Secretary of State no such cause of action, and indeed no rights at all save only those expressly conferred upon him by section 4(2) to arrange in certain circumstances either for the 'collection' of maintenance payable under an assessment or for the 'enforcement' of the obligation to pay such maintenance, in each instance as thereafter expressly provided for in sections 29 et seq. of the Act of 1991." In Huxley v Child Support Officer [2000] 1 FLR 898, 908, Hale LJ, with the concurrence of Auld and Pill LJJ, helpfully characterised the regime established by the 1991 Act: "The child support system has elements of private and public law but fundamentally it is a nationalised system for assessing and enforcing an obligation which each parent owes primarily to the child. It replaces the powers of the courts, which can no longer make orders for periodical payments for children save in very limited circumstances. Unless she can secure a voluntary agreement at least as high as that which the CSA would assess, the PWC is expected to look to the Agency to assess her child support according to the formula, whether or not she is on benefit. The fact that it does her no direct good if she is on means-tested benefits, and that much CSA activity so far has been in relation to parents on benefit, does not alter the fundamental characteristics of the scheme."   That a caring parent in the position of Mrs Kehoe was given no right of recovering or enforcing a claim to child maintenance against an absent or non-resident parent was not a lacuna or inadvertent omission in the 1991 Act: it was the essence of the new scheme, a deliberate legislative departure from the regime which had previously obtained. The merits of that scheme are not for the House in its judicial capacity to evaluate. But plainly the scheme did not lack a coherent rationale. The state has an interest, most directly in cases where public funds are disbursed, but also more generally that children should be adequately supported. It might well be thought that a single professional agency, with the resources of the state behind it and an array of powers at its command, would be more consistent in assessing and more effective and economical in enforcing payment than individual parents acting in a random and uncoordinated way. It might also be thought that the interposition of an independent, neutral, official body would reduce the acrimony which had all too frequently characterised applications for child maintenance by caring against absent or non-resident parents in the past which, however understandable in the aftermath of a fractured relationship, rarely enured to the benefit of the children. For better or worse, the process was deliberately changed.   The 1991 Act cannot in my opinion be interpreted as conferring any right on a parent in the position of Mrs Kehoe. She is of course the person to whom child maintenance will be paid, directly or indirectly and subject to any deduction of benefit, as the person who incurs the expense of bringing up the children. But the right which she had enjoyed under the former legislation was removed, and the right to recover the maintenance has been vested in the CSA.   This conclusion is not fatal to Mrs Kehoe's argument, but it is very highly damaging. For while the Strasbourg authorities are not bound by the classifications of national law, it is clear that the function of article 6 of the Convention is to guarantee certain important procedural safeguards in the exercise of rights accorded by national law and not ordinarily to require that particular substantive rights be accorded by national law: James v United Kingdom (1986) 8 EHRR 123, para 81; H v Belgium (1987) 10 EHRR 339; Z v United Kingdom (2001) 34 EHRR 97, paras 87 and 98; Matthews v Ministry of Defence [2003] 1 AC 1163, paras 3, 51, 142. Thus, if national law conferred on Mrs Kehoe a right to recover child maintenance from her former husband, article 6 would guarantee her access to an impartial and independent court where her claim would be fairly determined. But article 6 does not require that she have such a right.   I do not think that any of the Strasbourg jurisprudence to which the House was referred throws doubt on that conclusion. In Golder v United Kingdom (1975) 1 EHRR 524, it is true, the Court found a violation of Mr Golder's rights under article 6(1) in the denial of access to a solicitor. But the Court interpreted article 6(1) as conferring a right of access to a court (see paras 28-36 of the judgment); it was plain that this right would have been valueless had Mr Golder been unable to obtain legal advice; and there was no doubt about his right in principle to sue for defamation. I do not think any principle can be extrapolated from this case to assist Mrs Kehoe. In Ashingdane v United Kingdom (1985) 7 EHRR 528, para 54, the Court found it unnecessary to decide whether the right which the applicant sought to assert in this country was, in Convention terms, a "civil right". In Philis v Greece (1991) 13 EHRR 741 the right which the applicant had sought to assert in the national court was to professional fees for which he had contracted and which (he claimed) he had earned. There is, again, no principle which can be extrapolated to assist Mrs Kehoe.   Sympathetic though one must be with Mrs Kehoe, who appears to have suffered extreme frustration and a measure of loss, one cannot in my opinion ignore the wider principle raised by this case. This is that the deliberate decisions of representative assemblies should be respected and given effect so long as they do not infringe rights guaranteed by the Convention. As they have made clear, it is not for the Strasbourg institutions, under the guise of applying the procedural guarantees in article 6, to impose legislative models on member states. Whether the scheme established by the 1991 Act is on balance beneficial to those whom it is intended to benefit may well be open to question, but it is a question for Parliament to resolve and not for the courts, since I do not consider that any article 6 right of Mrs Kehoe is engaged.   I agree with the majority of the Court of Appeal and with my noble and learned friends Lord Hope of Craighead, Lord Walker of Gestingthorpe and Lord Brown of Eaton-under-Heywood, and would accordingly dismiss this appeal. LORD HOPE OF CRAIGHEAD My Lords,   The appellant, Mrs Mary Kehoe, was for many years one of those many thousands of lone parents caring for children who are dependent on the system for the payment of child support maintenance that was set up by the Child Support Act 1991. She was married in 1983 and has four children. They were born in 1982, 1984, 1987 and 1989. In 1992 she and her husband moved from Dublin to the United Kingdom. The marriage broke down in 1993. On 17 December 1993 Mrs Kehoe filed a petition for divorce. On 24 December 1993 she applied to the Child Support Agency under section 4(1) of the 1991 Act for a maintenance assessment to be made for her four children. On 1 January 1994 her husband moved out of the family home. The children were left in her care. She needed her husband's help to support them.   The history of Mrs Kehoe's relationship with the Child Support Agency ("the agency"), of the various maintenance assessments and of the steps which the agency took to try to enforce them against Mr Kehoe is lengthy and complex. The essential facts are set out in Wall J's careful judgment in the Administrative Court [2003] 2 FLR 578, paras 32 to 41 and in Ward LJ's equally careful judgment in the Court of Appeal [2004] EWCA Civ 225; [2004] QB 1378, paras 31 to 37. It is not necessary to set them all out again here. It is enough to provide the following outline by way of background. The facts   There was an initial delay by the agency in sending a maintenance inquiry form to Mr Kehoe. It lasted for well over a year, for which Mrs Kehoe has been compensated. The form was eventually sent to him on 25 May 1995. This was the date as from which his liability was to be calculated. He provided insufficient information for a full assessment to be made at that stage, so an interim maintenance assessment was made with effect from 5 October 1995. A full maintenance assessment was made later, but arrears of maintenance due by him since May 1995 began to accumulate. In June 1996 the agency applied in the magistrates' court for a liability order to be made against him under section 33(3) of the 1991 Act. At a hearing on 13 August 1996, at which Mrs Kehoe was not present, Mr Kehoe disputed the amount of the arrears. The hearing had to be adjourned for the dispute to be resolved. On 23 September 1996 the agency decided to withdraw the application because the amount of the arrears could not be substantiated.   Arrears continued to accumulate, so the agency made a second application for a liability order to cover arrears that had arisen between 25 May 1995 and 11 September 2000. On 15 December 2000 this application was granted. Bailiffs were instructed to levy distress, but this was unsuccessful. A deduction from earnings order was issued on 9 October 2001 and it was followed by a further order for an increased amount on 21 February 2002. But Mr Kehoe was a director of the company on which the orders were served, and these steps too were unsuccessful. When he was interviewed by the agency on 21 October 2002 Mr Kehoe alleged that two of the children had been living with him for five years and that a third child had moved to live with him recently. He also said that Mrs Kehoe had moved to Spain where she was living with the fourth child. The agency established that Mrs Kehoe had moved to Spain permanently, so it closed her file on 13 January 2003 with effect from 30 September 2002. But arrears remain due to Mrs Kehoe which the agency is still seeking to enforce against Mr Kehoe.   Mrs Kehoe was for a time in receipt of child benefit. But she had a part-time job when Mr Kehoe left the family home, and in October 1994 she obtained full-time employment as a secretary. Although she had to struggle to make ends meet, she did not claim income support, family credit or any other benefit of the kind prescribed for the purposes of section 6 of the 1991 Act. So she is not and never has been one of those persons with care who may be required under section 6(1) to authorise the Secretary of State to take action under the Act to recover child support maintenance from the absent parent. Her position is that she was entitled under section 4 of the 1991 Act to apply to the Secretary of State for the making of a maintenance assessment. This was done on her own initiative.   Section 4(2) of the 1991 Act provides: "Where a maintenance assessment has been made in response to an application under this section the Secretary of State may, if the person with care or absent parent with respect to whom the assessment was made applies to him under this subsection, arrange for - (a)  the collection of the child support maintenance payable in accordance with the assessment; (b)  the enforcement of the obligation to pay child support maintenance in accordance with the assessment." The issues   The question which lies at the heart of this case is whether the provisions of the 1991 Act which preclude a person with care from playing any part in the enforcement of maintenance assessments made against the absent parent in response to an application made under section 4 of the Act are compatible with article 6(1) of the European Convention for the Protection of Human Rights and Fundamental Freedoms. It should be noted that no challenge is being made in this case to the system which the 1991 Act lays down for the making of the assessments for child support maintenance by the agency. It is not suggested that this part of the system is incompatible with the Convention. It is the enforcement stage of the process only that is being brought under scrutiny. Nor are we concerned in this case with the various situations where the courts retain jurisdiction over claims for the enforcement of the right of children to be maintained by their parents which are outside the system for which responsibility has been placed by the 1991 Act on the agency: for a convenient list, see Wilkinson and Norrie, Parent and Child, 2nd ed (Edinburgh 1999), paras 14.13-14.   Mrs Kehoe's complaint is that the agency delayed unreasonably in taking enforcement action against Mr Kehoe, that the facts asserted by Mr Kehoe which were accepted by the agency when he disputed the amount of the arrears were not correct and that she was precluded by the statutory scheme from intervening on her own behalf for the enforcement of the maintenance assessments. She claims that the effect of the scheme was to restrict her right of access to a court for the determination of her civil rights within the meaning of article 6(1). She seeks a declaration under section 4(2) of the Human Rights Act 1998 that the provisions of the 1991 Act are incompatible with her Convention rights under that article. She also seeks a declaration that her Convention rights were breached by delay on the part of the agency. She claims damages under sections 7 and 8 of the Human Rights Act 1998 with respect to the agency's acts and failures to act for the period from 2 October 2000 when the relevant sections of that Act came into force.   The first question is whether Mrs Kehoe's right to the collection and enforcement of a maintenance assessment made in response to an application made under section 4 of the 1991 Act is a "civil right" within the meaning of article 6(1) of the Convention. If that question is answered in the affirmative, two further questions then arise: whether the scheme which the 1991 Act lays down is nevertheless compatible with the Convention because the duties of the Secretary of State under the Act, being amenable to judicial review, are subject to control by a court having full jurisdiction to deal with the case as the nature of the case requires so as to fulfil the Alconbury criteria (R (Alconbury Developments Ltd) v Secretary of State for the Environment, Transport and the Regions [2001] UKHL 23; [2003] 2 AC 295, 320-322, paras 49-54, per Lord Slynn of Hadley; p 330, para 88, per Lord Hoffmann); and, if not, whether the restriction on the right of the parent's access to a court for the enforcement of the maintenance assessment is nevertheless compatible with article 6(1) because it is proportionate. The scheme of the 1991 Act   A comprehensive description of the scheme of the 1991 Act, as amended by the Child Support Act 1995 and the Child Support, Pensions and Social Security Act 2000, is set out in the judgments of Wall J in the Administrative Court [2003] 2 FLR 578, paras 18 to 27 and of Ward LJ in the Court of Appeal [2004] 2 WLR 1481, paras 21 to 30. I can confine myself to the essential details.   The basic principles are set out in sections 1 to 10 of the 1991 Act, as originally enacted. It is necessary, to set the scene for this judgment, to mention only some of them. Section 1(1) provides that, for the purposes of the Act, each parent of a qualifying child is responsible for maintaining him. Section 1(2) provides: "For the purposes of this Act, an absent parent shall be taken to have met his responsibility to maintain any qualifying child of his by making periodical payments of maintenance with respect to the child of such amount, and at such intervals, as may be determined in accordance with the provisions of this Act." Section 3 defines the expressions "qualifying child", "absent parent" and "person with care". A child is a qualifying child if one or both of his parents is, in relation to him, an absent parent. The parent of any child is an absent parent in relation to the child if that parent is not living in the same household with the child and the child has his home with a person who is, in relation to him, a person with care. A person is a person with care in relation to any child if he is a person with whom the child has his home and usually provides day to day care for the child. That person need not be an individual: see section 44(2).   Section 4(1) provides that a person who is, in relation to any qualifying child or any qualifying children, either the person with care or the absent parent may apply to the Secretary of State for a maintenance assessment to be made under the Act with respect to that child or any of those children. That provision is to be contrasted with section 6(1), which provides that where income support, family credit or any other benefit of a prescribed kind is claimed by or in respect of, or paid to or in respect of, the parent of a qualifying child she shall, if she is a person with care of the child and she is required to do so by the Secretary of State, authorise him to take action under the Act to recover child maintenance support from the other parent. The Secretary of State has power to require a parent to authorise the making of an assessment as soon as benefits of the kind there specified are claimed. That is not what happened in Mrs Kehoe's case. So your Lordships are concerned with only maintenance assessments made under section 4, the making of an application for which is at the option of either the person with care or the absent parent.   Section 11 provides that any application for a maintenance assessment made to the Secretary of State shall be referred by him to a child support officer, and that the amount of child support maintenance to be fixed by any maintenance assessment shall be determined in accordance with the provisions of Schedule 1 which provides for its calculation according to an elaborate formula. Once this stage is reached we are in the field of algebra. But fortunately it is not necessary to probe into these details in this case.   I have already quoted the terms of section 4(2) in full, as they lie at the centre of this dispute: see para 17. In summary, it provides that, where a maintenance assessment has been made in response to an application under section 4 and either the person with care or the absent parent with respect to whom the assessment was made applies to him under that subsection, the Secretary of State may arrange for the enforcement of the obligation to pay child support in accordance with the assessment. Section 4(2) must be read together with section 4(3), which provides that where an application for the enforcement of the obligation authorises the Secretary of State to take steps to enforce the obligation whenever he considers it necessary to do so, the Secretary of State may act accordingly. These subsections must also be read together with section 2, which provides that where the Secretary of State is considering the exercise of any discretionary power conferred by the Act, he shall have regard to the welfare of any child likely to be affected by his decision. In practice, of course, applications under section 4 are made not to the Secretary of State himself but to the agency. It is the agency that decides whether or not, in any given case, the discretionary powers which the section confers on the Secretary of State with regard to the enforcement of the obligation to pay child support maintenance should be exercised.   Section 8 deals with the role of the courts with respect to maintenance for children. Subsection (1) provides that it applies in any case where a child support officer would have jurisdiction to make a maintenance assessment with respect to a qualifying child and an absent parent of his on the application of a person entitled to apply for that assessment. The basic rule is set out in subsection (3), which provides: "In any case where subsection (1) applies, no court shall exercise any power which it would otherwise have to make, vary or revive any maintenance order in relation to the child and absent parent concerned."   The jurisdiction of the courts to make orders for the maintenance of children is preserved in the various circumstances described in the remaining subsections of section 8. These include cases such as where the court is satisfied that the circumstances of the case make it appropriate for the absent parent to make payments under a maintenance order in addition to the child support maintenance payable by him in accordance with the maintenance assessment: see subsection (6). Parents who have previously been able to agree in writing the level of child maintenance may obtain an order from the court by consent: see subsection (5). Section 9(2) provides that nothing in the Act shall be taken to prevent any person from entering into an agreement for the making of periodical payments by way of maintenance to or for the benefit of any child. But it is unnecessary to explore these details further, as none of these exceptions apply in the case of Mrs Kehoe. The rights and obligations under the 1991 Act in domestic law   In Matthews v Ministry of Defence [2003] UKHL 4; [2003] 1 AC 1163, 1169, para 3 Lord Bingham of Cornhill said that an accurate analysis of a claimant's substantive rights in domestic law is an essential first step towards deciding whether he has, for purposes of the autonomous meaning given to the expression "civil rights" by the Convention, a "civil right" such as will engage the guarantees in article 6. I would respectfully follow this guidance. So I must now take a closer look at the effect of the provisions of the 1991 Act, as seen against the background of the previous law which the scheme of the Act was designed to replace.   The extent of parents' duty to maintain their children at common law and the statutory procedures that were introduced to enable courts to make orders for maintenance to be paid to or for a child's benefit have been described by Ward LJ in the Court of Appeal [2004] 2 WLR 1481, paras 7 to 16, and by my noble and learned friend Baroness Hale of Richmond. At the outset of his summary Ward LJ makes the point that, while there was a common law duty to maintain, the common law provided no remedy. Under English law a wife could neither claim nor enforce any right to maintenance, either for herself or the children, in the civil courts. The gap was filled for the first time by section 35 of the Matrimonial Causes Act 1857, which enabled the divorce courts to make provision with respect to the custody, maintenance and education of children, and by section 52 of that Act which provided for the enforcement of these orders. The jurisdiction was continued and enlarged upon in a series of later statutes. For example, the Guardianship of Infants Act 1925 enabled the court to make an order against a parent to pay such weekly or other periodic sum towards the maintenance of his child as, having regard to the means of that parent, it might think reasonable. The current powers are set out in section 15 of and Schedule 1 to the Children Act 1989 and, in regard to Scotland, sections 1 to 6 of the Family Law (Scotland) Act 1985. These provisions have not been repealed. But the effect of section 8(3) of the 1991 Act is that the court's power to make maintenance orders under those statutes in relation to a child is no longer available where a child support officer would have jurisdiction to make a maintenance assessment under the 1991 Act.   The effect of the 1991 Act, then, is to replace the existing statutory framework with an entirely new scheme. The background to its introduction was explained in paragraph 2 of the summary in the White Paper, Children Come First (October 1990) (Cm 1264), which stated: "The present system of maintenance is unnecessarily fragmented, uncertain in its results, slow and ineffective. It is based largely on discretion. The system is operated through the High and county courts, the magistrates' courts, the Court of Session and the sheriff courts in Scotland and the offices of the Department of Social Security. The cumulative effect is uncertainty and inconsistent decisions about how much maintenance should be paid. In a great many instances, the maintenance awarded is not paid or the payments fall into arrears and take weeks to re-establish. Only 30 per cent of lone mothers and 3 per cent of lone fathers receive regular maintenance for their children. More than 750,000 lone parents depend on income support. Many lone mothers want to go to work but do not feel able to do so."   The defects identified in this paragraph were due in part to the fact that the assessment of the amounts to be paid as maintenance for children by their parents was left to the courts, leading to inconsistency; and in part to the fact that the initiative lay with the parent in whose favour an order was made to ensure that payments were kept up to date and that, where necessary, the order was enforced, with the result that in many cases the amounts due were not paid. Hitherto the approach had been to confer a right on the parent with care to claim maintenance for the child and, if the sums which the court ordered to be paid were not paid, to take proceedings in her own name for their recovery. The system depended on the traditional view that the solution to problems created by gaps in the common law was to create new rights and obligations by statutory enactment. The enforcement of these rights and obligations would then follow the ordinary course, whereby it was up to the party whose rights were infringed to take proceedings to enforce them.   The 1991 Act departs entirely from this approach. As Hale LJ said in Huxley v Child Support Officer [2000] 1 FLR 898, 908, the child support system which was introduced by this Act is fundamentally a nationalised system for assessing and enforcing an obligation which each parent owes primarily to the child. It replaces the powers of the courts to make orders for periodical payments to be made for children. And it replaces the system which left it to parents to apply for the enforcement of these orders with a system that places the responsibility for enforcement on the Secretary of State and through him on the agency.   The Act starts by asserting in section 1(1) that, for its purposes, each parent of a qualifying child is responsible for maintaining him. It describes the maintenance of any qualifying child of his by an absent parent in section 1(2) as a "responsibility". Section 1(2) states that the absent parent will have met this responsibility by making such periodical payments of maintenance as may be determined in accordance with the provisions of the Act. The Act uses the word "duty" in section 1(3), where it refers to the duty of the absent parent with respect to whom the assessment was made to make the payments, and the word "obligation" in section 4(2)(b), where it refers to the enforcement of the obligation to pay child support maintenance in accordance with the assessment. But nowhere in the Act is it said that the absent parent owes a duty, or is under an obligation, to pay that amount to the person with care. Nor is it said anywhere that the person with care has a right which she can enforce against the absent parent.   The effect of the Act is that the obligation to pay the maintenance assessment is owed in respect of the qualifying child but that it is enforceable by the Secretary of State. As Morritt LJ said in Department of Social Security v Butler [1995] 1 WLR 1528, 1540, the Secretary of State claims in respect of the statutory right which is correlative with the obligation expressed in section 1(3). Both the person with care and the absent parent are given the right by section 4(1) to apply to the Secretary of State for the making of a maintenance assessment. Where an assessment is made, they are both then given the right by section 4(2) to apply to the Secretary of State to arrange for its collection and enforcement. But enforcement is not something which they can demand. Section 4(2) makes it clear that enforcement of the obligation to pay child support maintenance is at the discretion of the Secretary of State, not at the discretion of the person who applies for its enforcement.   I would conclude that the 1991 Act has deliberately avoided conferring a right on the person with care to enforce a child maintenance assessment against the absent parent. Enforcement is exclusively a matter for the Secretary of State. It follows that the person with care has no right to apply to a court for the enforcement of the assessment. A child who has attained the age of 12 years and is habitually resident in Scotland is given the right to apply to the Secretary of State for a maintenance assessment by section 7(1). But here too the enforcement of any assessment is a matter for the Secretary of State, not for the child. The system has been designed on the assumption that a system of child support maintenance which is run by the state will operate more efficiently than one that relies on private enterprise. Experience has shown that its operation in practice has fallen far short of what was expected of it. But that is the system that Parliament has laid down, and we must take it as we find it. It does not permit a person with care to intervene in proceedings for its enforcement which are not being conducted as efficiently or as effectively as she would like. This is a consequence of the fact that she has no right against the absent parent which she can enforce in any court. It is a matter of substantive law, not of procedure. Does the 1991 Act create a "civil right" for the purposes of article 6?   Article 6(1) of the Convention provides that in the determination of "his civil rights and obligations" everyone is entitled to a fair hearing by an independent and impartial tribunal established by law. This provision must be read in the light of the rule of law referred to in the preamble to the Convention, of which the principle whereby a civil claim must be capable of being submitted to a judge is an integral part. In Golder v United Kingdom (1975) 1 EHRR 524, 535-536, paras 35-36, the European Court said that this principle ranks as one of the universally recognised fundamental principles of law and that the right of access constitutes an element which is inherent in the right stated in article 6(1). In Ashingdane v United Kingdom (1985) 7 EHRR 528, 546-547, para 57, the court said that limitations applied by the state on the right of access must not restrict or reduce the access left to the individual in such a way or to such an extent that the very essence of the right is impaired. But in order to invoke this principle one must first be able to say that the individual has a claim for the infringement of a "civil right".   The approach which the European Court takes to this issue was explained by the Commission in Pinder v United Kingdom (1984) 7 EHRR 464, 465, para 5. It is worth quoting the following sentences from that important paragraph: "The Commission … recalls that the concept of 'civil rights' is autonomous. Thus, irrespective of whether a right is in domestic law labelled 'public', 'private', 'civil' or something else, it is ultimately for the Convention organs to decide whether it is a 'civil' right within the meaning of article 6(1). However, in the Commission's view, article 6(1) does not impose requirements in respect of the nature and scope of the relevant national law governing the 'right' in question. Nor does the Commission consider that it is, in principle, competent to determine or review the substantive content of the civil law which ought to obtain in the State Party any more than it could in respect of substantive criminal law. As it has stated in App No 7151/75: Sporrong and Lönnroth v Sweden, series B: Whether a right is at all at issue in a particular case depends primarily on the legal system of the State concerned. It is true that the concept of a 'right' is itself autonomous to some degree. Thus it is not decisive for the purposes of article 6(1) that a given privilege or interest which exists in the domestic system is not classified or described as a 'right' by that system. However, it is clear that the Convention organs could not create by way of interpretation of article 6(1) a substantive right which has no legal basis whatsoever in the State concerned."   As this passage indicates, each of the two words in the phrase "civil right" has a part to play in the assessment as to whether the guarantee in article 6(1) is engaged. The exercise may be broken down into stages in this way. First it must be demonstrated that the applicant is seeking access to a court to enforce what the European Court will accept, according to the autonomous meaning which it gives to this word, is a "right". It must then be demonstrated that this is a right which the European Court will classify, again according to the autonomous meaning that it gives to it, as a "civil" right. Then there is the question whether the "civil right", if it is subject to some degree of limitation by the national law, is restricted or reduced to such a degree or to such an extent that the very essence of the right is impaired. This is because, while the right of access to a court is not the subject of an absolute guarantee in article 6(1), the rule of law must be maintained and the individual must be protected against the exercise of arbitrary power by the executive. If it is so restricted or reduced, the Convention right will have been breached.   Each of these three stages presents its own problems. It is the question whether there is a 'right' at all that is in issue in Mrs Kehoe's case. Her case can be contrasted with Golder v United Kingdom (1975) 1 EHRR 524, where there was no doubt that the right which the applicant was seeking to enforce was a "right" and that it was a "civil right" too, as his complaint was that he was being prevented from instituting libel proceedings against a prison officer. It can be contrasted also with Ashingdane v United Kingdom (1985) 7 EHRR 528, where it was contended that the applicant did not have a "civil right" to challenge the legality of his continued detention in a secure hospital. The court said at p 546, para 54, that it did not consider it necessary to settle that dispute as it had come to the conclusion that, even assuming article 6(1) to be applicable, the requirements of that provision were not violated. In Philis v Greece (1991) 13 EHRR 741 a consultant engineer claimed that he had been denied access to a court for the recovery of fees that were owed to him, so here too there was an undoubted "right". In Hornsby v Greece (1997) 24 EHRR 250 the complaint was that a judicial decision in the applicants' favour had not been implemented. There was no issue in that case either as to whether there was a "right".   The problem in this case differs also from that which was considered in Matthews v Ministry of Defence [2003] 1 AC 1163, where the issue was whether the limitations that had been imposed on the serviceman's right of action was the product of rules of procedure which would engage the article 6(1) guarantee or was the product of substantive law which was for the State party itself to determine. We do not need in this case to trace the dividing line between what the court in Fayed v United Kingdom (1994) 18 EHRR 393, 430, para 67 referred to as the procedural and substantive limitations of a given entitlement under domestic law. Lord Hoffmann explained in his speech in Matthews, paras 29-38 how that issue should be approached. In these paragraphs he makes the point that the purpose for which this distinction exists is to prevent contracting states from imposing restrictions on the right to bring one's dispute before the judicial branch of government in a way that threatens the rule of law and the separation of powers: see para 35. In the present case, however, the issue is much more clear cut. It is whether Mrs Kehoe was given a right of any kind by the 1991 Act which could be classified as a "right" within the meaning of article 6(1).   The key to this case lies in the point of principle that was identified by the Commission in Pinder v United Kingdom (1984) 7 EHRR 464, 465, para 5. This is that, while the concept of a "right" is autonomous to some degree because it does not depend on how the privilege or interest concerned is classified in the domestic system, it is not open to the European Court when it is applying article 6(1) to create a substantive right which has no legal basis in that system at all. Article 6(1), on its own terms, has nothing to say about the content of the individual's civil rights. Nor does it impose an obligation on the state party to confer any particular rights in substantive law on the individual. As the European Court said in James v United Kingdom (1986) 8 EHRR 123, 157-158, para 81: "Article 6(1) extends only to 'contestations' (disputes) over (civil) 'rights and obligations' which can be said, at least on arguable grounds, to be recognised under domestic law: it does not in itself guarantee any particular content for (civil) 'rights and obligations' in the substantive law of the Contracting States." In Z v United Kingdom (2001) 34 EHRR 97, 134, para 87 the Court quoted these words which I have taken from its decision in James v United Kingdom, which it said was part of "its constant case law". At p 137, para 98 the Court said: "As it has recalled above in paragraph 87 it is a principle of Convention case law that article 6 does not in itself guarantee any particular content for civil rights and obligations in national law, although other articles such as those protecting the right to respect for family life and the right to property may do so. It is not enough to bring article 6(1) into play that the non-existence of a cause of action in domestic law may be described as having the same effect as an immunity, in the sense of not enabling the applicant to sue for a given category of harm."   The last sentence of the passage that I have quoted from Z v United Kingdom can, I think, be applied directly to the present case. It is not enough to bring article 6(1) into play to assert that, as the whole object of the scheme is that the person with care is the person who will ultimately benefit from the enforcement process, Mrs Kehoe should be allowed at least some say in how that process is conducted. I respectfully agree with Latham LJ that it seems unsatisfactory that she should not have that right, as the agency's priorities are inevitably different from those of the person with care of the child, who may disagree profoundly with the agency as to how the proceedings in which she has such an obvious interest should be conducted: [2004] QB 1378, 1414, para 102. But the fact is that the 1991 Act itself, which is the only source from which it could be derived, does not give her that right. The scheme of the 1991 Act is not designed to allow the person with care to play any part in the enforcement process at all. It is not possible to envisage how that might be done without re-writing the scheme which the Act has laid down. In my opinion this is not even a case where it can be said that the existence of a right to participate in this process is arguable. Conclusion   I would hold that Mrs Kehoe's argument that the system which prevents her from playing any part in the enforcement process is incompatible with article 6(1) fails at the first stage. This is because she has no substantive right to do this in domestic law which is capable in Convention law of engaging the guarantees that are afforded with regard to "civil rights and obligations" by that article. I appreciate the force of her complaint that the agency has failed to take action within a reasonable time to enforce the assessments. But, as article 6(1) is not engaged, the conclusion must be that the agency cannot be said to have acted unlawfully within the meaning of section 7(1) of the Human Rights Act 1998. The result is that that Act cannot provide her with a remedy. I would dismiss the appeal. LORD WALKER OF GESTINGTHORPE My Lords,   I have had the great advantage of reading in draft the opinions of my noble and learned friends Lord Bingham of Cornhill and Lord Hope of Craighead. I am in full agreement with their opinions. The Child Support Act 1991 as amended did not give Mrs Kehoe any right to participate directly in the process of enforcing a child support maintenance assessment against Mr Kehoe, in the sense of her being able to bring proceedings in her own name against him. That is, in the circumstances of her case, prohibited by section 8 of the 1991 Act.   I would only add that I would not accept (and I do not understand my Lords to be expressing the view) that Mrs Kehoe has no enforceable rights whatever in respect of the enforcement process. If the Child Support Agency were to refuse to enforce a claim because it made some error of law (such as misunderstanding the extent of its statutory powers) Mrs Kehoe could take proceedings by way of judicial review, and in that way she could hope to influence the enforcement process. She would plainly have a sufficient interest to bring such proceedings.   Whether she would (in any such judicial review proceedings) be securing the determination of a civil right is, I think, open to debate. She would be acting to obtain through a social welfare agency a pecuniary benefit in which she had a direct personal interest, but in the enforcement of which the agency had a measure of discretion. The trend of the Strasbourg jurisprudence is towards an ever-widening interpretation of "civil rights": see Runa Begum v Tower Hamlets London Borough Council [2003] 2 AC 430, 439, para 6 (Lord Bingham of Cornhill); pp 454-456, paras 61 to 69 (Lord Hoffmann) ; pp 459-461, paras 84-94 (Lord Millett).   There are, I think, parallels with private law relationships in which an individual may have interests which would generally be regarded as important legal rights, but which are not normally enforceable by direct action. A shareholder has an interest in seeing that his company's assets are not misappropriated, and a member of an occupational pension scheme has a similar interest in respect of assets in the pension fund. Well-settled principles of company law and trust law (to which there are also well-settled exceptions) require him to call on the company or the trustees to enforce rights of action which are vested, not in him, but in the company or the trustees. If they fail to act the shareholder or beneficiary may have to embark on domestic proceedings as an indirect means of trying to enforce his interest. The absence (as a normal rule) of a direct right of action is not a deprivation of his Article 6 (1) rights, but is a reflection of substantive principles which are part of the content of British company law or English trust law. Mrs Kehoe's position under the 1991 Act is essentially the same.   I agree that the appeal should be dismissed. BARONESS HALE OF RICHMOND My Lords,   This is another case which has been presented to us largely as a case about adults' rights when in reality it is a case about children's rights. It concerns the obligation to maintain one's children and the corresponding right of those children to obtain the benefit of that obligation. The issue is whether the restrictions placed on direct access to the courts to enforce that obligation by section 8(1) and (3) of the Child Support Act 1991 are compatible with article 6 of the European Convention on Human Rights. Article 6 is concerned only with the fair and impartial adjudication and enforcement of the rights recognised in domestic law. It does not guarantee any particular content to those rights. Put another way, the issue is whether the 1991 Act has defined the extent of that obligation and that right or whether it has merely altered the machinery for assessing and enforcing them. If it is the latter, then the underlying right still exists and the Act's provisions may be regarded as procedural only. If it is the former, then all that survive are the rights set out in the Act itself. In my view, it is not possible to answer that question by looking only at the rights contained in the 1991 Act itself. They have to be set in the context of the scope of the parents' obligations and the children's rights as a whole. The Child Support Act is only one of a number of ways in which the law recognises these. The development of the parental obligation to maintain   It is difficult to think of anything more important for the present and future good of society than that our children should be properly cared for and brought up. We who are nearing the end of our productive lives will depend more than most upon the health, strength and productivity of the following generations. The human infant has a long period of dependency in any event. But we have added to that by our requirements that they be educated up to the age of 16 and disabled from earning their own living until then. Someone must therefore provide for them. Blackstone (Commentaries, book 1, chapter XVI) regarded this as a matter of natural law: "The duty of parents to provide for the maintenance of their children, is a principle of natural law; an obligation laid on them not only by nature herself, but by their own proper act, in bringing them into the world: for they would be in the highest manner injurious to their issue, if they only gave their children life, that they might afterwards see them perish, By begetting them, therefore, they have entered into a voluntary obligation, to endeavour, so far as in them lies, that the life which they have bestowed shall be supported and preserved. And thus the children will have a perfect right of receiving maintenance from their parents."     He goes on to say that: "It is a principle of law, that there is an obligation on every man to provide for those descended from his loins; and the manner in which this obligation shall be performed, is pointed out ..."     This is so even for children born out of wedlock: "Let us next see the duty of parents to their bastard children by our law, which is principally that of maintenance. For, though bastards are not looked upon as children to any civil purposes, yet the ties of nature, of which maintenance is one, are not so easily dissolved;.."   Our law has always recognised the right of a child who is too young to fend for herself to be provided for by her parents. The problem has always been to find an effective method of enforcement. The child was too young to do so and the married mother had no separate right to sue her husband. Hence the machinery of enforcement was laid down in the Poor Laws. As Lindley LJ put it in Thomasset v Thomasset [1894] P 295, at p 299, "As regards maintenance, the parents' obligations were measured both at law and in equity by the Poor Laws".   But the fact that the father's obligations were measured by the Poor Laws did not mean that the courts of law and equity would ignore them. The principles underlying the later statutory concept of 'wilful neglect to maintain' a wife or child, even the later liability to reimburse the public purse for benefits expended, were those developed by the common law. Hence, just as the husband's common law duty to maintain his wife would normally be discharged by providing the home which they shared, the father's duty to maintain his children would be discharged by providing them with a home: see eg McGowan v McGowan [1948] 2 All ER 1032, per Lord Hodson at 1034.   The common law courts would not intrude into the matrimonial relationship, or trespass upon the jurisdiction of the ecclesiastical courts over that relationship, by ordering the husband to make payments to his wife. But a wife who was living with her husband did have the apparent authority to contract as his agent for the expenses of the household. And if they were living apart, the common law recognised her agency of necessity, the right to pledge her husband's credit for necessaries according to her station in life. Unlike the housekeeping authority, this could not be countermanded by the husband. But the agency of necessity subsisted only if the wife was justified in living apart from her husband. Hence she would lose it for ever if she was guilty of adultery, no matter how badly her husband had behaved: see Govier v Hancock (1796) 6 Term Rep 603; it would be suspended while she was in desertion: see Jones v Newtown and Llanidloes Guardians [1920] 3 KB 381; but if they were obliged to live apart through no fault of hers, for example because of illness, the obligation continued: see Lilley v Lilley [1960] P 169.   For a while there seems to have been a view that a child might have a similar agency of necessity to enforce the father's duty to maintain him, the moral obligation being if anything stronger than that towards a wife: see Urmston v Newcomen (1836) 4 Ad & El 899. It was eventually firmly established in Mortimore v Wright (1840) 6 M & W 482 that a father was not liable for his son's debts, even for necessaries, unless the father had agreed to this, whether expressly or by implication; see also Shelton v Springlett (1851) 11 CB 452. But these were cases of near-adult sons who might be expected to fend for themselves. On the other hand, it was recognised that if a father placed his young children in the care of a servant or nurse, he might be liable for necessaries supplied by her or at her request: see Hesketh v Gowing (1804) 5 Esp 131; Cooper v Phillips (1831) 4 C & P 581. But these may have been cases of implied authority rather than agency of necessity. However, once it became possible for the wife to obtain custody of a child even against the father's will, the law recognised that her agency of necessity extended to necessaries for a child in her custody as well as for herself: see Bazeley v Forder (1868) LR 3 QB 559.   A further recognition by the common law of a duty to maintain was the opinion of the judges that it was an indictable misdemeanour at common law for a person under a duty to provide for an infant of tender years to neglect to do so and thereby injure his health: see R v Friend (1802) Russ & Ry 20. A comprehensive offence of ill-treating, neglecting, abandoning or exposing a child was enacted in the Prevention of Cruelty to, and Protection of Children Act 1889, the forerunner of the present offence of child cruelty under section 1 of the Children and Young Persons Act 1933. A parent or person 'legally liable to maintain' a child is deemed to have neglected him for this purpose if he has failed to provide adequate food, clothing, medical aid or lodging, even if he is not living with the child. Until the Family Law Reform Act 1987, the expression 'parent' did not include the father of an illegitimate child; but the expression 'legally liable to maintain' did include a putative father if he had been adjudged to be such.   Statutory recognition of the parental duty to maintain dates back to the Elizabethan poor laws, culminating in the Poor Relief Act of 1601, 43 Elizabeth c 2, s 7 of which provided that " . . . the father and grandfather, and the mother and grandmother, and the children of every poor . . . person . . . being of a sufficient ability, shall, at their own charges, relieve and maintain every such poor person in that manner, and according to that rate, as by the justices of peace of that county where such sufficient persons dwell, or the greater number of them, at their general quarter sessions shall be assessed; upon pain that every one of them shall forfeit 20s for every month which they shall fail therein." The practice was to order, not only payment for the future, but also repayment of money already spent by the overseers of the poor: see Neville Brown, "National Assistance and the Liability to Maintain One's Family" (1955) 18 MLR 110, at p 113. Thus the principle of family responsibility or solidarity was laid down. The Poor Relief (Deserted Wives and Children) Act 1718, 5 Geo I, c 7, allowed warrants for the seizure of deserting husband's property in order to recoup relief given to his wife and children. The procedure for obliging the putative father of a child born out of wedlock to maintain the child was rather different, but according to Professor Brown, more commonly used. For if the children of married parents were poor, their parents would also be poor; but it by no means followed that if an unmarried mother was poor, the father would also be poor.   The new Poor Law Act of 1834 made it a great deal more difficult to recover the cost of poor relief from the father of a child born outside wedlock. It repealed the laws allowing the mother or Overseers of the Poor to charge or affiliate a man as the father, and substituted a procedure whereby the Overseers could seek an order from the Quarter Sessions for reimbursement. But, far from reducing the problem of illegitimacy (by deterring the mothers), as the Poor Law Commissioners had hoped, this seems to have increased it (by failing to deter the fathers). At all events, it led to the Poor Law Amendment Act 1844. This gave the unmarried mother the right to apply for an order for maintenance from the putative father, in what later became affiliation proceedings. These remained essentially unchanged until the Family Law Reform Act 1987 removed most of the legal distinctions between the children of married and unmarried parents. They were, however, the first in the modern line of statutes giving one parent the right to claim an order for periodical payments against the other.   The married mother had to wait until the Matrimonial Causes Act 1857 transferred the matrimonial jurisdiction of the ecclesiastical courts to grant decrees of nullity or divorce a mensa et thoro, now called judicial separation, to a new Court for Matrimonial Causes. It also gave that court the power to grant a divorce. Pending and on making those decrees, the court could also make orders for the custody, maintenance and education of the children (s 35). This power was later made available after the final decree (Matrimonial Causes Act 1859, s 4) and then to decrees for restitution of conjugal rights (Matrimonial Causes Act 1884, s 6). The great majority of married mothers, who could not afford to go to the new court, had to wait until the Matrimonial Causes Act 1878 first gave them the right to apply (in very limited circumstances) to a magistrates' court for a separation and maintenance order and for custody of children up to the age of 10. The grounds for making such orders were soon extended, first by the Married Women (Maintenance in Case of Desertion) Act 1886 and then by the Summary Jurisdiction (Married Women) Act 1895, to include, among other things, wilful neglect to provide reasonable maintenance for her or her infant children whom her husband was 'legally liable to maintain' (1895 Act, s 4). A separate power to award limited weekly maintenance for a child in her custody was given by the Married Women (Maintenance) Act 1920, s 1. Meanwhile, a succession of 19th century Acts gave the mother the independent right to apply for the custody of the children, and the Guardianship of Infants Act 1925, s 3(2), gave the court power to order the father to make weekly payments (originally up to 10 shillings a week) for a child in her custody.   These were the origins of the four private law systems under which one parent might be ordered to make payments to or for the benefit of a child being looked after by another: (i) as an ancillary to matrimonial causes, which until 1967 were always in the High Court; (ii) in matrimonial proceedings in magistrates' courts; (iii) in Guardianship of Minors Act proceedings in the High Court, county courts or magistrates' courts; and (iv) in affiliation proceedings in magistrates' courts, which were until 1987 the only means of obtaining support from the father of an illegitimate child. The Family Law Reform Act 1987 removed the discrimination between legitimate and illegitimate children by expanding the powers under the Guardianship of Minors Acts to include the capital provision which is available for the children of married parents in matrimonial causes and making them available to both. The Guardianship of Minors Act powers were replaced by Schedule 1 to the Children Act 1989; but this left intact the powers in matrimonial causes and matrimonial proceedings so as to avoid having to consider financial provision for the child separately from provision for the adults.   There is also a separate system, descended from the Poor Law, for recovering the costs of public assistance from 'liable relatives'. We have already seen the extent of the family obligations between parents, grandparents and children which dates back to the Elizabethan poor law. Obligations towards wives, and then husbands, came later. The position which had been reached by 1927 was consolidated in section 41 of the Poor Law Act of that year, which was repeated in section 14 of the Poor Law Act 1930. The power of the poor law authorities to recoup from liable relatives was widely used until the outbreak of World War I. According to Sir Morris Finer and Professor O R McGregor in their invaluable 'The History of the Obligation to Maintain' (published as Appendix 5 to the Report of the Committee on One-Parent Families, chaired by Sir Morris Finer, 1974, Cmnd 5629), '. . . the poor law authorities were much better placed to arraign liable relatives and to enforce claims for reimbursement of poor relief against them. But even their success was illusory because . . . the result in no less than half the cases before 1914 was not reimbursement but the imprisonment of the liable relative.'   The Poor Law was abolished by the National Assistance Act 1948. In the post war welfare state, it was expected that most areas of need would be covered by national insurance benefits and that means-tested benefits would be a safety net for the few who were not covered by the national insurance scheme. The 1948 Act retained the possibility of recovery from a 'liable relative' but reduced those liable: under section 42, a man was liable to maintain his wife and children, including illegitimate children of whom he had been adjudged putative father, and a woman was liable to maintain her husband and children. Neither was liable to maintain a former spouse.   It was also intended that the receipt of national assistance, later to become supplementary benefit, and later still income support, should not carry a stigma. As Dr Stephen Cretney relates, in his masterly history, Family Law in the Twentieth Century, A History, 2003, at p 460, in keeping with this new entitlement-based approach the benefit authorities changed their policy about seeking recovery from liable relatives. Instead of routinely seeking this, they would try to reach agreement with the husband or father, and accept any offer which they considered reasonable. Rather than take proceedings themselves, they would encourage the mother to do so. The disadvantage for the mother was that she would then not know from week to week how much benefit she would get, because it all depended upon how much maintenance the husband or father had paid that week. The sensible solution eventually found was that she would assign or 'divert' any payment made into the magistrates' court to the benefit authorities. They could then issue her with an order book which she could safely cash each week. Although the benefit authorities retained their power to seek recovery from the liable relative, in practice this was rarely done even in cases where the wife or mother had, for whatever reason, chosen not to bring proceedings.   It was scarcely surprising that the courts would have this changed climate in mind when deciding what orders for financial provision should be made. They were not supposed to take means-tested benefits into account as a resource available to the wife and mother, but neither were they supposed to order a sum which would reduce the husband and father's income below that which he would receive for himself and his new family were he also on benefit: see Barnes v Barnes [1972] 1 WLR 1381. Furthermore, there has never been a legal liability to support a former spouse, and divorce was becoming more and more readily available, so that fewer and fewer separated spouses would remain married and thus liable to support one another.   It became common for divorcing parties to agree a 'clean break', in which the wife and children would retain the family home, where the mortgage interest would be met by the benefit authorities, while the husband was relieved of any further maintenance liabilities. This approach may even have been accelerated by the encouragement given to a clean break and the ending of private maintenance for divorced wives by the Matrimonial and Family Proceedings Act 1984. The fact that there were still both private and public law liabilities to maintain the children receded into the background, especially as the risk that the benefit authorities would proceed against the absent parent were so slim. This trend culminated in Delaney v Delaney [1991] 2 FLR 457, where the court proclaimed that 'among the realities of life is that there is a life after divorce'. If, having regard to reasonable financial commitments undertaken by the husband, there was insufficient left properly to maintain the wife and children, the court could have regard to the social security benefits available to them and avoid making an order which would be 'financially crippling' to the husband. So an order that he should pay £10 per week in respect of each of his three children was reduced to an order for 50 pence each per year. The Child Support Act 1991     65.  To sum up, until the passing of the Child Support Act 1991, the position was as stated by Professor Peter Bromley in his leading textbook on Family Law (8th ed, 1992, p 651): "At common law a father is under a duty to maintain only his legitimate minor children and to provide them with food, clothing, lodging and other necessities." Save for its limited enforcement through other people, however, this duty was always unenforceable in the courts. But it was reinforced and expanded by two kinds of statutory obligation: a private law obligation to make the payments ordered by a court under the various statutes listed earlier; and a public law obligation to reimburse the state for benefits paid for the children.   The reality was, however, that in the many separated families who were dependent in whole or in part upon state benefits that obligation was not enforced. Indeed, in many cases it was not translated into an order at all. For those who were not dependent upon state benefits, however, it might remain an important part of their finances after separation. Husbands were often happier to pay maintenance for their children than for their former wives. Nevertheless, it is not surprising that the Government complained, in Children Come First, 1990, Cm 1263, vol II, para 1.4.5, that 'The contribution made by maintenance to the income of lone parent families therefore remains too low."   The solution chosen has three essential features. First, instead of the quantum of basic child support being left to the variable discretion of the courts, it is worked out according to a fixed formula. The formula has been greatly simplified by the Child Support, Pensions and Social Security Act 2000, but the principle is still the same. Secondly, the task of assessing that support, tracing absent parents and collecting it from them, whether voluntarily or compulsorily, was transferred from the courts to the new Child Support Agency, the successor to the old 'liable relative' branch of the Department of Social Security. Thirdly, the courts were prohibited from making periodical payment orders for the benefit of the child in any case where a child support officer would have jurisdiction to make a maintenance assessment: see the 1991 Act, s 8(1) and (3).   It is important to note, however, that neither the private nor the public law obligation, nor the corresponding right of the child to the benefit of that obligation, has been taken away. The public law liabilities, carried over from the old Poor Law, are defined by section 78(6) of the Social Security Administration Act 1992: "(a)  a man shall be liable to maintain his wife and any children of whom he is the father; (b)  a woman shall be liable to maintain her husband and any children of whom she is the mother." It is still an offence persistently to refuse or neglect to perform that obligation, as a result of which income-based benefits are paid in respect of a spouse or child: see s 105(1). And the Secretary of State may still apply for an order against such a liable person: see s 106(1).   The private law liabilities have also been retained in the new scheme. Unlike the father's common law guardianship of his legitimate children, his common law obligation to maintain them has never been abolished, although the wife's agency of necessity was abolished in 1970. Furthermore, the courts' powers to make the full range of orders for the benefit of children remain on the statute book. Despite the general prohibition in section 8(1) and (3) of the 1991 Act, already referred to, the courts remain able to give effect to the parental obligation in a number of ways: (i)  by making 'top up' orders for periodical payments where the income of the non-resident parent is above a threshold where it may be appropriate for him to pay more than is payable under the formula (s 8(6)); (ii)  by making 'school fees orders' for children who are being educated privately (s 8(7)); (iii)  by making orders to cover expenses attributable to the child's disability (s 8(8)); (iv)  by making lump sum and property adjustment orders for the benefit of children under the Matrimonial Causes Act 1973 or the Children Act 1989. Although these are mainly used to make provision for housing or other capital expenditure rather than as a substitute for periodical maintenance, it has been held that they may be used for maintenance purposes if the child support machinery has not been invoked: see V v V (Child Maintenance) [2001] 2 FLR 799; (v)  by making and varying consent orders which embody periodical payments for a child (s 8(5) to (11); Child Maintenance (Written Agreements) Order 1993). Unless the parent with care receives relevant social security payments, this precludes any further application for a child support assessment. Thus parents can, in effect, avoid the intervention of the Child Support Agency by agreeing a nominal sum in periodical payments at the outset and then returning to court for it to be varied: see again V v V; (vi)  by making an order for spousal maintenance which includes the costs of supporting the children and will be reduced pro tanto if and when a maintenance assessment under the 1991 Act is made (a so-called 'Segal order' named after the judge who invented it); (vii)  by enforcing a maintenance agreement made between the parents for the benefit of their children, although such an agreement cannot prevent a person making an application to the Agency for a maintenance assessment, nor does the court have jurisdiction to vary it if the Agency would have jurisdiction to make an assessment (s 9(3), (4) and (5)).   It is obvious, therefore, that the obligation of a parent to maintain his children, and the right of those children to have the benefit of that obligation, is not wholly contained in the 1991 Act. Far from it. The Act left all the previous law intact, merely precluding the courts from using their powers in cases where the Agency was supposed to do it for them. The situation could not be more different from cases such as Matthews v Ministry of Defence [2003] 1 AC 1163, where Parliament clearly did not intend that the servicemen should be able to seek compensation in tort; instead they were to be limited to their service pension rights. The Child Support Act 1991 contemplates that, as a minimum, children should have the benefit of the maintenance obligation as defined under the formula; but it does not contemplate that children should be limited to their rights under that Act; in appropriate circumstances, they may be supplemented or replaced in all the ways recounted earlier.   That being the case, it is clear to me that children have a civil right to be maintained by their parents which is such as to engage article 6 of the European Convention on Human Rights. Their rights are not limited to the rights given to the parent with care under the Child Support Act. The provisions of that Act are simply a means of quantifying and enforcing part of their rights. I appreciate that the line between a procedural and a substantive bar is not always easy to draw: see Matthews at para 3. A distinction can readily be drawn between that part of the child support scheme which lays down the formula and machinery for assessing the extent of the basic obligation and that part of the scheme which provides for its enforcement. The formula is a substantive definition of the extent of the basic right. But in my view the continued existence of the wider rights, together with the fundamental objective of the 1991 Act to improve the provision made for children by their non-resident parents, places the collection and enforcement provisions of the Act on the procedural rather than the substantive side of the line. A civil right to be maintained exists and prima facie children are entitled to the benefit of the article 6 rights in the determination and enforcement of that right.   The problem is that this is exactly what the system is trying to do. It is trying to enforce the children's rights. It is sometimes, as this case shows, lamentably inefficient in so doing. It is safe to assume that there are cases, of which this may be one, where the children's carer would be much more efficient in enforcing the children's rights. The children's carer has a direct and personal interest in enforcement which the Agency, however good its intentions, does not. Even in benefit cases, where the state does have a direct interest in enforcement, it is not the sort of interest which stems from needing enough money to feed, clothe and house the children on a day to day basis. Only a parent who is worrying about where the money is to be found for the school dinners, the school trips, the school uniform, sports gear or musical instruments, or to visit the 'absent' parent, not only this week but the next and the next for many years to come, has that sort of interest. A promise that the Agency is doing its best is not enough. Nor is the threat or reality of judicial review. Most people simply do not have access to the Administrative Court in the way that they used to have access to their local magistrates' court. Judicial review may produce some action from the Agency, but what is needed is money from the absent parent. Action from the Agency will not replace the money which has been irretrievably lost as a result of its failure to act in time.   To sum up, in my view the correct analysis of the situation is this. The children's civil right to the benefit of the parental obligation to maintain them survives the Child Support Act. The extent of that obligation is defined by the Act together with the remaining private law powers. But the Act operates, not only as a limit to the extent of the obligation but also as a limit to its enforcement. This is throughout a private civil right. Even in a benefit case the money paid by the non-resident parent is the children's money. All the Act does is take away the carer's right to enforce payment. That places the enforcement provisions on the procedural side of the line. The parallel with Philis v Greece (1991) 13 EHRR 741 is very close. Article 6 is therefore engaged.   Indeed, the Act was designed to improve the enforcement of the children's civil right. That must be a legitimate aim. But was it a proportionate response to that legitimate aim to remove the right of the parent with care to enforce the substantive obligation directly? I do not find that an easy question to answer. The comparative study prepared for this case by Professor Wikeley shows that it is not a necessary feature of comparable child support schemes elsewhere in the common law world. While the child support scheme was under review in the late 1990s, there was considerable debate about whether the courts should regain their power to make the basic award on the application of the parent with care. The formula would remain the same in all cases, but parents who were not receiving means-tested benefits would be able to apply to the courts rather than the Agency to award it. This was, however, rejected after careful consideration by the Government (their final conclusions on the role of the courts can be seen in A new contract for welfare: Children's rights and parents' responsibilities, 1999, Cm 4349, chapter 8). One can see why. The Government did not want to create 'one law for the rich and one for the poor'. It would be difficult to apply to the common case where the parent with care is sometimes in receipt of relevant benefits and sometimes not. The families who can be sure that they will never claim such benefits can still, with careful planning and advice, make use of the courts' residual powers to avoid the Agency if that is what they wish to do. Contrary to popular belief, there are many separating parents who are not at loggerheads with one another and who both want to do the best they can for their children. Sensible parents who know that they will have to go on co-operating in bringing up their children for some time to come may well prefer to make their own arrangements. Others may prefer the arm's-length intervention of the Agency, together with its enhanced collection and enforcement powers, to the face to face confrontation in court.   This is just the sort of policy choice in a socio-economic field which the courts are usually prepared to leave to the judgment of Parliament. Parliament, with the guidance of Government, is better able to make the decision as to which scheme will most effectively secure the recognition and enforcement of the children's rights generally. It would be difficult to hold that the scheme as a whole is incompatible with the children's rights to a speedy determination and enforcement of their claims.   But if I am right that the children's civil rights to be properly maintained by their parents are engaged, it follows that the public authority which is charged by Parliament with securing the determination and enforcement of their rights is under a duty to act compatibly with their article 6 right to the speedy determination and effective enforcement of those rights. Indeed, Mr Jay did not seek to argue that they were not. He accepted, for the sake of the issue before the House, that if article 6 was engaged in this case, the claim under section 7 of the Human Rights Act 1998 for failing to act in compliance with those rights should proceed. It stands to reason that if the state is going to take over the enforcement of a person's civil rights it has a duty to act compliantly with article 6 in doing so. Just as the courts, as public authorities, have to act compliantly with the Convention rights, so does the Agency. The remedies, however, may be different if they do not.   It follows that I have reached the same conclusion, albeit by a slightly different route, as Wall J in the Administrative Court. This comes as no surprise. I would allow this appeal and restore the order that he made. LORD BROWN OF EATON-UNDER-HEYWOOD My Lords,   The critical question for your Lordships' decision is whether Mrs Kehoe's (or indeed her children's) article 6 rights were engaged whilst the Child Support Agency (CSA), pursuant to the Child Support Act 1991 (the 1991 Act), were charged with the enforcement of her ex-husband's assessed maintenance obligation. Did she (or the children) have a civil right, akin to the engineer's undoubted right to his fees in Philis v Greece (1991) 13 EHRR 741, thwarted here as there by an enforcement scheme which denied to the claimants themselves any direct access to the courts? In my judgment she did not.   Having now had the advantage of reading in draft the opinions of all my noble and learned friends, I find myself in agreement with the majority. The 1991 Act introduced, for all those voluntarily or compulsorily seeking the CSA's help, an entire scheme, substituting for whatever rights the parent with care (or, indeed, qualifying children) might otherwise have had, the benefit of the scheme itself (with, necessarily, any incidental dis-benefits). The only right now enjoyed by those in Mrs Kehoe's position is to look to the CSA for the proper discharge of its public law obligations under the statute, a right which of course is itself sustainable under the courts' supervisory jurisdiction.   In short, I remain unpersuaded that Mrs Kehoe (or her children) retained any right to maintenance payments here such as to engage article 6 and thereby allow her to complain of procedural failures on the part of the CSA in its attempt to enforce payment by her ex-husband. I too would dismiss this appeal.

Judgment of the Court of First Instance (Fourth Chamber) of 16 March 1993. - David Blackman v European Parliament. - Officials - Medical expenses. - Joined cases T-33/89 and T-74/89. European Court reports 1993 Page II-00249 Summary Keywords ++++ 1. Officials ° Actions ° Act adversely affecting an official ° Definition ° Information provided by a claims office regarding a claim for reimbursement of medical expenses ° Exclusion (Staff Regulations, Art. 90(2)) 2. Officials ° Actions ° Prior complaint through official channels ° Time-limits ° Complaint submitted within the time-limit to a non-competent department on the basis of information provided by that department ° Excusable error ° Effects ° Prolongation of the time-limit for initiating proceedings (Staff Regulations, Arts 90 and 91) 3. Officials ° Social security ° Sickness insurance ° Medical expenses ° Definition ° Expenses in relation to an educational therapy programme ° Programme devised and carried out in an educational institution by persons with no medical or paramedical training ° Exclusion (Staff Regulations, Art. 72(1)) 4. Officials ° Social security ° Sickness insurance ° Claims offices ° Processing of claims for reimbursement ° Procedure (Staff Regulations, Art. 72; Sickness insurance rules, Art. 20) 5. Procedure ° Originating application ° Formal requirements ° Brief statement of grounds on which application is based (Statute of the Court of Justice of the EEC, Art. 19; Rules of Procedure of the Court of Justice, Art. 38(1)) 6. Officials ° Social security ° Sickness insurance ° Medical expenses ° Reimbursement ° Conditions ° Appraisal of each claim in the light of its own merits in fact and in law (Staff Regulations, Art. 72(1)) 7. Community law ° Principles ° Protection of legitimate expectations ° Conditions 8. Officials ° Duty of the administration to have regard to the interests of officials ° Scope ° Limits Summary 1. The only acts which may be regarded as adversely affecting an individual within the meaning of Article 90(2) of the Staff Regulations are acts issuing from the appointing authority which are capable of directly affecting a specific legal situation. The mere manifestation of an intention to adopt a specific decision in the future is not capable of creating corresponding rights or obligations on the part of the person concerned. Information provided by a claims office regarding an application for the reimbursement of medical expenses which reveals that a decision is to be taken subsequently does not constitute an act adversely affecting an official within the meaning of that provision. 2. A failure to comply with time-limits laid down in Article 90(2) of the Staff Regulations does not prevent a prior complaint through official channels or an application against the rejection of that complaint from being admissible where the applicant has been in excusable error. The concept of excusable error, in the context of time-limits for initiating proceedings, which are a matter of public policy and not subject to the discretion either of the court or of the parties, must be strictly construed and can concern only exceptional circumstances in which, in particular, the conduct of the institution concerned has been, either alone or to a decisive extent, such as to give rise to pardonable confusion in the mind of a party acting in good faith and exercising all the diligence required of a normally experienced person. In such an event, the administration may not rely on its own failure to observe the principles of legal certainty and the protection of legitimate expectations out of which the error arose. It constitutes an excusable error, of such a kind as to prolong the time-limit for initiating proceedings, where a complaint is lodged within the time-limit laid down in the Staff Regulations with a non-competent department on the basis of incorrect information provided by that department, which merely returned the complaint to the official concerned without forwarding it to the department actually competent, which therefore received it out of time. 3. The fees for special courses of educational therapy in the context of a programme of specialist teaching in an educational institution, which was neither devised nor carried out by persons legally authorized to practise a medical or paramedical profession or by a duly recognized medical or paramedical institution, cannot be treated as medical expenses eligible for reimbursement under Article 72(1) of the Staff Regulations. 4. The purpose of Article 20 of the Insurance Rules is to allow the practical, efficient settlement of claims for reimbursement under the Joint Sickness Insurance Scheme. The distribution of claims among the different claims offices is on a strictly geographical basis and does not mean that the different offices have different powers or tasks. Therefore, the fact that a claim for reimbursement submitted to one office is sent to another office so that the claim can be processed without interruption cannot affect the legality of the decision adopted in response to that claim. 5. The application initiating proceedings must contain a brief statement of the grounds on which it is based. This means that the application must specify the nature of the grounds on which it is based, so that a mere abstract statement does not alone satisfy the requirements of the Statute of the Court of Justice or the Rules of Procedure. A ground which has not been briefly set out in the application cannot, in the light of the prohibition on producing fresh issues in the course of the proceedings, be specified in the reply. 6. The appointing authority must, for every claim for reimbursement of medical expenses, determine whether the conditions for reimbursement laid down in Article 72(1) of the Staff Regulations are satisfied by reference to the matters of fact and of law disclosed by the person concerned, without being bound by a previous decision adopted on the basis of different or less complete evidence. Accordingly, the fact that the administration agreed to meet, under the Joint Sickness Insurance Scheme, certain expenses incurred by an official cannot confer on the official concerned the right to future reimbursement of similar expenses unless the administration has given him specific assurances. 7. The right to rely on the principle of the protection of legitimate expectations extends to any individual who is in a situation in which it appears that the conduct of the Community administration has led him to entertain reasonable expectations. However, an official may not plead a breach of the principle of the protection of legitimate expectations unless the administration has given him specific assurances. 8. The duty of the administration to have regard for the interests of its officials reflects the balance of the reciprocal rights and obligations established by the Staff Regulations in the relationship between a public authority and civil servants. That duty implies in particular that when the appointing authority takes a decision concerning the situation of an official, it should take into consideration all the factors which may affect its decision and that when doing so it should take into account not only the interests of the service but also those of the official concerned. However, the protection of the rights and interests of officials must always be subject to compliance with the legal rules in force.

KIRPAL, J. The main question which arises in this appeal by special leave is whether the suit for recovery of money filed by the appellant bank was properly instituted. The appellants branch at Ambala Cantt. had instituted a suit in the Court of Sub-ordinate Judge, Ambala Cantt. for recovery of Rs. 1,40,553.91 from the respondents. The case of the appellant was that on 12th April, 1984 a sum of Rs. 50,000/- was advanced as loan to respondent number 1 for the purposes of his business and on that date he had executed a demand promissory numbere, hypothecation of goods agreement and other documents. Respondent number2 and one Sh. Suresh Kumar, husband of respondent number3 had stood as guarantors for the repayment of the loan. The respondents were stated to have agreed to pay interest at the rate of 18 percent per annum with quarterly rests. When default in payment of the money was companymitted the aforesaid suit was filed for the recovery of the principal amount and the interest thereon. The sum total came to Rs.1,40,553.91. In the written statement filed by respondent number1 the plea which was taken was that he had never taken loan as alleged by the appellant bank and respondent number 2 and Sh. Suresh Kumar had number executed any guarantee deed. It was, however, admitted that certain blank documents had been got signed but it was denied that the respondents had agreed to pay interest at the rate of 18 percent per annum. He also took an additional plea challenging the authority of Sh. K. Rohatgi to sign and file the plaint on behalf of the appellant. Respondent number2 filed a separate written statement taking the pleas similar to the one which had been raised by respondent number1 in his written statement. A further plea which was taken by her was that her guarantee was limited to the extent of Rs. 50,000/- and she was number liable to pay any more amount merely because additional credit facilities may have been allowed to respondent number1. As the other guarantor- Sh. Suresh Kumar had died his widow, namely, respondent number3 was impleaded as one of the defendants but as she did number appear the case against her proceeded ex parte. The appellant bank filed its replication wherein it denied the allegations companytained in the written statements filed by respondents 1 and 2. On the pleadings of the parties the following issues were framed- Whether the plaint is duly signed and verified by a companypetent person? OPP Whether the defendant number 1 raised a loan of Rs. 50,000/- from the plaintiff bank on 12.4.84 and executed a demand promissory numbere, hypothecation of goods agreement, letter of loan and other documents in favour of the plaintiff bank? OPP Whether the defendants number2 and 3 stood as guarantors for the repayment of the loan and if so, what is the extent of their liability? OPP What is the balance amount? OPP Whether the plaintiff varied the terms of loan and if so, its effect qua the liabilities of defendants number2 and 3, Onus on parties. Whether the statement of account produced by the plaintiff is admissible in evidence? OPP Whether the defendants agreed to pay interest if so, at what rate and to what amount? OPP Whether the plaintiff has numbercause of action? OPP Relief. The trial judge by his judgment dated 14th November, 1987 decided issue number. 1,2 and 7 against the appellant. Issues 3,4,5 and 6 were held in the appellants favour. The trial companyrt, however, held, under issues 2 and 3, that respondent number3 was number liable to pay any amount and respondent number2 was liable to pay only a sum of Rs.55,699.20 as the principal amount plus interest at the rate or 18 per cent per annum for the period 12th April, 1984 to 11th February, 1985. In view, however, of the decision against the appellant of issue number1 the suit filed by the appellant was dismissed with companyts. The appellant then filed an appeal which was decided on 2nd November, 1992 by the Additional District Judge, Ambala. The Additional District Judge reversed the findings of the trial companyrt in so far as issues 2 and 7 were companycerned and came to the companyclusion that the appellant had been able to prove that respondent number1 had taken a loan of Rs. 50,000/- and had also proved the execution of relevant documents by the respondents. The principal debtor and the guarantors were also held to have agreed to pay interest at the rate of 18 percent per annum. It affirmed the decision of the trial companyrt limiting respondent number 2 liability to Rs. 50,000/- and interest thereon. With regard to the liability of respondent number3 the lower appellate companyrt held that in the absence of any evidence to prove that she had inherited any estate from her deceased husband numberliability companyld be fastened on her and the decision of the trial companyrt, to that effect, was affirmed. The appeal was, however, dismissed because the Additional District Judge upheld the decision of the trial companyrt with regard to issue number1. It was held that it has number been proved that Sh. L.K. Rohatgi had held any valid authority to file the suit on behalf of the appellant bank. Against the aforesaid decision of the Additional District Judge the appellant filed a regular second appeal. By order dated 30th August, 1993 a single judge of the Punjab and Haryana High Court dismissed the said appeal in limine by observing that there was numberground for interference with the companycurrent findings of facts recorded by two companyrts below. Hence this appeal by special leave. In this appeal, therefore, the only question which arises for companysideration is whether the plaint was duly signed and verified by a companypetent person. In cases like the present where suits are instituted or defended on behalf of a public companyporation, public interest should number be permitted to be defeated on a mere technicality. Procedural defects which do number go to the root of the matter should number be permitted to defeat a just cause. There is sufficient power in the Courts, under the Code of Civil Procedure, to ensure that injustice is number done to any party who has a just case. As far as possible a substantive right should number be allowed to be defeated on account of a procedural irregularity which is curable. It cannot be disputed that a companypany like the appellant can sue and be sued in its own name. Under Order 6 Rule 14 of the Code of Civil Procedure a pleading is required to be signed by the party and its pleader, if any. As a companypany is a juristic entity it is obvious that some person has to sign the pleadings on behalf of the companypany. Order 29 Rule 1 of the Code of Civil Procedure, therefore, provides that in a suit by against a companyporation the Secretary or any Director or other Principal officer of the companyporation who is able to depose to the facts of the case might sign and verify on behalf of the companypany. Reading Order 6 Rule 14 together with Order 29 Rule 1 of the Code of Civil Procedure it would appear that even in the absence of any formal letter of authority or power of attorney having been executed a person referred to in Rule 1 of Order 29 can, by virtue of the office which he holds, sign and verify the pleadings on behalf of the companyporation. In addition thereto and de hors Order 29 Rule 1 of the Code of Civil Procedure, as a companypany is a juristic entity, it can duly authorise any person to sign the plaint or the written statement on its behalf and this would be regarded as sufficient companypliance with the provisions of Order 6 Rule 14 of the Code of Civil Procedure. A person may be expressly authorised to sign the pleadings on behalf of the companypany, for example by the Board of Directors passing a resolution to that effect or by a power of attorney being executed in favour of any individual. In absence thereof and in cases where pleadings have been signed by one of its officers a Corporation can ratify the said action of its officer in signing the pleadings. Such ratification can be express or implied. The Court can, on the basis of the evidence on record, and after taking all the circumstances of the case, specially with regard to the companyduct of the trial, companye to the companyclusion that the companyporation had ratified the act of signing of the pleading by its officer. The companyrts below companyld have held that Sh. L.K. Rohatgi must have been empowered to sign the plaint on behalf of the appellant. In the alternative it would have been legitimate to hold that the manner in which the suit was companyducted showed that the appellant bank must have ratified the action of Sh. L.K. Rohatgi in signing the plaint. If, for any reason whatsoever, the companyrts below were still unable to companye to this companyclusion, then either of the appellate companyrts ought to have exercised their jurisdiction under Order 41 Rule 27 1 b of the Code of Civil Procedure and should have directed a proper power of attorney to be produced or they companyld have ordered Sh. L.K. Rohatgi or any other companypetent person to be examined as a witness in order to prove ratification or the authority of Sh. L.K. Rohatgi to sign the plaint. Such a power should be exercised by a companyrt in order to ensure that injustice is number done by rejection of a genuine claim. The Courts below having companye to a companyclusion that money had been taken by respondent number1 and that respondent number2 and husband of respondent number3 had stood as guarantors and that the claim of the appellant was justified it will be a travesty of justice if the appellant is to be number suited for a technical reason which does number go to the root of the matter. The suit did number suffer from any jurisdictional infirmity and the only defect which was alleged on behalf of the respondents was one which was curable. The companyrt had to be satisfied that Sh. L.K. Rohatgi companyld sign the plaint on behalf of the appellant. The suit had been filed in the name of the appellant companypany full amount of companyrt fee had been paid by the appellant bank documentary as well as oral evidence had been led on behalf of the appellant and the trial of the suit before the Sub Judge, Ambala, had companytinued for about two years. It is difficult, in these circumstances, even to presume that the suit had been filed and tried without the appellant having authorised the institution of the same. The only reasonable companyclusion which we can companye to is that Sh. L.K. Rohatgi must have been authorised to sign the plaint and, in any case, it must be held that the appellant had ratified the action of Sh. L.K. Rohatgi in signing the plaint and thereafter it companytinued with the suit.

Case C-291/09 Francesco Guarnieri & Cie v Vandevelde Eddy VOF (Reference for a preliminary ruling from the rechtbank van koophandel te Brussel) (Free movement of goods – Article 34 TFEU – Cautio judicatum solvi – Company governed by Monegasque law – First paragraph of Article 18 TFEU) Summary of the Judgment 1. Customs union – Customs territory of the Union – Principality of Monaco (Arts 34 TFEU and 36 TFEU; Council Regulation No 2913/92, Art. 3(2)(b)) 2. Free movement of goods – Quantitative restrictions – Measures having equivalent effect (Art. 34 TFEU) 1. Pursuant to Article 3(2)(b) of Regulation No 2913/92 establishing the Community Customs Code, the territory of the Principality of Monaco is to be considered to be part of the customs territory of the European Union. As no customs duty or charge having equivalent effect can, consequently, be applied to trade between Monaco and the Member States, goods originating in Monaco, exported directly to a Member State, must be treated as if they originated in those Member States. The result of that assimilation to goods originating in Member States is that goods originating in Monaco are covered by the rules of the Treaty on the free movement of goods. (see para. 14) 2. Article 34 TFEU must be interpreted as not precluding the legislation of a Member State from requiring the provision of security pending judgment, by a claimant of Monegasque nationality which has brought proceedings before one of the civil courts of that State against a national of that State in order to obtain payment of invoices relating to the delivery of goods assimilated to Community goods, although such a requirement is not imposed on nationals of that Member State. Admittedly, a measure of that sort has the effect of making traders wishing to bring proceedings subject to different procedural rules according to whether or not they have the nationality of the Member State concerned. Nevertheless, the possibility that nationals of other Member States would therefore hesitate to sell goods to purchasers established in that Member State who have the nationality of that State is too uncertain and indirect for it to be possible for that national measure to be regarded as liable to hinder intra-Community trade, for the causal link between the possible distortion of intra-Community trade and the difference in treatment at issue cannot thus be considered to have been established. (see paras 17, 21, operative part) JUDGMENT OF THE COURT (First Chamber) 7 April 2011 (*) (Free movement of goods – Article 34 TFEU – Cautio judicatum solvi – Company governed by Monegasque law – First paragraph of Article 18 TFEU) In Case C‑291/09, REFERENCE for a preliminary ruling under Article 234 EC from the rechtbank van koophandel te Brussel (Belgium), made by decision of 17 July 2009, received at the Court on 27 July 2009, in the proceedings Francesco Guarnieri & Cie v Vandevelde Eddy VOF, THE COURT (First Chamber), composed of A. Tizzano, President of the Chamber, J.-J. Kasel, A. Borg Barthet, E. Levits and M. Safjan (Rapporteur), Judges, Advocate General: E. Sharpston, Registrar: A. Calot Escobar, having regard to the written procedure, after considering the observations submitted on behalf of: – the Belgian Government, by T. Materne, acting as Agent, – the Commission of the European Communities, by J.-B. Laignelot and M. van Beek, acting as Agents, after hearing the Opinion of the Advocate General at the sitting on 14 September 2010, gives the following Judgment 1 This reference for a preliminary ruling concerns the interpretation of Articles 28 EC to 30 EC. 2 The reference has been made in proceedings between Francesco Guarnieri & Cie (‘Guarnieri’), a company governed by Monegasque law established in Monaco, and Vandevelde Eddy VOF (‘Vandevelde’), whose registered office is in Belgium, concerning the delivery of and payment for various goods. Legal context The Community Customs Code 3 Article 3(2)(b) of Council Regulation (EEC) No 2913/92 of 12 October 1992 establishing the Community Customs Code (OJ 1992 L 302, p. 1), now replaced by Article 3(2)(a) of Regulation (EC) No 450/2008 of the European Parliament and of the Council of 23 April 2008 laying down the Community Customs Code (OJ 2008 L 145, p. 1), provides: ‘The following territories situated outside the territory of the Member States shall, taking the conventions and treaties applicable to them into account, be considered to be part of the customs territory of the Community: … (b) France The territory of the Principality of Monaco as defined in the Customs Convention signed in Paris on 18 May 1963 (Journal officiel [de la République française] of 27 September 1963, p. 8679)’. Belgian law 4 Article 851 of the Belgian Judicial Code (code judiciare belge) (‘the Judicial Code’) provides: ‘Except in the case of conventions by which States have stipulated that their nationals are to be exempt from the obligation to provide security pending judgment (cautio judicatum solvi), any foreigner, whether a claimant in the proceedings or an intervener, is required, if the Belgian defendant makes an application to that effect before advancing any other plea, to provide security for the costs and damages arising from the proceedings which he may be ordered to pay. The defendant may request that security be provided, even for the first time, on appeal, if it is the respondent’. 5 It is not apparent from the file whether there is a convention in existence that allows companies governed by Monegasque law to be exempt from the payment of security pending judgment. The dispute in the main proceedings and the question referred for a preliminary ruling 6 The public limited company Fourcroy had placed an order with Vandevelde for 21 000 ‘twister-glazen’ (glasses) and 100 000 tea-lights with accessories in connection with a promotion campaign for the sale of bottles of ‘Mandarine Napoléon’. Vandevelde had sub-contracted that order to Guarnieri. 7 According to Vandevelde, Guarnieri did not properly fulfil its delivery obligations. According to Vandevelde, not only was delivery late, but it was not in accordance with the order, since 65% of the ‘twister-glazen’ were broken, the unbroken glasses were dirty, the plastic packaging was broken (3 000 items) and the promotional sticker was stuck on the wrong side. Vandevelde consequently refused to fulfil its payment obligation. 8 Consequently, Guarnieri brought an action before the rechtbank van koophandel te Brussel (Brussels Commercial Court), in essence seeking an order that Vandevelde must pay the outstanding invoices, plus interest for late payment. By way of counterclaim, Vandelvelde sought an order that Guarnieri must pay damages for the material damage and loss of income it claims to have suffered, plus statutory interest. 9 During the proceedings before the national court, Vandevelde raised, as a preliminary plea, the plea of cautio judicatum solvi, provided for by Article 851 of the Judicial Code, so that Guarnieri would be ordered to provide security of EUR 2 500 for the costs arising from the proceedings which it may be ordered to pay. 10 As Guarnieri claimed that an order requiring it to pay security would be contrary to Articles 28 EC to 30 EC, on the free movement of goods, the rechtbank van koophandel te Brussel considered it necessary, in order to assess the compatibility of Article 851 of the Judicial Code with European Union law, to stay the proceedings and to refer the following question to the Court of Justice for a preliminary ruling: ‘Do Articles [28 EC, 29 EC and 30 EC] preclude a claimant of Monegasque nationality, who lodges a claim in Belgium for payment of invoices relating to the delivery of “twister-glazen” (glasses) and tea-lights with accessories, from being required, upon application by a defendant of Belgian nationality, to give security for the costs and damages arising from the proceedings which he may be ordered to pay?’ Consideration of the question referred 11 It should be noted at the outset that it is apparent from the statement of the facts by the national court that patterns of exports are not at issue in this case, as the case relates only to trade in goods destined for Belgium. Therefore, there is no need to examine the question of the interpretation of Article 35 TFEU. 12 In relation to the assessment of the mechanism of cautio judicatum solvi in the light of Articles 34 TFEU and 36 TFEU, it is necessary, at the outset, to rule on the applicability of the provisions on the free movement of goods in circumstances such as those of the main proceedings, that concern the import into a Member State of goods originating in Monaco by a Monegasque company. 13 In that regard, it must, admittedly, be noted that Articles 52 TEU and 355 TFEU do not include in ‘the territorial scope of the Treaties’ the territory of the Principality of Monaco and that, further, exclusion from the customs territory of the European Union entails the inapplicability of the FEU Treaty rules on the free movement of goods (see, to that effect, Case C‑30/01 Commission v United Kingdom [2003] ECR I‑9481, paragraph 60). 14 However, pursuant to Article 3(2)(b) of Regulation No 2913/92, the territory of the Principality of Monaco is to be considered to be part of the customs territory of the European Union. As no customs duty or charge having equivalent effect can, consequently, be applied to trade between Monaco and the Member States, goods originating in Monaco, exported directly to a Member State, must be treated as if they originated in those Member States. The result of that assimilation to goods originating in Member States is that goods originating in Monaco are covered by the rules of the Treaty on the free movement of goods (see, by analogy, Case 41/76 Donckerwolcke and Schou [1976] ECR 1921, paragraphs 17 and 18, and Commission v United Kingdom, paragraph 54). 15 In relation to the question of whether a provision of a Member State, that requires any foreign national, such as Monegasque nationals, to provide security pending judgment when he seeks to bring proceedings against a national of that Member State, although such a requirement is not imposed on nationals of that State, constitutes a hindrance to the free movement of goods, it must be noted that all trading rules enacted by Member States, that are capable of hindering, directly or indirectly, actually or potentially, intra‑Community trade, are to be considered to be measures having an effect equivalent to quantitative restrictions (see, to that effect, Case 8/74 Dassonville [1974] ECR 837, paragraph 5, and Case C‑421/09 Humanplasma [2010] ECR I-0000, paragraph 26). 16 However, as the Advocate General pointed out at point 46 of her Opinion, a national rule, such as that relating to cautio judicatum solvi under Article 851 of the Judicial Code, is purely procedural and its purpose is not to regulate trade in goods. Further, its application depends not on the origin of the goods in question, but on two cumulative conditions, namely, first, that a dispute must arise subsequent to the conclusion of a contract that leads to litigation before the Belgian courts and, second, that any such action must involve a Belgian national as defendant who chooses to avail himself of the provision in question. 17 Admittedly, a measure of that sort has the effect of making traders wishing to bring proceedings subject to different procedural rules according to whether or not they have the nationality of the Member State concerned. Nevertheless, as the Advocate General pointed out at points 46 and 47 of her Opinion, the possibility that nationals of other Member States would therefore hesitate to sell goods to purchasers established in that Member State who have the nationality of that State is too uncertain and indirect for that national measure to be regarded as liable to hinder intra-Community trade (see, by analogy, Case C‑69/88 Krantz [1990] ECR I‑583, paragraph 11; Case C‑379/92 Peralta [1994] ECR I‑3453, paragraph 24; Case C‑96/94 Centro Servizi Spediporto [1995] ECR I‑2883, paragraph 41; and Case C‑412/97 ED [1999] ECR I‑3845, paragraph 11). The causal link between the possible distortion of intra-Community trade and the difference in treatment at issue is therefore not established. 18 Article 34 TFEU therefore does not preclude a national measure such as that established by Article 851 of the Judicial Code. 19 That being said, it should be noted, as the Commission of the European Communities pointed out, that the Court has already held that a national provision of one Member State, such as that at issue in the main proceedings, while it does not operate any distinction according to the origin of goods, nevertheless entails, in relation to nationals of other Member States, direct discrimination based on the nationality of the claimant, in so far as it does not require security from nationals of the first-mentioned State (Case C‑43/95 Data Delecta and Forsberg [1996] ECR I‑4661, paragraphs 17 and 22, and Case C‑323/95 Hayes [1997] ECR I‑1711, paragraph 19). 20 Such discrimination, which is prohibited by the first paragraph of Article 18 TFEU, cannot however be found in relation to a Monegasque company, such as the claimant in the main proceedings, since that company may not usefully claim the benefit of that provision of the Treaty (see, to that effect, Case C‑122/96 Saldanha and MTS [1997] ECR I‑5325, paragraph 15; see also, on freedom of movement of persons, Joined Cases C‑22/08 and C‑23/08 Vatsouras and Koupatantze [2009] ECR I‑4585, paragraph 52). 21 In the light of the foregoing considerations, the answer to the question referred is that Article 34 TFEU must be interpreted as not precluding the legislation of a Member State from requiring the provision of security pending judgment, by a claimant of Monegasque nationality which has brought proceedings before one of the civil courts of that State against a national of that State in order to obtain payment of invoices relating to the delivery of goods assimilated to Community goods, although such a requirement is not imposed on nationals of that Member State. Costs 22 Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable. On those grounds, the Court (First Chamber) hereby rules: Article 34 TFEU must be interpreted as not precluding the legislation of a Member State from requiring the provision of security pending judgment, by a claimant of Monegasque nationality which has brought proceedings before one of the civil courts of that State against a national of that State in order to obtain payment of invoices relating to the delivery of goods assimilated to Community goods, although such a requirement is not imposed on nationals of that Member State. [Signatures] * Language of the case: Dutch.

SECOND SECTION CASE OF TEMESVÁRI v. HUNGARY (Application no. 12935/05) JUDGMENT STRASBOURG 7 October 2008 FINAL 07/01/2009 This judgment may be subject to editorial revision. In the case of Temesvári v. Hungary, The European Court of Human Rights (Second Section), sitting as a Chamber composed of: Françoise Tulkens, President,Ireneu Cabral Barreto,Vladimiro Zagrebelsky,Danutė Jočienė,András Sajó,Nona Tsotsoria,Işıl Karakaş, judges,and Françoise Elens-Passos, Deputy Section Registrar, Having deliberated in private on 16 September 2008, Delivers the following judgment, which was adopted on that date: PROCEDURE 1. The case originated in an application (no. 12935/05) against the Republic of Hungary lodged with the Court under Article 34 of the Convention for the Protection of Human Rights and Fundamental Freedoms (“the Convention”) by a Hungarian national, Mrs Zoltánné Temesvári (“the applicant”), on 25 March 2005. 2. The applicant was represented by Mr T. Gaudi-Nagy, a lawyer practising in Budapest. The Hungarian Government (“the Government”) were represented by Mr L. Höltzl, Agent, Ministry of Justice and Law Enforcement. 3. On 9 January 2008 the President of the Second Section decided to give notice of the application to the Government. It was also decided to rule on the admissibility and merits of the application at the same time (Article 29 § 3). THE FACTS THE CIRCUMSTANCES OF THE CASE 4. The applicant was born in 1950 and lives in Budaörs. 5. On 8 May 1998 the applicants’ neighbours brought an action against her and other respondents, claiming adverse possession of a right of way on their land. 6. Between 1 May 1999 and 5 February 2001 the proceedings were interrupted because of the death of a plaintiff. 7. Between 18 May 2001 and 16 March 2005 the Budaörs District Court held several hearings and obtained the opinion of an expert. 8. Since 21 April 2005 the proceedings have been interrupted because one of the respondents died, his successor did not join the proceedings voluntarily and the plaintiffs failed to apply for the successor to be made a party to the proceedings. 9. According to the information in the case file, the case is still pending before the first-instance court. THE LAW I. ALLEGED VIOLATION OF ARTICLE 6 § 1 OF THE CONVENTION 10. The applicant complained that the length of the proceedings had been incompatible with the “reasonable time” requirement of Article 6 § 1 of the Convention, which reads as follows: “In the determination of his civil rights and obligations ..., everyone is entitled to a ... hearing within a reasonable time by [a] ... tribunal...” 11. The Government contested that argument. 12. The period to be taken into consideration began on 8 May 1998 and apparently has not yet ended, according to the information in the case file as of the day of adoption of the present judgment. It has thus lasted over ten years and four months to date. However, in the Court’s view, the periods from 1 May 1999 until 5 February 2001 and from 21 April 2005 onwards (altogether over five years and two months), during which the case had to be interrupted because of the deaths of certain parties, should be deducted from the overall length, given the other parties’ passivity concerning this measure. The relevant period is therefore five years and two months for one level of jurisdiction. A. Admissibility 13. The Court notes that this complaint is not manifestly ill-founded within the meaning of Article 35 § 3 of the Convention. It further notes that it is not inadmissible on any other grounds. It must therefore be declared admissible. B. Merits 14. The Court reiterates that the reasonableness of the length of proceedings must be assessed in the light of the circumstances of the case and with reference to the following criteria: the complexity of the case, the conduct of the applicant and the relevant authorities and what was at stake for the applicant in the dispute (see, among many other authorities, Frydlender v. France [GC], no. 30979/96, § 43, ECHR 2000-VII). 15. The Court has frequently found violations of Article 6 § 1 of the Convention in cases raising issues similar to the one in the present application (see Frydlender, cited above). 16. Having examined all the material submitted to it, the Court considers that the Government have not put forward any fact or convincing argument capable of persuading it to reach a different conclusion in the present circumstances. Having regard to its case-law on the subject, the Court finds that the length of the proceedings was excessive and failed to meet the “reasonable time” requirement. There has accordingly been a breach of Article 6 § 1. II. OTHER ALLEGED VIOLATIONS OF THE CONVENTION 17. The applicant also complained that the proceedings were unfair. She relied on Articles 8, 13 and 17 of the Convention, Article 1 of Protocol No. 1 and Article 3 of Protocol No. 7. 18. The Court observes that the proceedings are still pending and considers that this complaint must be rejected as premature, pursuant to Article 35 §§ 1 and 4 of the Convention. III. APPLICATION OF ARTICLE 41 OF THE CONVENTION 19. Article 41 of the Convention provides: “If the Court finds that there has been a violation of the Convention or the Protocols thereto, and if the internal law of the High Contracting Party concerned allows only partial reparation to be made, the Court shall, if necessary, afford just satisfaction to the injured party.” A. Damage 20. The applicant claimed 11,000 euros (EUR) in respect of non-pecuniary damage. 21. The Government contested the claim. 22. The Court considers that the applicant must have sustained some non-pecuniary damage. Ruling on an equitable basis, it awards her EUR 4,000 under that head. B. Costs and expenses 23. The applicant also claimed EUR 2,640 for the costs and expenses incurred before the Court. This sum corresponds to the fee of her lawyer, whose work amounted to 25.4 hours and was charged at an hourly rate of EUR 100, and to the costs of translation amounting to EUR 100. 24. The Government did not express an opinion on the matter. 25. According to the Court’s case-law, an applicant is entitled to the reimbursement of costs and expenses only in so far as it has been shown that these have been actually and necessarily incurred and were reasonable as to quantum. In the present case, regard being had to the information in its possession and the above criteria, the Court considers it reasonable to award the sum of EUR 1,200, covering costs under all heads. C. Default interest 26. The Court considers it appropriate that the default interest should be based on the marginal lending rate of the European Central Bank, to which should be added three percentage points. FOR THESE REASONS, THE COURT UNANIMOUSLY 1. Declares the complaint concerning the excessive length of the proceedings admissible and the remainder of the application inadmissible; 2. Holds that there has been a violation of Article 6 § 1 of the Convention; 3. Holds (a) that the respondent State is to pay the applicant, within three months from the date on which the judgment becomes final in accordance with Article 44 § 2 of the Convention, EUR 4,000 (four thousand euros), plus any tax that may be chargeable, in respect of non-pecuniary damage and EUR 1,200 (one thousand two hundred euros) in respect of costs and expenses, to be converted into Hungarian forints at the rate applicable at the date of settlement; (b) that from the expiry of the above-mentioned three months until settlement simple interest shall be payable on the above amounts at a rate equal to the marginal lending rate of the European Central Bank during the default period plus three percentage points; 4. Dismisses the remainder of the applicant’s claim for just satisfaction. Done in English, and notified in writing on 7 October 2008, pursuant to Rule 77 §§ 2 and 3 of the Rules of Court. Françoise Elens-PassosFrançoise TulkensDeputy RegistrarPresident

MR JUSTICE SULLIVAN: This is a renewed application for permission to apply for judicial review of the defendant's decision on 11th December 2007 to remove the claimant, who comes from Somalia, to Greece under the provisions of the Dublin Convention. The claimant was interviewed on 12th November 2007 and contended that she had left Somalia two weeks earlier and travelled to Ethiopia and never claimed asylum. Investigations were carried out and in due course it became clear that the claimant had in fact been in Greece and she flew to the United Kingdom from Athens, so the defendant made a formal request to Greece to take responsibility. To cut a long factual and procedural history very short indeed, it is the claimant's own case that her case is on all fours with that of R (Nasseri) v Secretary of State for the Home Department. All was well while Mr Nasseri could rely on the favourable judgment of McCombe J ([2008] 2 WLR 523, [2007] EWHC 1548 (Admin)). However, as the claimant recognises, that position changed when the Court of Appeal reversed the decision of McCombe J ([2008] EWCA Civ 464) in a judgment dated 14th May 2008. Thus, Mrs Benitez very frankly acknowledges that the only basis for the claim now is the proposition that it is unreasonable for the defendant to refuse to accede to a stay of this claim pending the presentation of a petition to the House of Lords for permission to appeal from the Court of Appeal's decision. The Court of Appeal refused permission to Mr Nasseri to appeal, but was told that a petition would be presented to the House of Lords and stayed removal of Mr Nasseri pending the outcome of that petition. I have been told by Mrs Benitez that public funding has been sought for the presentation of the petition and indeed that a petition is in draft, although as I understand it it has not yet been presented to the House of Lords. It seems to me that the mere fact that it is intended to present a petition to the House of Lords cannot be a proper basis for a stay of these proceedings. The law is as stated by the Court of Appeal in Nasseri. The claimant accepts that her case is on all fours with Nasseri. Therefore, it seems to me there is no justification for granting a stay. The position might be different if a request was made for permission to appeal against this decision. I bear in mind that the Court of Appeal, although it dismissed Mr Nasseri's claim, did stay matters pending the outcome of his petition to the House of Lords. What I propose to do, since Mrs Benitez has made it quite plain that she will apply for permission to appeal to the Court of Appeal against my decision, is dismiss this renewed application for the reasons that I have given. I also refuse the application for permission to appeal to the Court of Appeal, but I will grant a stay to enable the claimant, if so advised, to present an application for permission to appeal to the Court of Appeal. The stay will operate until such time as that application is determined, but that is on the basis that permission to appeal to the Court of Appeal is made within the time prescribed under the Civil Procedure Rules. If an application is not made within time, then the stay will lapse. If it is, the stay continues until such time as the Court of Appeal deals with the matter. Thank you. MR GREATOREX: My Lord, so far as costs are concerned -- MR JUSTICE SULLIVAN: Yes. MR GREATOREX: -- I have just noticed that there was no application in the acknowledgement of service and that is why it was not dealt with by the deputy judge. It will be the standard amount, my Lord. MR JUSTICE SULLIVAN: Treasury Solicitors, 3 hours. MR GREATOREX: 3 hours, £480. My Lord, there is also an application for today because plenty of cases have been withdrawn, without even an oral hearing, pending Nasseri and so we say that course that has been adopted by very many other claimants and their representatives was the sensible course and pursuit is not, and on that basis I ask for the costs of today as well. MR JUSTICE SULLIVAN: What are they? MR GREATOREX: £350, my Lord. MR JUSTICE SULLIVAN: What do you want to say about that, Mrs Benitez? Not much you can say about the acknowledgement of service, I would have thought. MRS BENITEZ: No, my Lord, I cannot. Only to say that we do not know the facts behind those cases that have been withdrawn and as I have stated, I do know that Mark Henderson, the same counsel for Nasseri, has lodged judicial review (inaudible), so at least one other barrister has taken a similar view to that which was taken in this case. MR JUSTICE SULLIVAN: Yes. In the circumstances I think the right thing to do is to give the Secretary of State the costs of the acknowledgement of service, but not the costs of today. I simply do not know enough about the other cases to decide whether or not that would have been the right course in this case. So £480 summarily assessed costs to be paid by the claimant to the defendant. Thank you very much. Thank you both.

THIRD SECTION CASE OF LAGUNOV v. RUSSIA (Application no. 40025/10) JUDGMENT STRASBOURG 1 March 2016 This judgment is final but it may be subject to editorial revision. In the case of Lagunov v. Russia, The European Court of Human Rights (Third Section), sitting as a Committee composed of: Helena Jäderblom, President,Dmitry Dedov,Branko Lubarda, judges,and Marialena Tsirli, Deputy Section Registrar, Having deliberated in private on 2 February 2016, Delivers the following judgment, which was adopted on that date: PROCEDURE 1. The case originated in an application (no. 40025/10) against the Russian Federation lodged with the Court under Article 34 of the Convention for the Protection of Human Rights and Fundamental Freedoms (“the Convention”) by a Russian national, Mr Pavel Ivanovich Lagunov (“the applicant”), on 2 July 2010. 2. The Russian Government (“the Government”) were represented by Mr G. Matyushkin, the Representative of the Russian Federation to the European Court of Human Rights. 3. On 30 March 2015 the complaint concerning the right to compensation for unlawful detention was communicated to the Government and the remainder of the application was declared inadmissible pursuant to Rule 54 § 3 of the Rules of Court. THE FACTS I. THE CIRCUMSTANCES OF THE CASE 4. The applicant was born in 1951 and lives in Izhevsk. 5. On 27 August 2008 the police arrested the applicant in the street on suspicion of being drunk. He was taken to the police station where he was held for more than two hours. The police charged the applicant with public drunkenness and told him to pay a fine. 6. Further to a complaint by the applicant, on 8 December 2008 the Pervomayskiy District Court of Izhevsk quashed the police decision, finding that the charge had not been supported by evidence. 7. The applicant brought a claim for compensation for pecuniary and non-pecuniary damage in connection with his arrest and detention. 8. By a judgment of 16 November 2009, the Pervomayskiy District Court dismissed his claim. Noting that the claim arising out of administrative detention fell outside the exhaustive list of examples of strict liability under Article 1100 of the Civil Code, the court held that the lawful actions of the police officers could not give rise to liability in tort. It acknowledged that the applicant must have suffered frustration and anxiety as a result of his detention, but determined that his suffering had been “of no legal consequence”. 9. On 3 March 2010 the Supreme Court of the Udmurtiya Republic upheld the District Court’s decision on appeal. II. RELEVANT DOMESTIC LAW 10. For a summary of the relevant provisions of Russian law, see Makhmudov v. Russia, no. 35082/04, §§ 47-48, 26 July 2007. THE LAW I. ALLEGED VIOLATION OF ARTICLE 5 § 5 OF THE CONVENTION 11. The applicant complained that that he was unable to obtain compensation for the detention which he considered unlawful. He relied on Article 5 § 5, which reads: “Everyone who has been the victim of arrest or detention in contravention of the provisions of this Article shall have an enforceable right to compensation.” A. Admissibility 12. The Government claimed that the case must be declared inadmissible because the applicant had not suffered a significant disadvantage owing to his short stay in custody. They relied on Article 35 § 3 (b) of the Convention. 13. The Court reiterates that, in the light of the prominent place that the right to liberty has in a democratic society, it has rejected the application of the “no significant disadvantage” admissibility criterion in relation to complaints under Article 5 §§ 3 and 4 of the Convention (see Bannikov v. Latvia, no. 19279/03, § 58, 11 June 2013, and Van Velden v. the Netherlands, no. 30666/08, §§ 33-39, 19 July 2011). This approach is applicable a fortiori in the circumstances of the present case, which concerns a rejection of the applicant’s claim for compensation for a period of unlawful detention. Genuine respect for human rights, as defined in the Convention and the Protocols thereto, requires the Court to continue an examination of the application. 14. The Court considers that this complaint is not manifestly ill-founded within the meaning of Article 35 § 3 (a) of the Convention. It further notes that it is not inadmissible on any other grounds. It must therefore be declared admissible. B. Merits 15. The Court reiterates that the right to compensation under Article 5 § 5 of the Convention arises if a breach of one of the Article’s other four paragraphs has been established, directly or in substance, either by the Court or by the domestic courts (see, among many other authorities, Stanev v. Bulgaria [GC], no. 36760/06, § 182, ECHR 2012; Svetoslav Dimitrov v. Bulgaria, no. 55861/00, § 76, 7 February 2008; and Çağdaş Şahin v. Turkey, no. 28137/02, § 34, 11 April 2006). 16. In the present case, the domestic courts acknowledged that the police had arrested the applicant without there being a “reasonable suspicion” of his having committed any offence (see paragraph 6 above). The deprivation of liberty to which he was subjected did not therefore fall under any exception to the right to liberty listed in subparagraphs (a) to (f) of Article 5 § 1. Since his arrest was effected in breach of Article 5 § 1, Article 5 § 5 applies. 17. The Court has previously found that the Russian law of tort limited strict liability for unlawful detention to specific procedural forms of deprivation of liberty, which included, in particular, deprivation of liberty in criminal proceedings and post-conviction detention in administrative proceedings, but excluded administrative arrest (see Makhmudov, cited above, § 104). In the instant case, as in Makhmudov, the applicant was subjected to administrative arrest and his claim for compensation was rejected by reference to the same provision (see paragraph 8 above). In these circumstances, the Court finds no reason to reach a different conclusion in the present case. 18. There has therefore been a violation of Article 5 § 5 of the Convention. II. APPLICATION OF ARTICLE 41 OF THE CONVENTION 19. Article 41 of the Convention provides: “If the Court finds that there has been a violation of the Convention or the Protocols thereto, and if the internal law of the High Contracting Party concerned allows only partial reparation to be made, the Court shall, if necessary, afford just satisfaction to the injured party.” A. Damage 20. The applicant claimed 100,000 euros (EUR) in respect of non-pecuniary damage. 21. The Government submitted that the claim was excessive and that the award should not be in excess of EUR 5,000. 22. The Court awards the applicant EUR 5,000 in respect of non-pecuniary damage, plus any tax that may be chargeable. B. Costs and expenses 23. The applicant also claimed approximately EUR 25 for postal and copying expenses. 24. The Government stated that the applicant did not need to copy Russian legal instruments which could be downloaded from the internet free of charge. 25. Regard being had to the documents in its possession and to its case-law, the Court considers it reasonable to award the sum of EUR 25 to cover costs under all heads, plus any tax that may be chargeable to the applicant. C. Default interest 26. The Court considers it appropriate that the default interest rate should be based on the marginal lending rate of the European Central Bank, to which should be added three percentage points. FOR THESE REASONS, THE COURT, UNANIMOUSLY, 1. Declares the application admissible; 2. Holds that there has been a violation of Article 5 § 5 of the Convention; 3. Holds (a) that the respondent State is to pay the applicant, within three months, the following amounts, to be converted into the currency of the respondent State at the rate applicable at the date of settlement: (i) EUR 5,000 (five thousand euros), plus any tax that may be chargeable, in respect of non-pecuniary damage; (ii) EUR 25 (twenty-five euros), plus any tax that may be chargeable to the applicant, in respect of costs and expenses; (b) that from the expiry of the above-mentioned three months until settlement simple interest shall be payable on the above amounts at a rate equal to the marginal lending rate of the European Central Bank during the default period plus three percentage points; 4. Dismisses the remainder of the applicant’s claim for just satisfaction. Done in English, and notified in writing on 1 March 2016, pursuant to Rule 77 §§ 2 and 3 of the Rules of Court. Marialena TsirliHelena Jäderblom Deputy RegistrarPresident

Lokeshwar Singh Panta, J. The above-said two appeals relate to single incident and are directed against companymon Judgment dated 22nd December, 2005 passed by the High Court of Judicature, Andhra Pradesh at Hyderabad in Criminal Appeal No. 2290 of 2004, they are heard together and shall stand disposed of by this companymon judgment. Criminal Appeal No. 763 of 2006 has been filed by G. Venkatesh A-1 against his companyviction under Section 302 of the Indian Penal Code for short IPC and sentence to undergo imprisonment for life and to pay a fine of Rs. 2000/-, in default thereof to suffer simple imprisonment for two months. Criminal Appeal No. 758 of 2006 has been filed by J. Ramulu A-2 against his companyviction under Section 302 read with Section 34 of IPC and sentence to undergo imprisonment for life and to pay a fine of Rs. 2000/-, in default thereof to suffer simple imprisonment for two months, passed by II Additional Metropolitan Sessions Judge, Hyderabad and companyfirmed by the High Court in Criminal Appeal No. 2290 of 2004. In all, nine accused persons were tried by the II Additional Metropolitan Sessions Judge, Hyderabad, in Sessions Case No. 352 of 2001 for the offences under Section 302, IPC, and Section 302, IPC, read with Section 34 of IPC and Section 109 of IPC. A-l and A-2 were found guilty of the murder of G. Janardhan, while other seven accused were acquitted of the charges. Briefly stated, the case of the prosecution against A-1, A-2 and other accused persons is that G. Janardhan was resident of Anandnagar Colony, Malakpet. A-1 is resident of R.K. Puram, whereas A-2 and A-7 are residents of Dilshuknagar and A-3 and A-6 are residents of Chaitanyapuri. A-4 is resident of Vanaparthy, Mahaboobnagar District, A-5 is resident of Kothakota, Mahaboobnagar District, and A-8 A-9 are residents of Jadcherla, Mahaboobnagar District. A-1, A-2 and G. Janardhan were partners in Manjunadha Rice Mill and they had some disputes between themselves and other partners regarding the mill transactions. G. Janardhan filed O.S. No. 92 of 1999 on the file of the I Additional Senior Civil Judge, Ranga Reddy, against A-l and A-2 for dissolution of the partnership of the mill. Second suit O.S. No. 579 of 1994 on the file of. the II Additional Senior Civil Judge, Ranga Reddy, is also pending between the parties. G. Janardhan also filed C.C. No. 114 of 1998 on the file of the Additional Judicial First Class Magistrate,. Hyderabad, inter alia alleging that the accused persons cheated him in the transactions of the rice mill. On 08.07.2000 at about 4.00 P.M., G. Janardhan along with his eldest paternal uncle G. Satyanarayana went to Ramkrishna Muth and after companypleting of their prayers, they came back to their residence by city bus. After getting down from the bus, G. Satyanarayana went to his house, while G. Janardhan proceeded to go to his house. A-1 and A-2 stated to have companye from the rice mill road on a Scooter. A-1 was pillion rider, he sprinkled acid on the face of G. Janardhan with a Mug. G. Jandardhan shouted for help which attracted the attention of G. Raju, son PW-1 , Jamuna Rani, daughter PW-2 , G. Savithri, wife of G. Janardhan PW-3 , who were sitting in the verandah of their house. They immediately came to the spot and took G. Janardhan to Yashoda Hospital for medical treatment. G. Janardhan received burn injuries on his face, chest and neck. PW-1 went to the Police Station Chaderghat, Hyderabad and handed over companyplaint Ex.P1 to Shri B. Sivaranireddy PW-9 , who, at the relevant time, was Sub-Inspector of the Police Station, Chaderghat. On the basis of the said companyplaint, FIR Ex.P26 was registered under Section 307 read with Section 34 of IPC. G. Guravaiah PW-13 , Sub-Inspector of Police took up investigation of the crime at 10.20 P.M. on the same day. He went to Yashoda Hospital, Malakpet, where injured G. Janardhan was admitted in emergency ward. He recorded the statements of PWs-1, 2, 3 and G. Anuradha PW-4 wife of PW-1 and daughter-in-law of injured G. Janardhan. On the next day, i.e. 09.07.2000, at about 7.00 A.M., the Investigating Officer recovered burnt leaves of small plants and acid-mixed earth and companytrol earth from the place of occurrence. He again went to Yashoda Hospital where the injured G. Janardhan gave his statement by gestures and writing on small chits to him. The statement of injured G. Janardhan was recorded after obtaining permission from the Doctor. On the same day at about 8.00 P.M., the Investigating Officer apprehended A-1 and A-2 on the road in front of the house of A-1. He recorded the disclosure statement of A-l which is marked as Ex.P24 and on the basis of the said statement, Scooter bearing No. AP 28 L 2745 was recovered and one green companyour mug was taken into possession, from inside the ducky of the Scooter. On requisition Ex.P27 sent by the Inspector of Police, B. Gyaneshwar Rao PW-11 XIV Metropolitan Magistrate, Hyderabad, at midnight of 11/12.07.2000, went to Yashoda Hospital and recorded statement made by G. Janardhan to him by gestures and signs as the injured was unable to see and talk due to burn injuries. On 25.07.2000, P. William Caruy PW-12 received information in regard to the death of injured G. Janardhan at about 12.30 A.M. He companyverted the offence in the FIR from Section 307 of IPC to Section 302 of IPC. After receipt of the dead body and companypletion of the investigation, charge-sheet was filed against the above-said nine accused persons. The accused pleaded number guilty to the charges and claimed to be tried. The prosecution examined as many as 13 witnesses and produced on record 32 documents in support of its case. The accused persons in their statements recorded under Section 313 Cr.P.C. pleaded number guilty to the charges and claimed to be tried. No defence witness has been examined by them. The trial companyrt, on appreciation of the oral and documentary evidence, found A-1 and A-2 guilty of the charge of murder of G. Janardhan and companyvicted and sentenced them as aforesaid, while numbercase has been found against A-3, A-4 and A-6 to A-9, therefore they are acquitted of the charge. During the pendency of the trial, A-5 had expired, therefore, the trial stood abated against him. Being aggrieved against the Judgment and Order of the learned Trial Judge, A-l and A-2 filed appeal under Section 374 2 of the Cr.P.C. before the High Court. The High Court dismissed their appeal and companyfirmed their sentence. Hence, A-l and A-2 have filed these appeals by special leave. We have heard Mr. U.U. Lalit, learned senior Advocate appearing on behalf of A-l, Mr. Sushil Kumar, learned senior Advocate appearing on behalf of A-2, and Ms. Altaf Fathima, Advocate for respondent-State, and with their assistance, we have examined the entire oral and documentary evidence on record. The learned Counsel for A-l and A-2, inter alia, companytended a that in the Yashoda Hospital record where injured G. Janardhan was admitted on 08.07.2000, it was specifically stated therein that some unknown offenders had thrown acid on the face of the injured G. Janardhan, the general diary number companyumn in the FIR has been left blank, which would suggest that the first recorded information, being the intimation by the Hospital authorities referring to unknown persons as the culprits, has been suppressed b PW-1, the son of G. Janardhan, clearly stated that on the evening of 09.07.2000, Police got companyplaint Ex.P1 made from him in which the names of A-1 and A-2 were disclosed at the instance of their relatives, on the basis of which tutored FIR Ex.P25 came to be registered c PW-4, daughter-in-law of G. Janardhan, also clearly stated that Police got companyplaint Ex.P1 recorded from her husband PW-1 at the instance of their relatives and d the so-called dying declaration Ex.P28 recorded by PW-11 - the Magistrate, on 11/12.07.2000 at midnight mentioning the names of A-1 and A-2 along with the names of A-3 to A-9, was as a result of due deliberation and tutoring of G. Janardhan by his relatives as per the admission of PW-1 and the statement allegedly made by G. Janardhan before the Magistrate was vague and there is numberspecific reference to A-1 and A-2 implicating them in the companymission of the offence. Lastly, the learned Counsel submitted that the trial companyrt and the High Court have companysidered the alleged dying declaration as partly untrue in respect of accused A-3 to A-9, who were acquitted of the charges and partly true against A-1 and A-2 without any companyroboration from independent evidence and, therefore, numberimplicit reliance companyld have been placed on tutored dying declaration. Per companytra, the learned Counsel appearing on behalf of the respondent-State companytended that the evidence of PW-11 is very clear, who recorded dying declaration Ex.P28 of G. Janardhan in which the names of A-l and A-2, who poured acid on his face which caused his death, were mentioned by the deceased. The learned Counsel also companytended that the trial companyrt as well as the High Court have appreciated the entire evidence in its right perspective and this Court shall be slow to interfere in the well-reasoned and wellmerited judgments of the companyrts below. We have given our anxious and thoughtful companysideration to the respective companytentions of the learned Counsel for the parties. We may, at the outset, record that PW-1, son, PW-2, daughter, PW-3, wife, and PW-4, daughter-in-law of G. Janardhan, the alleged witnesses of the occurrence, have number supported the case of the prosecution at all and despite searching cross-examination by the learned Public Prosecutor, numbermaterial evidence is elicited from their testimony to implicate A-1 and A-2 in the companymission of the crime. FW-1, the son of the deceased, on 08.07.2000 submitted report Ex.P1 to the police at Police Station, Chaderghat, on the basis of which FIR Ex.P25 was registered at the Police Station, He deposed before the Court that he gave companyplaint Ex.Pl to the Police at the instance of their relatives. Even this witness did number say in his statement under Section 164 of the Code of Criminal Procedure that he and his sister PW-2 , his mother PW-3 and his wife PW-4 witnessed the incident and or his father disclosed the names of A-l and A-2 who sprinkled acid on his face. It is his evidence that on the day of the occurrence they heard the sound of cry of his father near the gate of their house and he along with PWs-2 and 3 rushed to the spot and found acid burns on the face and neck of his father who was number in a position to speak number he companyld open his eyes. The incident took place in front of the house of injured G. Janardhan at around 8 P.M. PW-1 categorically stated that he numbericed two unknown persons going on Scooter at the place of occurrence. PW-1 deposed that his father had given the names of A-1 and A-2 and other seven accused persons to PW-11 the Magistrate, on having tutored by their relatives. This witness in cross-examination companyducted by the learned Counsel for A-1 and A-2 categorically stated that he did number know the persons who poured acid on the face of his father. It is his evidence that their relatives came to Yashoda Hospital where his father was taken immediately after the incident. The Police also reached at the Hospital and wanted to record his fathers statement but his father was number in a position to speak, so his statement companyld number be recorded. He stated that his father before the incident had been telling him that naxalites were threatening him with dire companysequences, if money was number paid to them. PW-2 - daughter of G. Janardhan, deposed that on the day of incident, i.e. 08.07.2000, she was number at the house of her parents, but she was at a house in Warasiguda when at about 7.00 or 7.30 P.M. she received telephone call that her father had been taker to Yashoda Hospital for medical treatment for acid burns. She deposed that she did number know who caused acid burns injuries to her father. She denied the suggestion of the prosecution that she deposed against the prosecution in order to help the accused. It is the evidence of PW3 - wife of the deceased that on 08.07.2000 at about 7.30 or 8.00 P.M. when she was in her house, she heard some sound of cry. She came out of her house and saw her husband companying inside the gate of their house, who was unable to speak. He was shifted to Yashoda Hospital as he received acid burns. She did number see the persons who caused acid burns to him. The suggestion of the Public Prosecutor, that she has resiled from her earlier statement in order to help A-1 and A-2, is denied by her. Similarly, PW4 - wife of PW-1 has number supported the prosecution version. According to this witness, her father-in-law received acid burns at 7.30 or 8.00 P.M. near their house when she along with her husband and mother-in-law was present in the house. They took injured G. Janardhan to Yashoda Hospital where he was admitted in emergency ward. She was number allowed to go inside the ward while PWs 1, 2 and 3 were allowed to go inside the ward. Their relatives were also present in the hospital. In cross-examination by the learned Public Prosecutor, she stated that her father-in-law was in Intensive Care Unit for 15 days and thereafter he was shifted to Apollo Hospital. Their relatives were regularly visiting her father-in-law in the unit. She stated that on 09.07.2000, their relatives and police got a report drafted from her husband against A-1 and A-2. The oral evidence of the eye-witnesses, discussed above, who are numbere else than the son, daughter, wife and daughter-in-law of the deceased, have number supported the prosecution version to prove that it were A-l and A-2 who poured acid on the face, neck, etc. of the deceased - G. Janardhan on the day of occurrence. PWs 1, 2, 3 and 4 are the truthful witnesses whose testimony has to be accepted without any embellishment. The family members of G. Janardhan would have number spared A-l and A-2, if they in fact were the real culprits who caused acid burns injuries on his person. The evidence of the eye-witnesses clinches that the deceased had named A-1 and A-2 as assailants in dying declaration made to PW-11, the Magistrate, on the intervening night of 11/12.07.2000 on being tutored by his relatives during the period 07/08.07.2000 to 11/12.07.2000, when they had gone to visit him in the ward of the hospital. PW- 11 recorded original dying declaration of the deceased G. Janardhan in Telugu. The evidence of PW-11 would show that on 11/12.07.2000 at 12 O Clock mid-night he received requisition Ex.P27 from the Inspector of Police, Police Station Chaderghat requesting him to record dying declaration of G. Janardhan at Yashoda Hospital. He stated that the declarant was number able to speak and see due to burn injuries but he was responding by gestures to the questions put to him. He gave him pen and a paper to write his statement who wrote the answers on the proceedings of the dying declaration. On perusal of the dying declaration, it reveals that the deceased had given the names of A-1 and A-2 and other accused persons who were acquitted by the trial companyrt. It has companye in the cross-examination of PW-11 that he did number make any endorsement on the proceedings of the dying declaration that the declarant was physically and mentally fit throughout the proceedings. Similarly, the Doctor on duty also did number specifically state in his endorsement that the declarant was physically and mentally in a fit state to make the statement. PW-11 also admitted suggestion of the defence that in Ex.P2S he did number mention that he disclosed his identity to the declarant before recording dying declaration. We have carefully examined the reasons recorded by the learned Sessions Judge and the High Court for accepting the dying declaration as credible and for accepting the evidence of Magistrate who recorded the alleged dying declaration Ex.P28 as bringing home the charge of murder against A-1 and A-2 beyond shadow of reasonable doubts. The dying declaration allegedly made by the deceased, in our view, is number free from doubt and embellishment. It is the specific case of PW-13 G. Guravaiah, Sub-Inspector, who went to the hospital immediately on receipt of the companyplaint Ex.P1 and found injured G. Janardhan admitted in the Yashoda Hospital on 09.07.2000 that he took the permission of the duty Doctor in regard to the physical and mental companydition of the deceased. As per his version, the Doctor certified that injured G. Janardhan was fit to make statement. He recorded the statement of injured G. Janardhan on small chits which he did number place on record of the case. This version of the Investigating Officer clearly and plainly shows that on 09.07.2000 G. Janardhan made some statement to the Investigating Officer which in all probability did number companytain the names of A-1 and A-2 who were responsible for throwing acid on his face, neck and chest. Those chits were important documentary evidence which was deliberately withheld by the prosecution from the Court with clear intention of suppressing the true version of G. Janardhan subscribed by him on some paper chits at the first available opportunity. G. Janardhan remained in Yashoda Hospital from 08.07.2000 till 24.07.2000 on which date he left the hospital and got himself admitted in Apollo Hospital where he died on the next day. The medical report of Yashoda Hospital reveals that injured G. Janardhan had refused to undergo surgery and got discharged from the hospital against medical advice. PWs-2 and 4 clearly and plainly deposed that the deceased made tutored statement to PW-11 at the behest of their relatives who had been the regular visitors of the ward where the deceased before death was lying and they had companypelled the deceased to mention the names of A-1 and A-2 along with other accused. The suppression and withholding of the first dying declaration of the deceased recorded by PW-13 on 09.07.2000, by itself creates suspicion and reasonable doubt as to the companyrectness and truthfulness of the dying declaration allegedly made by the deceased to PW-11, XIV Metropolitan Magistrate. This Court in P. Mani v. State of T.N. , while dealing with the question of dying declaration, held that companyviction can be recorded on the basis of the dying declaration alone but the same must be wholly reliable. In a case where suspicion can be raised as regards the companyrectness of the dying declaration, the Court before companyvicting an accused on the basis thereof would look for some companyroborative evidence. Suspicion is numbersubstitute for proof. If evidence brought on records suggests that such dying declaration does number reveal the entire truth, it may be companysidered only as a piece of evidence in which event companyviction may number be rested only on the basis thereof. The question as to whether a dying declaration is of impeccable character would depend upon several factors physical and mental companydition of the deceased is one of them. As numbericed above, the medical report raised a number of questions which have number been satisfactorily answered, which precluded implicit acceptance of the dying declaration Ex.P28 . First, PWs 1 and 3, who took injured G. Janardhan to Apollo Hospital and got him admitted there, have deposed that at that time G. Janardhan was number physically and mentally fit to make the statement. Second, who was the doctor on duty at the time of admission? PWs-1 and 2 did number say about it and the history sheet reveals that the injured was alleged to have sustained multiple burns over face and upper part of chest and neck when attacked with acid by unknown persons near his residence at about 8.15 P.M. PW-13 recorded the first dying declaration of the injured G. Janardhan on 09.07.2000 in the presence of some doctor, but the name of the Doctor has number been mentioned by him. The Doctor, in whose presence PW-11 recorded dying declaration Ex.P28 , has number been examined by the prosecution to companyroborate the companyrectness and truthfulness of the dying declaration on which companyviction of A-1 and A-2 has been recorded by the Trial Court and companyfirmed by the High Court, while the same document was number accepted by the companyrts below in respect of A-3 to A-9 whose names were also mentioned in the dying declaration. The dying declaration shows that the deceased was number in a position to speak and see and in such state of mind, it is highly doubtful and unbelievable that the deceased had written such a lengthy statement running in more than 3 pages companytaining various details by sign and gestures.

The appellants along with six others were chargesheeted for the offences punishable under sections 148, 302 and 307 read with Section 149 of the IPC. After companypletion of the trial, the appellants along with A-1 Jhenju, A-5 Jhamku Bai, A-6 Janu Bai and A-7 Bhangadiya were companyvicted for companymission of the offences punishable under sections 148 and 302 read with Section 149 and sentenced to undergo life imprisonment for the main offence. The companyvicted accused filed an appeal in the High Court which was disposed of by the impugned judgment, by acquitting A-1 Jhenju, A-5 Jhamku Bai and A-7 Bhangadiya. However, the companyviction and sentence of the appellants was upheld. According to the prosecution, on 28th July, 1988 at about 4,00 p.m. Bhadru, P.W. 2. Badiya deceased and one Sastiya had gone to the house of Pujara Idle where the appellant Jhunzara had also companye. The appellant Jhunzara invited P.W. 2, the deceased and Sastiya for dinner and drinks at his place. The deceased accompanied by other two persons went to the house of Jhunzara where other accused persons were also present. AN of them companysumed liquor. Jhamku Bai A-5 then closed the door from inside. At that time Kel Singh, Jhunzara, Kekadiya the appellants, put their arrows on the Kamahi and decided to kill the deceased and his companypanions. Accused Kel Singh and Jhunzara shot two arrows at Bhadru P.W. 2, one of which hit him at his left shoulder and other at his chest. Jhamku Bai is alleged to have hit the aforesaid witness with a stick. Janu Bai A-6 also hit Badiya the deceased with an axe. The appellant then shot arrows at the deceased which hit at his stomach, chest and right hand, After the matter was reported to the police, the injured was shifted to the hospital where he succumbed to his injuries on the 3rd day of the occurrence. While acquitting the other accused persons, the High Court found that numbercase was made out for attracting the provisions of Section 149 of the Indian Penal Code and finding that there existed the companymon intention amongst the appellants, the provisions of Section 34 of the Indian Penal Code were invoked for upholding the companyviction and sentence. Learned companynsel appearing for the appellants has submitted, that as P.W. 2 has number been believed so far as the involvement of the other accused is companycerned, his statement cannot be made the basis for companyviction of the appellants. In support of his companytention, learned companynsel has relied upon the judgment of this Court reported in Sorab and Anr. v. The State of Madhya Pradesh . After perusing the aforesaid judgment, we are of the opinion that the submissions made by the learned companynsel cannot be accepted as the said judgment has numberapplication to the facts of the present case. Only because a part of the statement of the witnesses has number been accepted by the trial companyrt, is numberground for rejecting the whole testimony of the witness. The companyrts below have rightly sifted the grain out of the chaff to ascertain the criminal liability of the appellants. We have also perused the aforesaid statement and find numbercontradiction worth any credence to disbelieve the testimony of the said witnesses so far as the involvement of the appellants in the companymission of the crime is companycerned. Learned companynsel further companytended that, as the location of the injury found on the person of the deceased at the time of autopsy are different than the injuries detailed by the prosecution witnesses, numberreliance can be placed upon their oral testimony. This argument is also without any substance because in his cross-examination, PW 2, has explained all the injuries attributed to the appellants which were inflicted on the persons of the deceased. Such injuries are located on the parts of the body of the deceased, as were numbericed by the doctor who companyducted the post-mortem of the dead body, Learned companynsel for the appellants then companytended that as other accused persons have been acquitted, the appellants being similarly situated are also entitled to similar treatment. We are afraid, such general, broad propositions without reference to the facts of the present case cannot be accepted. Other accused persons have been acquitted as their involvement was number found to have been established by the prosecution.

Order of the Court (First Chamber) of 21 January 1970. - Andreas Reinarz v Commission of the European Communities. - Case 17-68. European Court reports 1970 Page 00001 Parties Grounds Operative part Parties ++++ IN CASE 17/68 - COSTS ANDREAS REINARZ V COMMISSION OF THE EUROPEAN COMMUNITIES Grounds WHEREAS THE APPLICANT ASKS THE COURT TO DECLARE, IN INTERPRETATION OF ITS ORDER OF 17 SEPTEMBER 1969, THAT THE COSTS TO BE RECOVERED BY THE APPLICANT SHALL INCLUDE THE SUM OF .... FRANCS BY WAY OF COUNCIL' S FEES, EXCLUDING THE COSTS WHICH MUST BE CONSIDERED TO BE PAYABLE IN ADDITION; WHEREAS THE ONLY OBJECT OF THE TAXATION OF COSTS TO BE RECOVERED UNDER ARTICLE 74 OF THE RULES OF PROCEDURE IS TO DETERMINE, IF NECESSARY, THE AMOUNT OF THE COSTS AND FEES WHICH, HAVING REGARD TO ALL THE FACTS OF THE CASE, MUST BE BORNE BY THE UNSUCCESSFUL PARTY BY WAY OF COSTS TO BE RECOVERED; WHEREAS THE TERMS OF THE ORDER OF 17 SEPTEMBER 1969 STATE CLEARLY THAT THE AMOUNT OF THE COSTS TO BE RECOVERED OUT OF THE ENTIRE COSTS INCURRED BY THE APPLICANT SHALL BE ..... FRANCS; WHEREAS IT IS THEREFORE UNNECESSARY TO INTERPRET THE SAID ORDER, ON THOSE GROUNDS, Operative part THE COURT ( FIRST CHAMBER ) COMPOSED OF : R . MONACO, PRESIDENT, A . M . DONNER AND J . MERTENS DE WILMARS, JUDGES, ADVOCATE-GENERAL : K . ROEMER REGISTRAR : A . VAN HOUTTE HEREBY ORDERS : THE APPLICATION IS DISMISSED .

COURT OF APPEAL FOR ONTARIO CITATION: R. v. Boe, 2018 ONCA 531 DATE: 20180608 DOCKET: C64807 Lauwers, Pardu and Miller JJ.A. BETWEEN Her Majesty the Queen Respondent and Devon Boe Appellant Devon Boe, appearing in person Nader R. Hasan, appearing as duty counsel Ian Bell, for the respondent Heard and released orally: June 5, 2018 On appeal from the convictions entered on December 6, 2017 by Justice Terrence L. J. Patterson of the Superior Court of Justice. REASONS FOR DECISION [1] The appellant appeals convictions for possession of marijuana, cocaine and MDMA for purposes of trafficking, and possession of a prohibited weapon, on the basis that the police did not have reasonable and probable grounds for his arrest. [2] We disagree. The police received a tip from a confidential informant that someone named Devon was dealing drugs from a Dodge Avenger. The tip provided the name and description of the person, a description of the vehicle including the licence number, and a cell phone number. The police corroborated the name, description and age of the appellant from a search of the vehicle licence number. The information was detailed enough to warrant further investigation. [3] The police conducted surveillance of the appellant on two days. They observed him in his vehicle interacting with others in circumstances they believed to be suspicious and consistent with drug trafficking. [4] Although police did not observe any hand-to-hand transactions, or anyone carrying anything away from the vehicle, the trial judge concluded from the pattern of conduct that the police had reasonable and probable grounds to arrest the appellant. The search incident to arrest led to the drugs and weapon.  The trial judge did not err in finding on the evidence before him that the police had reasonable and probable grounds to arrest the appellant, and there is no basis upon which this court could interfere. The appeal is dismissed. “P. Lauwers J.A.” “G. Pardu J.A.” “B.W. Miller J.A.”

Dr. B.S. CHAUHAN, J. This appeal has been preferred by the Rajasthan State Road Transport Corporation hereinafter referred to as Corporation against the judgment and order dated 8.11.2005 passed by the High Court of Judicature for Rajasthan Jaipur Bench in S.B. Civil Second Appeal No. 449 of 2003 upholding the judgment and decree dated 28.1.2003 in Civil Regular Appeal No. 119 of 2002 passed by Additional District Judge, Jaipur, by which and whereunder, it has affirmed the judgment and decree dated 30.11.1994 passed by the Additional Civil Judge Jr. Div. No. 2, Jaipur in Civil Suit No. 1346 of 1988. Facts and circumstances giving rise to this appeal are that The respondent while working as a trainee companyductor on daily basis was found carrying certain passengers without tickets and, thus, an enquiry was initiated against him. Two chargesheets dated 11.3.1988 were served upon him. In the first chargesheet, it was alleged that on 24.2.1988 while he was on duty enroute Kota-Rajpura, when his bus was checked, it was found that 10 passengers were traveling without tickets, though he had companylected the fare from each of them. In the second chargesheet, it had been alleged that when he was on duty on route Kota-Neemuch, his bus was checked and he was found carrying two passengers traveling on tickets of lesser amount though, he had companylected the full fare from them. The respondent submitted separate reply to the said chargesheets which were number found satisfactory. Therefore, the enquiry officer was appointed to enquire into the matter and a regular enquiry ensued. The enquiry officer after companyclusion of the enquiry submitted the report holding that charges leveled against the respondent in both the chargesheets stood proved against him. After companysidering the report, the Disciplinary Authority vide order dated 5.8.1988 passed order of punishment of removal from the service. The respondent filed a Civil Suit on 2.9.1988 challenging the order of removal alleging that he was number supplied with the documents referred to in the chargesheets, number was given the enquiry report number other documents. More so, the quantum of punishment was disproportionate to the proved delinquency. The Suit was companytested by the appellants denying all the averments made therein. However, on companyclusion of the trial, the Suit was decreed vide judgment and decree dated 30.11.1994. Aggrieved, the Corporation filed Civil Regular Appeal No. 119 of 2002, which stood dismissed vide judgment and decree dated 28.1.2003. The Corporation challenged both the aforesaid judgments by filing Regular Second Appeal No. 449 of 2003, which also stood dismissed vide impugned judgment and decree. Hence, this appeal. Shri S. K. Bhattacharya, learned companynsel appearing on behalf of the appellants, has submitted that numbere of the companyrts below have examined the case in companyrect perspective. The stand taken by the appellants that the Suit itself was number maintainable, as the only remedy available to the respondent was to approach the Labour Court under the Industrial Disputes Act, 1947 hereinafter referred to as the Act 1947 has number been properly examined by the companyrts below. More so, the pleadings in the plaint were vague. The respondent plaintiff failed to prove any of the allegations made in the plaint, therefore, the companyrts below have erred in holding that the enquiry stood vitiated due to violation of statutory provisions and principles of natural justice. The enquiry had been companyducted strictly in accordance with law, the provisions of Section 35 of the Standing Order have been fully companyplied with and the respondent was given full opportunity to defend himself. Therefore, the findings of fact recorded by the companyrts below in this respect are perverse. The respondent was found to have embezzled money of the companyporation and the punishment of dismissal cannot be held to be disproportionate to the proved delinquency. Thus, the appeal deserves to be allowed. On the companytrary, Shri Anis Ahmed Khan, learned companynsel appearing on behalf of the respondent, has opposed the appeal companytending that there are companycurrent findings of facts recorded by the three companyrts. The trial companyrt as well as the first appellate companyrt have recorded the findings of fact that the enquiry had number been companyducted in accordance with law and the punishment of dismissal from service was disproportionate to the delinquency proved. Therefore, numberinterference is called for. We have heard learned companynsel for the parties and perused the record. Undoubtedly, the appellant companyporation had taken the plea regarding the maintainability of suit on the ground that the respondent being a workman ought to have approached the forum available under the Act 1947 and the civil suit was number maintainable. In order to fortify this submission Shri Bhattacharya has placed reliance on the judgments of this Court in The Premier Automobiles Ltd. v. Kamlekar Shantaram Wadke of Bombay Ors., AIR 1975 SC 2238 Uttam Das Chela Sunder Das v. Shiromani Gurdwara Parbandhak Committee, Amritsar, AIR 1996 SC 2133 Rajasthan SRTC Ors. v. Mohar Singh, AIR 2008 SC 2553 Rajasthan SRTC Anr. v. Bal Mukund Bairwa, 2009 4 SCC 299 and Rajasthan State Road Transport Corporation Ors., v. Deen Dayal Sharma, AIR 2010 SC 2662 and asserted that the judgments of the companyrts below are without jurisdiction. Be that as it may, before the trial companyrt, the appellants did number press the issue regarding the maintainability of suit even though the issue in this regard had specifically been framed. Thus, we are number inclined in delving into this companytroversy at all. The relevant part of the plaint reads That the plaintiff was imposed with the charge sheet number 1158 dated 11.3.88 that on date 24.2.88 on the route Kota-Rajpura his vehicle was checked and it was found during the companyrse of the inspection that he was carrying 10 passengers without tickets and another Charge sheet number 1159 dated 11.3.88 was imposed with the statement that on date 27.11.88 the plaintiff was found carrying 2 passengers without tickets during the companyrse of his giving the duty on the route Kota-Neernuch in the capacity of the companyductor and he was also caught in the case of the difference in the ticket amount. That if the bus was number checked in time then the plaintiff would have used the entire sum of money he recovered from the passengers found without tickets for his personal use. Whereas as per the terms and companyditions of the Corporation the plaintiff is required to issue the tickets to all the passengers and then to get the same entered in the waybill and that then only the vehicle should have been departed. The aforesaid charges were totally wrong and baseless. The appellant defendant in its written statement basically stated ? ?The Defendants have mentioned in the reply that the plaintiff had been appointed on the post of the companyductor on the daily wage basis. The plaintiff is number entitled of receiving the salary of the regular pay scale from the date 7.12.85 because the plaintiff was appointed as a daily wageworker and the salary in accordance with the law was given to the plaintiff. ? During the companyrse of the inquiry the plaintiff was given full opportunity of defence and of being heard. The companyy of the enquiry report was supplied to the plaintiff after the companypletion of the inquiry and he was also intimated the result of the inquiry. In this way numberviolation of the principle of natural justice was done as against the plaintiff whereas the provisions of section 35 of the standing orders were fully companyplied with. The Disciplinary Authority had by fully applying its mind passed the order of termination of the plaintiff. The plaintiff has produced the companyrt fee at his own risk. The Defendant Corporation companyes within the definition of the Industry and for which it is only the Honble Industrial Tribunal who has got the jurisdiction to hear and decide the case of such nature. The plaintiff is number entitled of receiving the monetary benefits and other companysequential benefits from the defendants. Therefore, the suit of the plaintiff be dismissed with companyts. After appreciating the material on record, the trial companyrt held In this way the plaintiff has clearly made the allegation in the plaint that in the inquiry the statement of the witnesses were number recorded in front of the plaintiff. He was number given an opportunity to cross-examine the witnesses produced by the defendant companyporation and number he was given an opportunity to defend his case and lead the evidence. That he was number supplied with the companyies of the documents and was number heard on the quantum of the punishment and he deposed the same by way of the affidavit. That in order to companytradict the same the defendants have number produced any evidence by way of deposition and number any other document in support of the same has been produced. Under these circumstances, there is numberreason to disbelieve the evidence of the plaintiff. That since the inquiry which has been initiated against the plaintiff is against the principle of natural justice, under these circumstances, the order of termination which has been passed is also against the law. Therefore, this suit issue is decided in favour of the plaintiff and against the defendants. Emphasis added The aforesaid findings recorded by the trial companyrt is based only on the allegations made by the respondent in the plaint and on failure of the Corporation defendant to rebut the same, though the trial companyrt had proceeded with the case clearly observing that the burden of proving this issue was on the respondent plaintiff and number on the Corporation defendant. In such a fact situation, numberreasoning whatsoever has been given by the trial companyrt in support of its companyclusion. Neither there is any specific pleading as to what document had number been supplied to him which has been relied upon by the enquiry officer or which witness was number permitted to be crossexamined by him. The trial companyrt did number make any reference to enquiry report or companytents thereof. The entire case is based on ipsi dixi. It is settled proposition of law that a party has to plead the case and produce adduce sufficient evidence to substantiate his submissions made in the plaint and in case the pleadings are number companyplete, the Court is under numberobligation to entertain the pleas. Vide M s. Larsen Toubro Ltd. Ors. v. State of Gujarat Ors., AIR 1998 SC 1608 National Building Construction Corporation v. S. Raghunathan Ors., AIR 1998 SC 2779 Ram Narain Arora v. Asha Rani Ors., 1999 1 SCC 141 Smt. Chitra Kumari v. Union of India Ors., AIR 2001 SC 1237 and State of U.P. v. Chandra Prakash Pandey, AIR 2001 SC 1298. In M s. Atul Castings Ltd. v. Bawa Gurvachan Singh, AIR 2001 SC 1684, this Court observed as under The findings in the absence of necessary pleadings and supporting evidence cannot be sustained in law. See also Vithal N. Shetti Anr. v. Prakash N. Rudrakar Ors., 2003 1 SCC 18 Devasahayam Dead by L.Rs. v. P. Savithramma Ors., 2005 7 SCC 653 Sait Nagjee Purushotam Co. Ltd. v. Vimalabai Prabhulal Ors., 2005 8 SCC 252, Rajasthan Pradesh V.S. Sardarshahar Anr. v. Union of India Ors., AIR 2010 SC 2221 Ritesh Tiwari Anr. v. State of U.P. Ors., AIR 2010 SC 3823 and Union of India v. Ibrahim Uddin Anr. 2012 8 SCC 148 . Therefore, once the trial companyrt has held that the burden of proof was on the respondent plaintiff, it companyld number have companye to the aforesaid findings as there is numberhing on record to show how the averments allegations made by the respondent stood proved. Even the First Appellate Court misdirected itself while dealing with the issue as it held? ? That numberevidence was produced by the defendants appellants. The statement given by the plaintiff is unrebutted. That as per the statement of the plaintiff the statement of the witnesses were number recorded in front of the plaintiff. The plaintiff was number given an opportunity of cross-examining the witnesses produced by the Defendants Appellants. The plaintiff was number given an opportunity of leading the evidence and defending his case. The companyies of the documents were number supplied to the plaintiff. He was also number heard on the quantum of the punishment. In this way the deposition given by the plaintiff are number rebutted and due to the reason of the same been unrebuttable it can be said that numberdepartmental inquiry was initiated as against the plaintiff. Due to the reason of number holding the departmental inquiry the proceeding initiated against the plaintiff was number in accordance with the principle of natural justice. The order of termination which has been passed without holding the inquiry cannot be said to be passed in accordance with the law. In this way the finding arrived at by the learned subordinate companyrt in respect of the issue number 1 is just and proper and there is numberneed to interfere in the same. The appellate companyrt companymitted a grave error by declaring the enquiry as number-est. The termination order as a companysequence thereof, stood vitiated though there is numberreference to any material fact on the basis of which such a companyclusion was reached. The finding that companyy of the documents was number supplied to the respondent plaintiff, though there is numberhing on record to show that how the documents were relied upon and how they were relevant to the companytroversy involved, whether those documents had been relied upon by the enquiry officer and how any prejudice had been caused by number-supply of those documents, is therefore without any basis or evidence. When the matter reached the High Court in Second Appeal, the High Court refused to examine the issue at all by merely observing that numbersubstantial question of law was involved and the findings of fact, however erroneous, cannot be disturbed in Second Appeal. With all respect, we do number agree with such a companyclusion reached by the High Court, as Second Appeal, in exceptional circumstances, can be entertained on pure questions of fact. There is numberprohibition for the High Court to entertain the Second Appeal even on question of fact where factual findings are found to be perverse. In Ibrahim Uddin Supra , this Court held In Suwalal Chhogalal v. CIT, 1949 17 ITR 269 Nag the Court held as under ITR p. 277 A fact is a fact irrespective of evidence by which it is proved. The only time a question of law can arise in such a case is when it is alleged that there is numbermaterial on which the companyclusion can be based or numbersufficient material. There is numberprohibition to entertain a second appeal even on question of fact provided the Court is satisfied that the findings of the companyrts below were vitiated by number-consideration of relevant evidence or by showing erroneous approach to the matter and findings recorded in the companyrt below are perverse. Vide Jagdish Singh v. Natthu Singh, AIR 1992 SC 1604, Prativa Devi v. T.V. Krishnan, 1999 5 SCC 353, Satya Gupta v. Brijesh Kumar, 1998 6 SCC 423, Ragavendra Kumar v. Firm Prem Machinery Co., AIR 2000 SC 534, Molar Mal v. Kay Iron Works P Ltd., AIR 2000 SC 1261, Bharatha Matha v. R. Vijaya Renganathan, 2010 11 SCC 483 and Dinesh Kumar v. Yusuf Ali, 2010 12 SCC In Jai Singh v. Shakuntala, AIR 2002 SC 1428, this Court held that SCC p. 638, para 6 it is permissible to interfere even on question of fact but it may be only in very exceptional cases and on extreme perversity that the authority to examine the same in extenso stands permissibleit is a rarity rather than a regularity and thus in fine it can be safely companycluded that while there is numberprohibition as such, but the power to scrutiny can only be had in very exceptional circumstances and upon proper circumspection. Similar view has been taken in Kashmir Singh v. Harnam Singh, AIR 2008 SC 1749. As regards the question of disproportionate punishment is companycerned, the issue is numbermore res-integra. In U.P State Road Transport Corporation v. Suresh Chand Sharma, 2010 6 SCC 555, it was held as under In Municipal Committee, Bahadurgarh v. Krishnan Behari, AIR 1996 SC 1249 this Court held as under SCC p. 715, para 4 In a case of such natureindeed, in cases involving companyruptionthere cannot be any other punishment than dismissal. Any sympathy shown in such cases is totally uncalled for and opposed to public interest. The amount misappropriated may be small or large it is the act of misappropriation that is relevant.

MR JUSTICE MITTING: This judgment contains acronyms and a word without ordinary meaning in English. I use them without apology because they were used by the parties to the events that I am about to describe. The National Health Service Superannuation Scheme has 1.3 million members, of whom approximately 33,000 are general practitioners. The majority of scheme members, from hospital porters to consultants, are officers. For them, the scheme is a conventional contributory final salary pension scheme. That is not so for general practitioners. Since the inception of the National Health Service, general practitioners' pensions have been based on a percentage of lifetime practice earnings. Until 1973, the percentage was 1.5 per cent. By the early 1970s, the value of general practitioners' pensions was being undermined by inflation. The British Dental Association, then in the same position as general practitioners, proposed that past earnings be "dynamised". Negotiations with the Department of Health followed, which produced a scheme which contained two elements: the uprating of past earnings to allow for inflation to 1971/2; and providing for future annual uprating of past earnings by reference to anticipated earnings in 1972/3 and following years. In return, the annual pension was reduced to 1.4 per cent of uprated lifetime earnings. This aspect of the scheme was passed into law by regulation 3 of the National Health Service (Superannuation) (Amendment) (No 2) Regulations 1973, which provided: "... a practitioner's total uprated remuneration shall be calculated by uprating his remuneration for all reckonable service as a practitioner in each financial year in such way as the Secretary of State, after consulting such professional organisations as appear to him to be appropriate, may determine and by adding together the uprated remuneration for each financial year..." The percentage by which past earnings were uprated was known in the jargon as the "dynamising factor". Until 2003/04, the dynamising factor was based on intended average net income ("IANI"). This was the average pre-tax, but after expenses, income earned from NHS practice which was more or less fixed by a process undertaken annually. General practitioners were paid on a cost-plus basis for NHS work. Each year a review body, the Independent Review Body on Doctors and Dentists Remuneration ("DDRB") recommended that IANI be increased by a percentage. The Secretary of State then decided what the percentage should be. His decision fixed the dynamising factor for past earnings for pension purposes. There was thus a close correlation between the amount by which general practitioners' National Health Service earnings rose and the increase in the value of their pensions. Marginal adjustments were made from time to time in an attempt to ensure that IANI matched actual earnings. The 1973 regulations were successively replaced by the 1980 and 1995 regulations. Paragraph 11(2) of Schedule 2 to the 1995 regulations is that which is currently in force. What paragraph 11 does is to substitute for the provision relating to officers a provision relating to general practitioners only. The relevant parts provide: "(1) In the case of members who are or have been practitioners, regulation E1 (normal retirement pension) is modified so that the yearly rate of a member's pension... (b) in respect of practitioner service will be equal to 1.4 per cent of the member's uprated earnings. (2) The member's uprated earnings are to be calculated by uprating the member's pensionable earnings in the manner determined by the Secretary of State after consulting such professional organisations as she considers appropriate." By 2001, the Government had come to the view that the contractual arrangements with general practitioners should be fundamentally changed. The Department of Health entered into discussions with the British Medical Association to that end. The fruit was a detailed 108 page draft General Medical Services Contract sent to the BMA on 26th February 2003. It is known as "the Blue Book". Paragraphs 5.48 to 5.61 dealt with pensions. The relevant parts are: 5.48. GPs' pensions are calculated under a career earnings method rather than a final salary scheme. Each year of pensionable income is increased by an uprating or dynamising factor on a cumulative basis. The uprating factor is currently based on year on year changes in the Intended Average Net Income (IANI). An accrual rate is then applied on retirement age to the individual GP's total uprated career earnings to provide an annual pension entitlement. In addition, a tax-free lump sum of three times the annual pension is payable. Once a pension is being paid, it is uprated annually by retail price inflation. 5.50. As a result of the increased investment guaranteed under the new contract, average practice income will rise. It is not possible to state how much that rise is likely to be, given that the future ratio of profit to expenses is unknown and the concept of IANI will disappear. The pensions changes that will be made will mean that, over time, the total percentage increase in pensions should exceed the percentage increase in net income, because of the change in the definition of pensionable earnings. 5.56. It is essential that practitioners have certainty about the factor that will be applied at the point in time when they are contemplating retirement, and yet the abolition of IANI necessarily means that the actual year-on-year change in earnings cannot be known in advance. Equally, practitioners reasonably expect that increases in earnings that accrue under the new contract will be fully reflected in the uprating factor as soon as is feasible. 5.57. The uprating factor is currently based on the year on year percentage increase in IANI. IANI will disappear as a concept and a new method will be needed. We intend that the uprating factor, moving forward, should be based on the year on year percentage change in all pensionable earnings from NHS work (the aggregate of net NHS pensionable income, divided by the number of practitioners), adjusted by the TSC annually to allow for the shift towards less than full-time working. The TSC will also rebase the uprating factor on 1 April 2004 to ensure that the transfer of out-of-hours work does not depress the uprating factor." General practitioners were invited by the BMA to vote on the new contract. They voted by a substantial majority in favour. In December 2003, the Department of Health published a contract, "Investing in General Practice", draft contract regulations and a draft standard GMS contract and a detailed explanatory document "Delivering Investment in General Practice", which is known as "the Green Book". In a forward to the Green Book, the Right Honourable John Hutton, the Minister of State for Health, wrote: "Delivering Investment in General Practice – Implementing the new GMS contract is the product of negotiations between the GPC, the NHS Confederation and the Department and has been agreed by all parties. It fleshes out the detail of the contract document Investing in General Practice and sets out how implementation needs to be taken forward. It needs to be read in conjunction with the Contract Regulations published in draft on Friday 12th December, the Standard GMS Contract published in draft on 19th December, and the draft Statement of Financial Entitlements published today. These documents have been agreed by the NHS Confederation and the GPC and they provide the further information that PCTs and practices need to implement the new contract. We have worked in partnership at national level. The Government is 100% committed to effective and timely implementation. The NHS, through the NHS Confederation, and the profession, through the GPC, have together developed the vision and the contractual mechanisms. It is now for PCTs and practices to work in partnership locally to make that vision a reality. The local contracting process and its ongoing review mechanisms will fundamentally change the current relationship between PCTs and practices, enabling them to work together much more closely and more effectively. The contract is not just about a legal agreement. It must be about a relationship based on mutual trust, respect and support." Two acronyms require explanation. GPC is the subcommittee of the BMA which deals with general practice matters and PCT is a Primary Care Trust. Paragraphs 4.18 to 4.23 dealt with pensions. Paragraph 4.21 was headed "Uprating Factor" and reads: "In the new contract, the uprating factor is based on the actual growth in GP pensionable earnings compared with the previous year. This will be adjusted by the Joint Health Departments/NHSC/GPC Technical Steering Committee to take account of the shift to less than full-time working. The exact figures cannot be known until after the end of the financial year, so the TSC will estimate an interim award to mitigate any short-term loss in benefits for newly retired doctors while the actual uprating factor for the year is assessed. The interim reward will be set at a level that avoids the need to make subsequent reductions or reclamation of pension or lump sum." The Technical Steering Committee or TSC had on it representatives of the GPC and the Department of Health. In fact, the contractual documents said nothing about pensions or uprating, no doubt because the contract was to be between the general practitioners and Primary Care Trusts, which had no responsibility for the superannuation scheme. The primary case of the claimants (the BMA and the representative general practitioner, who has retired) is that, by that statement and/or by steps subsequently taken to refine and implement it, the Secretary of State has determined the manner in which uprated earnings and so a general practitioner's pensionable earnings were to be calculated. The claimant's case is that, by a decision foreshadowed by a letter of 7th December 2006 from the then Minister of State, Lord Warner, the Secretary of State has unlawfully failed to apply that determination for the years 2003/2004 to 2006/2007 inclusive. I should add that there is no further document evidencing a decision by the Secretary of State to accept Lord Warner's recommendation. That letter is therefore treated as the decision that is the subject of this challenge. It is common ground that (1) the Secretary of State would not have been entitled retrospectively to revoke her determination if made in relation to 2003/04 to 2005/06 in a manner which adversely affected the interest of general practitioners; (2) the Secretary of State was entitled to revoke her determination if made for the year 2007/08 and subsequent years and to replace it with a new determination. The Secretary of State's case is that she has never made a final determination under paragraph 11(2) in respect of any year. There is a subsidiary issue as to whether or not, if the Secretary of State has made a determination under paragraph 11(2) for 2003/04 to 2005/06, she has done so for 2006/07 or, having done so, is entitled to change her determination and redetermine the matter for that year. If I decide those issues in favour of the Secretary of State, the claimants contend in the alternative that they have a substantive legitimate expectation, which also counts as a possession under the First Protocol, Article 1 of the European Convention on Human Rights, which it is not open to the Secretary of State to frustrate. Finally, the claimants claim a procedural legitimate expectation which the Secretary of State has not fulfilled. The Secretary of State disputes each of these propositions. No document or documents internal to the Department of Health recording the making of a determination has been put in evidence. What, if any, determination was made has therefore to be ascertained from the published documents, correspondence and actions of officials and others. Despite the absence of an internal document, it is common ground that a determination of some kind was made. Ms Laing for the Secretary of State puts it as follows: the Secretary of State has decided what process should be followed by the TSC in making a recommendation to the Secretary of State but no more; it was for her to determine what dynamising factor would be applied in the light of that recommendation. I understand her to submit that this was not a conscious documented decision but an assumption based on past practice. There is no evidence of the circumstances in which, in the years before 2003 to 2004, the Secretary of State had declined to follow the recommendations of the DDRB as to the IANI for a particular year but I accept that the Secretary of State retained the power to reject its recommendations and may well have done so. Paragraph 4.21 of the Green Book reads like the report of a determination already made. It set out in unqualified terms the basis upon which the uprating factor was to be calculated: "the actual growth in GP pensionable earnings compared with the previous year." It sets out what adjustment is to be made by the TSC to reflect "the shift towards less than full-time working". It sets out how an interim award on a conservative basis is to be determined by the TSC. The statement in the forward that the Government was "100% committed to effective and timely implementation" is wholly consistent with the manner of calculation having been determined: what was required was to implement it effectively. Ms Laing submits that it is not enough that the Secretary of State had determined the basis on which pensionable earnings were to be uprated. A detailed methodology or formula was required and, as at December 2003, this was still under discussion. She is factually correct and in my judgment legally correct as well. In meetings in October 2003 between the GPC and Department of Health officials, options for implementing the agreed basis were discussed. At a plenary meeting on 22nd October 2003 it was agreed that pension dynamisation was to be discussed in a subgroup. It was, and agreement on a proposal to be put to a plenary meeting was reached on 5th February 2004: "Dynamisation for 2003/4 3. Pensions for GPs retiring in '03/04 have been provisionally assessed at the '02/03 rate, pending conclusion on nGMS discussions. The sub group has been in agreement that the uprating factor should be based on the existing IANI principles and that the TSC should consider this with input from GAD [the Government Actuaries Department]... Dynamisation for 2004/05 and subsequent years 5. From 2004/05 the sub group has agreed that the uprating factor should be based upon the year on year change in actual GP earnings. Each new DF will be the year's measured growth in actual GP earnings. This will be assessed on the basis of returns of Certificates of NHS Pensionable Profits received by PCTs and the NHS Pensions' Agency. TSC, with input from GAD, will make necessary assumptions about total numbers of GPs, and changes in, for example full time versus part time working, and transfers, for example, of OOH work. The final figures will, as before, be subject to consultation between DH and GPC. 6. Returns from practices will not be available until some time after the end of the financial year to which they refer, and significant numbers will not be available until after the Inland Revenue deadline for the submission of tax returns of 31 January following the end of the tax year. It will not be possible to make an assessment until a sufficient number of returns of NHS pensionable profits are available. The sub group has therefore agreed that the TSC should make a provisional assessment of the expected DF for GPs retiring in the current year at a safe level that will then be uprated when a final DF is available." Ms Laing tells me, and I accept, that these proposals were put to and agreed at a plenary meeting in September 2004. Meanwhile, Dr John Chisholm of the GPC and John Hutton exchanged correspondence noting that agreement. Dr Chisholm wanted the agreement to be enshrined in regulations. Mr Hutton did not. Nevertheless, both reported the agreement on methodology reached at the subgroup meeting on 5th February 2004. Dr Chisholm, 25th February 2004: "We have been encouraged by the very good and constructive progress made in recent months between the GPC and the Department on pension arrangements for GPs in 2003/04 and from 2004/05 onwards. We have no dispute with the methodology for the uprating factor that has been agreed and we are confident that the methodology will be implemented if it is left to the discretion of the Secretary of State." Mr Hutton on 16th March 2004: "Thank you for your letter of 25 February about the new pension dynamisation arrangements. I too am very pleased that agreement has been reached on the future arrangements for dynamisation. I am not however persuaded that changing the existing dynamisation regulations is necessary, or indeed beneficial for the profession. The agreement between the GPC and the Confederation is that for 2003/2004, the Technical Steering Committee (on which the GPC, the NHS Confederation and the Department are represented), will recommend an interim level for the DF. Further analytical work will then be undertaken following which a final DF for the year will be recommended and arrears paid to doctors who have retired and whose benefits are affected. From 2004/2005 the TSC will again recommend an interim DF which will be revised when the actual changes in GP earnings become available some time after the end of the year in question. The current regulations allow the Secretary of State to set the DF and there is no need in law to amend them to give effect to these agreed changes." He proposed the exchange of a formal memorandum of understanding specifying "how the dynamisation agreement should work in practice". The agreement as to method reached was circulated to National Health Service chief executives by Howard Robinson, a NHS Pension Agency Officer, a member of the TSC and the Scheme Communications Manager, as annexed to his circular of 17th December 2004: "Medical pensions dynamising factor Professional and NHS employer representatives have agreed a revised method of calculating the dynamising factor (DF) to be used for uprating the pensionable earnings used to calculate NHS Scheme benefits for all medical practitioners. For 2003-2004, the DF has been based on assessments of expected GP NHS earnings and expenses. For April 2004-2005 onwards however, the DF will be based on movements in actual GP NHS earnings since the previous year. For both 2003-2004 and 2004-2005 onwards, an interim estimated DF would first be declared, followed by a final confirmed figure for the year, once complete data for that year is available. Pensions awarded on the interim DF will then be reassessed and any arrears paid. In the unlikely event that pensions (including dependants benefits) calculated using the interim DF are found to have been overpaid because the final DF is lower than the interim DF, the overpayment will be recovered. The DF calculated under the new arrangements will take account of all GP pensionable NHS earnings and apply to all GP NHSPS benefits, including those of freelance locum GPs. An interim DF is now available for 2003-2004 (7.2%); see Newsletter 13/2004. The interim DF for 2004-5 is 6.1% and further details will be announced soon in a future newsletter." Further circulars from the TSC, dated 17th May and 6th November 2005, set out the product of its detailed interim assessments for the years of 2003/04 to 2005/06 inclusive, setting out the formula for determining the interim dynamising factor and the outcome in tabular form. The language was that of decision: in the circular of 17th May 2005 "Annex 1 to this Newsletter now contains the interim medical DF for 2004-2005" and in the letter of 6th November 2005 the same for the following year. At no time and on no occasion before the meeting between Dr Meldrum (Dr Chisholm's successor at the GPC) and Lord Warner on 6th December 2005 did any official or minister of the Department suggest that the agreement finally reached at the plenary meeting in September 2004 or the detailed implementation of that agreement by the TSC were merely provisional and subject to a further determination to be made by the Secretary of State. I agree with Ms Laing that the details of how the basis for determination stated in paragraph 4.21 of the Green Book was to be implemented had to be determined before it could be said that the Secretary of State had determined the manner in which the uprating of pensionable earnings was to be calculated under paragraph 11(2). The object of the exercise was to produce a mathematically certain figure. Without the details, that could not be achieved. All that would have existed would have been a determination in principle of no practical effect. However, by September 2004 or 17th December 2004 (the date of Mr Robinson's circular) or, at the very latest, 17th May 2005 (when the TSC assessed the interim dynamising factor for 2004/05) the details had been worked out and agreed by, amongst others, Department of Health officials. What they were doing was carrying into effect the decision in principle notified by the Department to the profession in paragraph 4.21 of the Green Book. They must have done so with ministerial approval. If, as the Secretary of State now contends, her approval was always conditional on reserving the final decision to herself, she should have said so in unmistakeable terms. There is no evidence that she contemplated that it might be desirable to do so until December 2005, by which date Lord Warner realised, apparently for the first time, that the dynamising factor produced by the agreed formula would produce a sudden and very large increase in general practitioners' pensions, far larger than had been anticipated in 2003. A report dated 9th December 2005 from the Government Actuaries Department set out the financial impact in stark terms. If the dynamising factor was of the order anticipated by the Department of Health in 2003 (36 per cent in the years 2003/04 to 2005/06), there would be an unfunded liability of £1.4 billion for the National Health Service superannuation scheme. If the dynamising factor was as anticipated by applying the agreed formula, the unfunded liability would be between £2.1 billion and £2.8 billion. There is difference of recollection as to what Lord Warner said at the meeting, but he did undoubtedly point out the financial difficulties to Dr Meldrum which would be caused to the scheme or to the taxpayer if it was not recast. On 24th April 2006, he wrote to Dr Meldrum, stating his intention to recommend to the Secretary of State that the TSC's "recommendations" (as he put it) for 2003/04 only be approved by her on the basis that it set no precedent for the following years. On 10th August 2006, he wrote in terms that implicitly acknowledged the existence of an existing, if unwelcome, method for determining the dynamising factor: "As you are aware, the Department of Health has been concerned for some time about the windfall gains GPs who are members of the NHS pensions scheme stand to make from the operation of the current pension dynamisation rules [my emphasis] as a result of the new GMS contract... I am minded to recommend to the Secretary of State that, in exercising her power to determine the dynamisation factor, she should if necessary limit the factors for this period so that the total increase does not place any additional pressures on the NHS pensions scheme beyond those allowed for in the proposals recently published by the NHS Employers organisation and the NHS Trades Unions. In that latter passage, he articulated the proposition now advanced by Ms Laing that, until the Secretary of State made a decision on the amount of the dynamising factor for a particular year, she had not fully discharged her powers under paragraph 11(2); but he did so after "the current pension rules" had produced a different sum. The same duality of approach is to be found in his letter of 9th October 2006 to Dr Meldrum, in which he states: "However, I believe the problems with the NGMS methodology go further, as neither the profession, other scheme members, nor the tax payer, are well served by a methodology that may deliver major increases in some years, and much smaller increases, and perhaps none at all, in other years, regardless of the overall movement in national average earnings or prices... It will also allow for much quicker implementation of GPDF by the BSA for the 2004/08 years than is possible under current methodology [my emphasis], by avoiding the long time delay while GP contribution data is gathered." Again, the references to "methodology" and "current methodology" impliedly acknowledge the existence of a manner of calculating pensionable earnings already determined, which he wished to change. His final recommendation was set out in his letter to Dr Meldrum dated 7th December 2006, which gives rise to this claim. It states: "I have indicated my readiness to discuss the detail of the Government's proposal, but, in the absence of comprehensive GPC comment on it, I am writing now to let you know that the Secretary of State has decided to exercise her powers to apply GMP Dynamisation totalling 48% over the years 2003/2008. This will be applied as set out in the table below." The table sets out the dynamising factors amounting cumulatively to 48 per cent for the five years 2003/04 to 2007/08. Even in this letter, however, Lord Warner acknowledged the existence of an already established arrangement: "I believe that the Government's proposal is an extremely fair approach to an existing arrangement that has proved unsustainable in a mutual pension scheme." This material, in my judgment, establishes that a decision in principle was made by the Secretary of State in December 2003 and worked out in detail and applied with the express approval of officials in 2004 and 2005. That must have occurred as a result of a determination by the Secretary of State of the manner in which pensionable earnings were to be calculated under paragraph 11(2). It was not made conditional on her final approval of the outcome. If it had been, that reservation would have been notified to the BMA and the National Health Service employers. It was only when the true cost of the manner determined by her became apparent at the end of 2005 that she attempted, by Lord Warner, to renegotiate the arrangements which she had already determined. She cannot do so with retrospective effect. The claim accordingly succeeds as regards the years 2003/04 to 2005/06 inclusive. The Secretary of State's determination was made during the year 2006/07. No final dynamising factor could be fixed until several months after the end of the financial year. Provided that a decision to revoke her previous decision as to the manner in which pensionable earnings were to be uprated was made before the end of the financial year to which it related, there can be no question of retrospection. Lord Warner's letter gave explicit notice of revocation of the Secretary of State's determination for the year 2006/07. That revocation was lawful and effective for that year and for subsequent years. I should add by way of clarification that, although the letter sets out in percentage terms the dynamising factors for 2006/07 and 2007/08, those figures were set out as part of a total package and do not now bind the Secretary of State. She is free to determine the manner in which pensionable earnings are to be uprated under paragraph 11(2) for those years, notwithstanding the terms of that letter. In light of my findings on the principal issue, it is not necessary for me to set out what my conclusions would have been on the remaining issues. Lest this case goes further, I will do so, but briefly. The facts which I have set out did give rise to a substantive legitimate expectation on the part of individual general practitioners, of whom the second claimant is representative, that their pensionable earnings would be uprated in the manner described in the three years identified. If, contrary to my finding, the Secretary of State did not so determine, she gave the clearest impression that she had. It does not matter that the class of persons to whom she gave the expectation is relatively large. General practitioners form part of an identifiable and limited class, of which membership can be ascertained with certainty. That legitimate expectation was attached to a property right -- an entitlement to a pension -- so that acting in breach of it is capable of giving rise to a claim of infringement of a right to a possession under Article 1, First Protocol ECHR. Nevertheless, for the reasons summarised in paragraph 31 of Ms Laing's skeleton argument, the Secretary of State was in my judgment entitled to change her mind and disappoint the legitimate expectations of general practitioners. This is an issue to be decided at the "macro level", affecting, as it does, the interests of taxpayers and other contributors to the National Health Service superannuation scheme. The sums of money involved are large. It is a decision for ministers and not the judiciary. Accordingly, if I had not held that that decision had already been made, I would have held that the Secretary of State was entitled to revoke the apparent decision communicated to general practitioners, even with retrospective effect. I would also hold that the procedural legitimate expectation which general practitioners have in relation to changes to the scheme were satisfied by discussions between Lord Warner and Dr Meldrum and by the exchange of correspondence between them. Accordingly, this claim succeeds only upon the principal ground and not upon any of the subsidiary grounds. MR GORDON: My Lord, may I deal with relief? It seems to me that, in view of your Lordship's ruling, one will need to qualify probably the relief that we have sought. If your Lordship goes to bundle A, page 4, what we have sought is a declaration that the decision of 7th December 2006 is unlawful. It may be that we should draw up an order which more precisely reflects your Lordship's ruling that, save as to -- MR JUSTICE MITTING: The decision of 7th December 2006 as to the three relevant years is of no effect. MR GORDON: Exactly, and, similarly, with the declaration, we would seek a declaration to similar effect. MR JUSTICE MITTING: Well, I imagine that Ms Laing would, given my judgment, prefer that the decision is simply quashed. MR GORDON: Possibly. MR JUSTICE MITTING: Leaving it open to the Secretary of State to redetermine the method by which the years 06/07 onwards is to be assessed. MR GORDON: I am sure we can agree on relief. I do not know if my learned friend wants to make any submissions on relief. MS LAING: While we are on that subject, I had not anticipated that there was a problem in relation to the decision for 03/04. I had not realised that my learned friend was challenging that, because I had understood that the final dynamising had effectively been agreed and that was fine. The problem arose in relation to 04/05 and 05/06. MR GORDON: Well, yes, I think that is right. I think for 2003/2004 we are happy with the DF that has been reached. I think that is right. MR JUSTICE MITTING: Well, that I think is factually correct. Can I leave it to you to agree the form of order that will be made? I hope my judgment is sufficiently clear to permit you to do so. MR GORDON: It is, my Lord. MR JUSTICE MITTING: And would you lodge it with the court when it has been agreed? MR GORDON: My Lord, certainly. The only other aspect is costs and we seek an order for costs against the defendant. MS LAING: My Lord, I cannot resist that second application. We have lost and we should pay the costs. Can I raise a couple of matters in relation to the transcript, when it is corrected. Before I do that, it would assist both my learned friend and me if your Lordship were able to direct that the transcript be expedited. MR JUSTICE MITTING: Certainly, although my experience of recent weeks is that transcripts arrive much more quickly if I do not direct them to be expedited than when I do. MS LAING: Funnily enough, I had a similar experience in relation to a transcript of a judgment of your Lordship's. Let us hope that that works. So far as the transcript is concerned, when your Lordship comes to correct it, there are a just couple of slips I wonder if I could just mention now. Right at the beginning, when your Lordship referred to the regulations, the first set of regulations was the 1961 regulations, which were then amended by the 1973 regulations. MR JUSTICE MITTING: I know that, but there is no point in going back as far as 1961. MS LAING: And so it was the 1961 regulations which were replaced by the 1980, rather than the 1990, regulations. MR JUSTICE MITTING: That is strictly correct. MS LAING: Then, finally, your Lordship has referred in one or two places to regulation 11(2) and it is paragraph 11(2) of schedule 2. MR JUSTICE MITTING: Quite right. MR GORDON: They are very small points. Then, again, I think it follows from the point I made about the year 2003 to 2004. There are one or two references, I think, in the judgment to the year 2003 to 2004 which, perhaps, in the light of the discussion we have just had, have no place there, because I think it is accepted that that decision is not challenged in these proceedings. Moving away from the transcript, I would apply for permission to appeal. The central issue on which your Lordship has found against the Secretary of State concerns the true construction of paragraph 11(2) and we would submit that the construction that we were advancing before your Lordship is an arguable construction. It is clearly a very important issue for the Secretary of State and we would submit that it is an appropriate case for you to grant it. MR JUSTICE MITTING: I grant you permission to appeal on both bases. MS LAING: I am very grateful to your Lordship. My Lord, I do not think there is anything else. (pause) MR JUSTICE MITTING: Thank you both for an efficiently conducted and interesting argument.

COURT OF APPEAL FOR ONTARIO CITATION: Carpenter v. Doull-MacDonald, 2018 ONCA 521 DATE: 20180606 DOCKET: C64854 MacPherson, LaForme and Roberts JJ.A. BETWEEN Carol Carpenter (Appellant) Applicant and Cynthia Doull-MacDonald (Respondent) Respondent Robert Kalanda, for the appellant Sarah Corman and Hilary Brown, for the respondent Heard: June 5, 2018 On appeal from the order of Justice Paul Perell of the Superior Court of Justice dated December 19, 2017, with reasons reported at 2017 ONSC 7560. REASONS FOR DECISION [1] The appellant appeals from the dismissal of her application for a declaration that she holds a permanent easement over part of the respondent’s property. At the conclusion of the hearing of the appeal, we dismissed the appeal with reasons to follow. These are those reasons. [2] The appellant and respondent own neighbouring houses, respectively at 11 and 15 Ferncroft Drive in Toronto. The appellant claims a right of easement over the passageway between the two houses that runs to the backyards of the properties. No easement is registered on title to 15 Ferncroft Drive. The appellant bases her claim on the historical use exercised by the former owner of 11 Ferncroft Drive over the respondent’s property in order to carry out cleaning and repairs. She submits that the application judge erred in determining that this historical use of the respondent’s property was not “as of right” but was instead granted by permission or licence from its former owner, and that the former owner had not acquiesced to such use by the appellant’s predecessor. [3] We do not accept this submission. [4] The application judge carefully reviewed and applied the correct legal principles, including that a prescriptive easement requires the use of the property over which the easement is claimed to be “a claim of right which is continuous, uninterrupted, open and peaceful for a period of twenty years”:  see s. 31 of the Real Property Limitations Act , R.S.O. 1990, c. L.15; and Henderson v. Volk , [ 1982] O.J. No. 3138 (C.A.), at para. 12.  Moreover, the use or enjoyment of the easement “must not be permissive but, instead, as if the claimant had the right to the easement”: 1043 Bloor Inc. v. 1714104 Ontario Inc. , 2013 ONCA 91, at para. 59. [5] The application judge concluded that the historical usage of the respondent’s property on which the appellant relies was only “modest, infrequent, and intermittent”, and was permitted by the extension of the former owner’s neighbourly good will to his fellow war veteran and neighbour of many years.  This conclusion was based on the application judge’s acceptance of the testimony given by the former owner of 15 Ferncroft Drive, William Tryon, who had lived at the property for almost 60 years.  Specifically, Mr. Tryon testified that the historical usage of his property consisted of the former owner of 11 Ferncroft Drive coming onto the passageway perhaps once or twice a year to clean eaves troughs or windows, or service air conditioning lines. As a result, the application judge found that the appellant had not met her evidentiary burden of establishing an easement “as of right”. [6] As noted by the application judge, the threshold for meeting the criteria for establishing an easement is high. It is well-established that courts should proceed cautiously before finding that an easement exists because of the burden it places on a landowner’s ownership interest without compensation. Moreover, it may discourage neighbourly accommodations and reward aggressive overreaching. (See: Henderson , at para. 21; 1043 Bloor Inc. , at paras. 103-106.) [7] The application judge’s characterization of the occasional permissive historical usage of the respondent’s property was open to him on the record.  We see no error that would permit appellate intervention. [8] For these reasons, we dismiss the appeal. [9] The respondent is entitled to her partial indemnity costs of the appeal in the amount of $9,000.00, inclusive of disbursements and applicable taxes. “J.C. MacPherson J.A.” “H.S. LaForme J.A.” “L.B. Roberts J.A.”

Parties Grounds Operative part Parties In Case T‑268/10 RENV, Polyelectrolyte Producers Group GEIE (PPG), established in Brussels (Belgium), SNF SAS, established in Andrézieux-Bouthéon (France), represented by R. Cana, D. Abrahams and E. Mullier, lawyers, applicants, v European Chemicals Agency (ECHA), represented by M. Heikkilä, W. Broere and T. Zbihlej, acting as Agents, and by J. Stuyck and A.-M. Vandromme, lawyers, defendant, supported by Kingdom of the Netherlands, represented by B. Koopman, acting as Agent, and by European Commission, represented by D. Kukovec, E. Manhaeve and K. Talabér-Ritz, acting as Agents, interveners, APPLICATION for annulment of the decision of ECHA (EC No 201-173-7) identifying acrylamide as a substance fulfilling the criteria referred to in Article 57 of Regulation (EC) No 1907/2006 of the European Parliament and of the Council of 18 December 2006, concerning the Registration, Evaluation, Authorisation and Restriction of Chemicals (REACH), establishing a European Chemicals Agency, amending Directive 1999/45/EC and repealing Council Regulation (EEC) No 793/93 and Commission Regulation (EC) No 1488/94 as well as Council Directive 76/769/EEC and Commission Directives 91/155/EEC, 93/67/EEC, 93/105/EC and 2000/21/EC (OJ 2006 L 396, p. 1), in accordance with Article 59 thereof, THE GENERAL COURT (Fifth Chamber, Extended Composition), composed of A. Dittrich (Rapporteur), President, F. Dehousse, J. Schwarcz, V. Tomljenović and A.M. Collins, Judges, Registrar: L. Grzegorczyk, Administrator, having regard to the written procedure and further to the hearing on 15 April 2015, gives the following Judgment Grounds Background to the dispute 1. The first applicant, Polyelectrolyte Producers Group GEIE (PPG), is a European economic interest grouping established in Belgium. It represents the interests of companies that are producers or importers of polyelectrolytes, polyacrylamide or other polymers containing acrylamide. The member companies of the first applicant are also users of acrylamide and manufacturers or importers of acrylamide or polyacrylamide. All European Union producers of acrylamide are members of the first applicant. 2. The second applicant, SNF SAS, is a member company of the first applicant. It is principally active in the manufacture of acrylamide and polyacrylamide which it sells directly to its customers. It has production plants in France, the United States, China and South Korea. 3. Polyelectrolytes are water-soluble, synthetic and organic polymers that are produced from different monomers; one of these monomers is acrylamide. They are used, for example, to purify drinking water, treat waste water, produce paper and extract precious minerals. 4. Polyacrylamide is a polymer formed by polymerisation of the monomer acrylamide that is most commonly used in water treatment, the paper industry, the mining industry, the oil industry, in agriculture, as a textile additive and in the cosmetics and personal-care fields. 5. On 25 August 2009, the Kingdom of the Netherlands submitted to the European Chemicals Agency (ECHA) a dossier that it had drawn up concerning the identification of acrylamide as a substance fulfilling the criteria set out in Article 57(a) and (b) of Regulation (EC) No 1907/2006 of the European Parliament and of the Council of 18 December 2006 concerning the Registration, Evaluation, Authorisation and Restriction of Chemicals (REACH), establishing a European Chemicals Agency, amending Directive 1999/45/EC and repealing Council Regulation (EEC) No 793/93 and Commission Regulation (EC) No 1488/94 as well as Council Directive 76/769/EEC and Commission Directives 91/155/EEC, 93/67/EEC, 93/105/EC and 2000/21/EC (OJ 2006 L 396, p. 1), subsequently amended, inter alia, by Regulation (EC) No 1272/2008 of the European Parliament and of the Council of 16 December 2008 on classification, labelling and packaging of substances and mixtures, amending and repealing Directives 67/548/EEC and 1999/45/EC (OJ 2008 L 353, p. 1), making reference to the classification of acrylamide as a category 2 carcinogen and a category 2 mutagen in Annex VI, Part 3, to Regulation No 1272/2008. On 31 August 2009, ECHA published a notice on its website inviting interested parties to submit comments on the acrylamide dossier. On the same day, ECHA also invited competent authorities from other Member States to submit comments on this subject. 6. After receiving comments on the dossier in question, in particular from the first applicant, and the responses to those comments from the Kingdom of the Netherlands, ECHA referred the dossier to its Member State Committee, which, on 27 November 2009, unanimously agreed on the identification of acrylamide as a substance of very high concern, because acrylamide fulfilled the criteria set out in Article 57(a) and (b) of Regulation No 1907/2006. 7. On 22 December 2009 the Executive Director of ECHA adopted Decision ED/68/2009 to include acrylamide, on 13 January 2010, in the list of substances identified with a view to their eventual inclusion in Annex XIV to Regulation No 1907/2006 (‘the candidate list of substances’). 8. Following an application for interim relief brought by the second applicant in Case T‑1/10 R, by order of the President of the Court of 11 January 2010, operation of the decision of ECHA identifying acrylamide as a substance fulfilling the criteria set out in Article 57 of Regulation No 1907/2006, pursuant to Article 59 of that regulation, was suspended until the order terminating those proceedings for interim relief had been made. Following that order, ECHA suspended the inclusion of acrylamide in the candidate list of substances. 9. By order of 26 March 2010 in PPG and SNF v ECHA (T‑1/10 R, EU:T:2010:128), the second applicant’s application for interim relief was dismissed. 10. On 30 March 2010, ECHA published the candidate list of substances including acrylamide. Procedure before the General Court and the Court of Justice and forms of order sought 11. By application lodged at the Registry of the General Court on 10 June 2010, the applicants brought an action for annulment of the decision of ECHA identifying acrylamide as a substance fulfilling the criteria set out in Article 57 of Regulation No 1907/2006 and including acrylamide in the candidate list of substances, in accordance with Article 59 of that Regulation (‘the contested decision’). 12. By letters registered at the Registry of the General Court on 19 and 25 November 2010 respectively, the Kingdom of the Netherlands and the European Commission sought leave to intervene in support of the form of order sought by ECHA. After hearing the principal parties, that leave was granted by order of 10 January 2011. 13. By order of 21 September 2011 in PPG and SNF v ECHA (T‑268/10, ECR, EU:T:2011:508), the General Court (Seventh Chamber, Extended Composition) dismissed the action as being inadmissible. 14. By application lodged at the Registry of the Court of Justice on 30 November 2011, the applicants brought an appeal against the order in PPG and SNF v ECHA , cited in paragraph 13 above (EU:T:2011:508). 15. By judgment of 26 September 2013 in PPG and SNF v ECHA (C‑625/11 P, ECR, EU:C:2013:594; ‘the appeal judgment’), the Court of Justice set aside the order in PPG and SNF v ECHA , cited in paragraph 13 above (EU:T:2011:508). The Court of Justice held that the General Court had erred in law in so far as it held that the action had been brought out of time due to the fact that the rule, according to which the time period for bringing proceedings starts to run from the end of the 14th day following the date of publication of the contested decision, provided for in Article 102(1) of the Rules of Procedure of the General Court of 2 May 1991, applied only to measures published in the Official Journal of the European Union and not to measures published on the Internet (appeal judgment, paragraph 37). 16. Since the state of the proceedings did not permit final judgment to be given in the matter, the Court of Justice referred the case back to the General Court and reserved the costs. 17. The case was allocated to the Fifth Chamber (Extended Composition) of the General Court in accordance with Article 118(1) of the Rules of Procedure of 2 May 1991. 18. Since the written procedure had not been completed when the appeal judgment was delivered, ECHA was invited, by decision of the General Court (Fifth Chamber, Extended Composition) of 24 October 2013, to lodge a defence in accordance with Article 119(2) of the Rules of Procedure of 2 May 1991. 19. By document lodged at the Registry of the General Court on 5 December 2013, ECHA raised an objection of inadmissibility pursuant to Article 114(1) of the Rules of Procedure of 2 May 1991. 20. By order of the General Court (Fifth Chamber, Extended Composition) of 17 June 2014, consideration of the objection of inadmissibility was reserved for the final judgment and the costs were reserved. 21. The Kingdom of the Netherlands lodged its statement in intervention on 16 September 2014. By documents lodged at the Court Registry on 10 November 2014, ECHA and the applicants submitted their observations on that document. 22. The Commission lodged its statement in intervention on 17 September 2014. By document lodged at the Court Registry on 10 November 2014, ECHA submitted its observations on that statement in intervention. The applicants have submitted no observations on that statement in intervention. 23. Upon hearing the report of the Judge-Rapporteur, the General Court (Fifth Chamber, Extended Composition) decided to open the oral procedure. 24. In the context of measures of organisation of procedure provided for in Article 64 of the Rules of Procedure of 2 May 1991, the Court requested, first, ECHA to provide documents and, secondly, all parties to respond to certain questions. The parties complied with those requests within the time allowed. 25. The parties presented oral argument and answered the questions put by the Court at the hearing on 15 April 2015. 26. The applicants claim that the Court should: – declare the action to be admissible and well founded; – annul the contested decision; – order ECHA to pay the costs. 27. ECHA, the Kingdom of the Netherlands and the Commission contend that the Court should: – dismiss the action as being inadmissible or, in the alternative, as being unfounded; – order the applicants to pay the costs. Law 28. Before examining the parties’ substantive pleas and arguments, it is appropriate to examine the objection of inadmissibility raised by ECHA. Admissibility 29. In support of its objection of inadmissibility, ECHA, supported by the Kingdom of the Netherlands and the Commission, raises a plea of inadmissibility on the ground that the applicants are not directly concerned. 30. Under the fourth paragraph of Article 263 TFEU, any natural or legal person may, under the conditions laid down in the first and second paragraphs of that article, institute proceedings against an act addressed to that person or which is of direct and individual concern to them, and against a regulatory act which is of direct concern to them and does not entail implementing measures. 31. In the present case, it is common ground that since the contested decision was not sent to the applicants, they are not addressees of that act. That being the case, in accordance with the fourth paragraph of Article 263 TFEU, the applicants may institute proceedings for annulment of that act only if it is of direct concern to them. 32. As regards the admissibility of the first applicant’s action, it must be observed that it has already been held that an association responsible for defending the collective interests of its members, was, as a rule, entitled to bring an action for annulment only if the undertakings that it represented or some of these undertakings themselves had locus standi or if it could prove an interest of its own (see, to that effect, judgment of 22 June 2006 in Belgium and Forum 187 v Commission , C‑182/03 and C‑217/03, ECR, EU:C:2006:416, paragraph 56 and the case-law cited). That rule also applies to a European economic interest grouping which, like the first applicant, was created in order to defend the interests of a category of undertakings (see order of 24 June 2014 in PPG and SNF v ECHA , T‑1/10 RENV, EU:T:2014:616, paragraph 30 and the case-law cited). 33. In the present case, the first applicant did not produce any evidence to show that its own interests were directly affected. Even on the assumption that it is under a duty to organise and coordinate a harmonised approach to the obligations under Regulation No 1907/2006 for the entire sector in question, it did not assert its own interests, b ut those of its members. Consequently, the first applicant is entitled to bring an action for annulment only if its members or some of them, such as the second applicant, are directly concerned by the contested decision. 34. As regards direct concern, it has consistently been held that that condition requires (i) that the impugned measure directly affect the individual’s legal situation and (ii) that it leave no discretion to the addressees of that measure who are entrusted with the task of implementing it, such implementation being purely automatic and resulting from the EU rules alone, without the application of other intermediate rules (judgments of 5 May 1998 in Dreyfus v Commission , C‑386/96 P, ECR, EU:C:1998:193, paragraph 43; 29 June 2004 Front national v Parliament , C‑486/01 P, ECR, EU:C:2004:394, paragraph 34; and 10 September 2009 Commission v Ente per le Ville vesuviane and Ente per le Ville vesuviane v Commission , C‑445/07 P and C‑455/07 P, ECR, EU:C:2009:529, paragraph 45). 35. The applicants claim that the contested decision is of direct concern to them in that the legal situation of the first applicant’s members and that of the second applicant are affected because of the obligations provided for in Article 31(9)(a) of Regulation No 1907/2006. As a result of the identification of acrylamide as a substance of very high concern, the first applicant’s members and the second applicant are required to update the safety data sheet for acrylamide in accordance with that provision. 36. It must be pointed out that, in accordance with Article 31(1)(a) of Regulation No 1907/2006, suppliers of a substance or a mixture must provide the recipient of that substance or mixture with a safety data sheet where the substance meets the criteria for classification as hazardous in accordance with Regulation No 1272/2008. Article 31(9)(a) of Regulation No 1907/2006 provides in that regard that suppliers must update that safety data sheet without delay as soon as new information which may affect the risk management measures, or new information on hazards becomes available. 37. In the present case, it is not disputed that the first applicant’s members and the second applicant had to provide the recipients of acrylamide with a safety data sheet since that substance met the criteria for classification as hazardous in accordance with Regulation No 1272/2008. Acrylamide has inter alia been classified among category 2 carcinogens and category 2 mutagens (see paragraph 5 above). 38. However, it is disputed that the identification of acrylamide as a substance of very high concern, resulting from the procedure provided for by Article 59 of Regulation No 1907/2006, pursuant to Article 57(a) and (b) of that regulation, constitutes, as the applicants argue, new information within the meaning of Article 31(9)(a) of that regulation, capable of triggering the obligation referred to in that provision, namely the updating of the safety data sheet, with the result that the contested decision directly affects the legal situation of the first applicant’s members and that of the second applicant. 39. As regards the safety data sheet, Article 31(1) of Regulation No 1907/2006 provides that it must be compiled in accordance with Annex II to that regulation. That annex sets out the requirements that the supplier must fulfil for the compilation of a safety data sheet that is provided for a substance in accordance with Article 31 of Regulation No 1907/2006. The safety data sheet must enable users to take the necessary measures relating to protection of human health and safety at the workplace, and protection of the environment. 40. According to the applicants, the identification of acrylamide as a substance of very high concern as a result of the procedure laid down in Article 59 of Regulation No 1907/2006, on the ground that that substance meets the criteria referred to in Article 57(a) and (b) of that regulation, constitutes new information relating, in particular, to Article 31(6)(15) of that regulation, as amended by Commission Regulation (EU) No 453/2010 of 20 May 2010, amending Regulation No 1907/2006 (OJ 2010 L 133, p. 1), which refers to regulatory information. 41. As regards Article 31(6)(15) of Regulation No 1907/2006, Section 15 of Part A of Annex II to that regulation, as amended by Regulation No 453/2010, states that that section of the safety data sheet is to describe the other regulatory information on the substance that has not already been provided in the safety data sheet. The information to be provided under Section 15.1 of Part A of Annex II to Regulation No 1907/2006 is, first, information regarding relevant European Union safety, health and environmental provisions, for example, Seveso category and named substances in Annex I to Council Directive 96/82/EC of 9 December 1996 on the control of major-accident hazards involving dangerous substances (OJ 1997 L 10, p. 13), or national information on the regulatory status of the substance or mixture, including the substances contained in the mixture, including advice regarding action that should be taken by the recipient as a result of these provisions. Secondly, if the substance or mixture covered by the safety data sheet is the subject of specific provisions in relation to protection of human health or the environment at EU level, such as authorisations granted under Title VII of Regulation No 1907/2006 or restrictions applied under Title VIII of that regulation, those provisions are to be mentioned. 42. The ECHA decision resulting from the procedure laid down in Article 59 of Regulation No 1907/2006 constitutes a European Union safety, health and environmental measure concerning the regulatory status of a substance. By that decision, a substance is identified as of very high concern which may be included in Annex XIV to that regulation, which annex contains the list of substances subject to authorisation. Consequently, the suppliers of such a substance or of mixtures containing that substance must mention that identification on the safety data sheet and provide advice as to the obligations on recipients as a consequence of that identification and, inter alia, as to the information obligations under Articles 7 and 33 of Regulation No 1907/2006. Therefore, the identification of a substance as being of very high concern as a result of the procedure laid down in Article 59 of Regulation No 1907/2006, on the ground that that substance meets the criteria referred to in Article 57(a) and (b) of that regulation, constitutes new information that may require the suppliers of that substance to update the safety data sheet concerned. 43. It follows that the ECHA decision identifying a substance as being of very high concern as a result of the procedure laid down in Article 59 of Regulation No 1907/2006 may directly affect the legal situation of the suppliers of that substance as a result of the obligation which it sets out. 44. In the present case, that conclusion is not called into question either by the fact that, at the time of lodging the application on 10 June 2010, when the conditions of admissibility of the action must be determined (see order of 7 September 2010 in Etimine and Etiproducts v Commission , T‑539/08, ECR, EU:T:2010:354, paragraph 76 and the case-law cited), Regulation No 453/2010 had not yet entered into force, nor by the fact that, according to the applicants, acrylamide was a substance registered and used exclusively as an intermediate. 45. In the first place, as regards the fact that, at the time of lodging the application on 10 June 2010, Regulation No 453/2010 had not yet entered into force, it is true that, according to Article 3, that regulation entered into force on the 20th day following its publication in the Official Journal. The regulation having been published in the Official Journal on 31 May 2010, it therefore entered into force on 20 June 2010. However, the possibility that Regulation No 453/2010 would not enter into force following its adoption on 20 May 2010 and its publication in the Official Journal was, at the time of lodging the application, purely theoretical (see, to that effect, judgment of 17 January 1985 in Piraiki-Patraiki and Others v Commission , 11/82, ECR, EU:C:1985:18, paragraph 9). 46. In that regard, the Court rejects ECHA’s argument, which refers to paragraph 76 of the order in Etimine and Etiproducts v Commission , cited in paragraph 44 above (EU:T:2010:354), according to which the question of the admissibility of an action must be resolved on the basis of the rules in force at the date on which it was brought. The present case does not concern the question of the temporal application of the rules determining the conditions of admissibility of an action for annulment brought by an individual before the European Union judicature. Regulation No 435/2010 is a substantive rule. 47. With regard to the fact that Annex II to Regulation No 1907/2006 was amended, in accordance with Article 1 of Regulation No 453/10, only with effect from 1 December 2010, it suffices to note here that the fact that the effects of an act do not materialise until a subsequent date determined in the same act does not preclude an individual from being directly affected by it as a result of an obligation entailed by that act (see, to that effect, order of 11 July 2005 in Bonino and Others v Parliament and Council , T‑40/04, ECR, EU:T:2005:279, paragraphs 46 and 47). 48. In the second place, with regard to the fact that, according to the applicants, acrylamide was a substance registered and used exclusively as an intermediate, it should be noted that, under Article 2(1)(c) of Regulation No 1907/2006, that regulation is not applicable to non-isolated intermediates and that, under Article 2(8)(b) of that regulation, isolated intermediates are exempt from Title VII of that regulation relating to the authorisation procedure, which includes the procedure for identifying a substance as of very high concern. 49. In the present case, it is unnecessary to rule on the question whether, under those provisions, the applicants are exempt from the information requirements set out in Article 31(9)(a) of Regulation No 1907/2006 since, in any event, at the time of lodging the application, the acrylamide supplied by the first applicant’s members and by the second applicant was not used exclusively as an intermediate. 50. According to the definition set out in Article 3(15) of Regulation No 1907/2006, an intermediate is a substance that is manufactured for and consumed in or used for chemical processing in order to be transformed into another substance (‘synthesis’). In accordance with Article 3(15)(a) of that regulation, a non-isolated intermediate is an intermediate that, during synthesis, is not intentionally removed, except for sampling, from the equipment in which the synthesis takes place. Article 3(15)(b) and (c) of that regulation contains the definition of an on-site isolated intermediate and a transported isolated intermediate. The former is an intermediate not meeting the criteria of a non-isolated intermediate and where the manufacture of the intermediate and the synthesis of (an)other substance(s) from that intermediate take place on the same site, operated by one or more legal entities. The latter is an intermediate not meeting the criteria of a non-isolated intermediate and transported between or supplied to other sites. 51. It is true that it is apparent from Section 1.1 of the dossier drawn up by the Kingdom of the Netherlands on acrylamide, which concerns ‘information on exposure’, that 99.9% of acrylamide was used as an intermediate. However, in that regard, it is correctly pointed out that there were other uses as an agent in grouting products and for on-site preparation of polyacrylamide electrophoresis gels. 52. First, with regard to the use of acrylamide for grouting products, that consists, inter alia, in its use for water shut-off, concrete repair and salt damp remediation (judgment of 1 February 2013 in Polyelectrolyte Producers Group and Others v Commission , T‑368/11, EU:T:2013:53, paragraph 2). It is apparent from the description of that use, set out in paragraph 1.1 of the file drawn up by the Kingdom of the Netherlands on acrylamide and which, according to the applicants, is correct, that when the acrylamide grout polymerises or gels, it solidifies into a stiff gel that is impervious to water. 53. The applicants argue that that process demonstrates that acrylamide is used as an intermediate in accordance with the definition set out in Article 3(15) of Regulation No 1907/2006. Acrylamide is manufactured or imported in order to be consumed or used in the synthesis of another substance, namely a water-impervious polymer. A polymer is defined as being a substance in Article 3(5) of that regulation. 54. That argument cannot be accepted. According to the definition set out in Article 3(15) of Regulation No 1907/2006, an intermediate is a substance that is manufactured for chemical processing and consumed in or used in that processing in order to be synthesised. In the present case, it is true that the acrylamide-based grouting agent is used in the manufacture of another substance during which it is itself transformed into that other substance, namely a polymer. However, as ECHA states, the acrylamide is not used for the purposes of undergoing synthesis, as defined in Article 3(15) of Regulation No 1907/2006. It is not used with the aim of manufacturing that other substance, the main purpose of the chemical process being to obtain a sealing function that occurs when the acrylamide grouting agent polymerises. Upon polymerisation, it solidifies into a rigid gel that is waterproof when used in grouting applications. The use of acrylamide as a grouting agent is not an intermediate use, but rather an end use of the substance. 55. That conclusion is supported, moreover, by the ‘Definition of intermediates as agreed by Commission, Member States and ECHA on 4 May 2010’. According to Section 4 of that definition, which concerns industrial end use other than in manufacturing of another substance, where a substance A is used by the manufacturer himself or by a downstream user and chemically reacts in a process other than the manufacturing of another substance, the substance A cannot be an intermediate. Further, it provides where the main aim of the chemical process is not to manufacture another substance, but rather to achieve another function, specific property, or a chemical reaction as an integrated part of producing articles, the substances used for this activity should not be regarded as intermediates under Regulation No 1907/2006. Those considerations are also reflected in Section 2 of that definition, which contains an analysis of the definition of an intermediate within the meaning of Article 3(15) of Regulation No 1907/2006. 56. Secondly, as regards the use of acrylamide for the preparation of polyacrylamide electrophoresis gels, it is apparent from Section 1.1 of the file drawn up by the Kingdom of the Netherlands on acrylamide, which concerns ‘information on exposure’, that the gels were used as research tools for separating nucleic acids in research establishments, universities and hospitals. 57. The applicants argue that the use of acrylamide in the manufacture of polyacrylamide electrophoresis gels is an intermediate use since the acrylamide is transformed into another substance, namely the gel which is a polymer. 58. As ECHA states, unless the context under which the chemical reaction leading to polyacrylamide gels takes place is specified, such an argument is not sufficient to establish that the acrylamide used in the manufacture of electrophoresis gels was used exclusively as an intermediate. It has already been noted (see paragraphs 54 and 55 above) that acrylamide constituted an intermediate where that substance was used for the purpose of undergoing synthesis. As ECHA states, this is not the case, in particular, as regards the use of acrylamide in the preparation of polyacrylamide gel handcasts. The intention behind the handcast preparation, which is one of the steps in the electrophoresis protocol, is not the manufacturing of polyacrylamide but the analytical separation of molecules by electrophoresis. 59. Thirdly, as regards the applicants’ argument that the three registration dossiers for acrylamide listed on the ECHA database of registered substances all identified that substance as an intermediate, it should be noted that, in accordance with the first paragraph of Article 20(2) of Regulation No 1907/2006, ECHA undertakes a completeness check of the registration dossier, which does not include, however, an assessment of the quality or adequacy of the data or justifications submitted. Furthermore, it is apparent from Article 6(1) of that Regulation that, save where that regulation provides otherwise, any manufacturer or importer of a substance, either on its own or in one or more mixture(s), in quantities of one tonne or more per year, is to submit a registration to ECHA. It cannot therefore be excluded that certain manufacturers or importers do not register acrylamide because they use lower quantities of it. The fact that there were only registration dossiers for acrylamide as an intermediate does not mean, therefore, that that substance was used exclusively as an intermediate. 60. In the light of the above, the applicants are directly concerned by the contested decision as a result of the information requirements set out in Article 31(9)(a) of Regulation No 1907/2006. The objection of inadmissibility must therefore be rejected. 61. Consequently, as the other conditions of admissibility have been fulfilled, which, moreover, is not contested by the parties, the action is admissible. Substance 62. In support of the action, the applicants put forward four pleas in law which allege (i) infringement of Article 2(8)(b) and Article 59 of Regulation No 1907/2006, (ii) manifest error of appraisal, (iii) breach of the principle of proportionality and, (iv) breach of the principle of equal treatment. The first plea in law, alleging infringement of Article 2(8)(b) and Article 59 of Regulation No 1907/2006 63. The applicants claim that, by identifying acrylamide as a substance of very high concern, ECHA infringes Article 2(8)(b) and Article 59 of Regulation No 1907/2006 because acrylamide is a substance registered and used exclusively as an intermediate and is therefore exempt from Title VII of that regulation. According to the applicants, during the procedure provided for in Article 59 of Regulation No 1907/2006, only evidence to the effect that acrylamide is an intermediate substance was advanced. That is the case, in particular, where that substance is used in grouting products and for the manufacture of electrophoresis gels, which are the only uses referred to by the Kingdom of the Netherlands in its dossier on acrylamide as examples of the use of that substance as such and not as an intermediate. 64. It should be noted that, by the contested decision, acrylamide was identified as a substance of very high concern in accordance with the procedure referred to in Article 59 of Regulation No 1907/2006. That procedure is included in the authorisation procedure set out in Title VII of that regulation. Under Article 2(8)(b) of that regulation, on-site isolated intermediates and transported isolated intermediates are exempted from that title. It is therefore appropriate to examine whether, as a result of that exemption, the contested decision is unlawful in so far as it identified acrylamide as a substance of very high concern. 65. In the first place, it should be noted that the procedure provided for by Article 59 of Regulation No 1907/2006 concerns the identification of substances. It should also be noted that, in accordance with Article 1(2) of Regulation No 1907/2006, the latter lays down provisions on substances and mixtures, within the meaning of Article 3 thereof, that apply to the manufacture, placing on the market or use of such substances on their own, in mixtures or in articles, and to the placing on the market of mixtures. According to the definition set out in Article 3(1) of that regulation, a substance is a chemical element and its compounds in the natural state or obtained by any manufacturing process, including any additive necessary to preserve its stability and any impurity deriving from the process used, but excluding any solvent which may be separated without affecting the stability of the substance or changing its composition. A substance is therefore defined by its intrinsic properties. In the light of those provisions, and since it is established that acrylamide constitutes a substance within the meaning of that definition, it could properly be subject to the identification procedure provided for by Article 59 of Regulation No 1907/2006. 66. In the second place, it must be noted that the fact that a substance may have intermediate status does not mean that it is exempt from identification as being of very high concern in accordance with the procedure referred to in Article 59 of Regulation No 1907/2006. It is true that, under Article 2(8)(b) of that regulation, on-site isolated intermediates and transported isolated intermediates are exempted from Title VII of that regulation with regard to the authorisation procedure that includes the identification procedure. However, it is apparent from the definition of an intermediate, laid down in Article 3(15) of Regulation No 1907/2006, that the classification of a substance as an intermediate depends on the intended purpose of its manufacture and use. As has already been pointed out (see paragraph 50 above), according to that definition, an intermediate is a substance that is manufactured for chemical processing and consumed in or used in that processing in order to be synthesised. In so far as any substance may, in principle, be manufactured for chemical processing and consumed in or used in that processing in order to be synthesised and, therefore, have the status of an intermediate, the fact that a substance has, in a specific case, the status of an intermediate cannot exempt it from the identification procedure provided for by Article 59 of Regulation No 1907/2006. 67. Those considerations are confirmed by the fact that the criteria laid down in Article 57 of Regulation No 1907/2006, in order to identify a substance as being of very high concern in accordance with the procedure referred to in Article 59 of that regulation, relate to the instrinsic properties of that substance. Under Article 57(a) to (e) of that regulation, a substance may be identified if it meets the criteria for classification as carcinogenic, germ cell mutagenic or toxic for reproduction or if it is persistent, bioaccumulative and toxic or very persistent and very bioaccumulative. Article 57(f) of Regulation No 1907/2006 allows identification of a substance that has serious effects on human health or the environment which give rise to a level of concern equivalent to that resulting from the use of other substances listed in Article 57(a) to (e). Whereas a substance within the meaning of Regulation No 1907/2006 is defined by its intrinsic properties (see paragraph 65 above), the concept of an intermediate laid down in that regulation does not relate to the properties of a substance and does not change those properties in any way, but defines an intermediate according to the intended purpose of the manufacture and use of a substance. 68. In that regard, in relation to the applicants’ claim that the exemption for intermediates provided for in Article 2(8)(b) of Regulation No 1907/2006 is not expressly based on the uses of a substance, it must be noted that, according to the definition of intermediate laid down in Article 3(15) of that regulation, it is necessary to take into account the intended objective of the manufacture and use of that substance in order to determine whether it has the status of an intermediate. 69. In so far as the applicants claim that, under Article 59 of Regulation No 1907/2006, the identification of acrylamide should have been based on all the information contained in the dossier drawn up by the Kingdom of the Netherlands pursuant to Annex XV to that regulation, according to which that substance is used as an intermediate only, that argument must also be rejected. Even if that dossier refers only to examples of the use of that substance as an intermediate, that is not relevant for the purposes of identifying acrylamide as a substance of very high concern meeting the criteria referred to in Article 57 of Regulation No 1907/2006, given that that information does not concern the intrinsic properties of acrylamide. As ECHA states, that information could become relevant in the later stages of the authorisation procedure provided for under Title VII of Regulation No 1907/2006, namely during the procedure for submitting a substance for authorisation and during the procedure for granting authorisations for specific uses. In any event, it has already been established that it cannot be concluded that all the uses of acrylamide referred to by the Kingdom of the Netherlands in its dossier were intermediate in nature (see paragraphs 49 to 59 above). 70. Furthermore, as regards the applicants’ claim that ECHA infringed the principle of good administration in that it did not justify the identification of acrylamide as a substance of very high concern, having regard to its alleged exclusive use as an intermediate, it should be noted, first, that use of that substance as an intermediate did not preclude its identification as a substance of very high concern and, secondly, that the dossier drawn up by the Kingdom of the Netherlands, which constituted the basis of the identification procedure, indicated two uses of acrylamide which were, according to that dossier, other than intermediate. That argument must therefore be rejected. 71. Consequently, the first plea in law must be rejected. The second plea in law, alleging a manifest error of appraisal 72. The applicants claim that ECHA committed a manifest error of assessment in so far as it relied, for the purposes of identifying acrylamide as a substance of very high concern, on the proposal of the Kingdom of the Netherlands which contained no information proving that 0.1% of acrylamide is not used as an intermediate. According to the applicants, the use of that substance in grouting products and for the manufacture of electrophoresis gels, which are the only uses referred to by the Kingdom of the Netherlands in its dossier on acrylamide as examples of the use of that substance as such and not as an intermediate, are not conclusive. Those are uses of acrylamide as an intermediate. In the absence of information on a use of acrylamide other than as an intermediate, the contested decision is arbitrary. 73. First of all, it should be pointed out that, in accordance with settled case-law, where the authorities of the European Union have a broad discretion, in particular as to the assessment of highly complex scientific and technical facts in order to determine the nature and scope of the measures which they adopt, review by the European Union judicature is limited to verifying whether there has been a manifest error of assessment or a misuse of powers, or whether those authorities have manifestly exceeded the limits of their discretion. In such a context, the European Union judicature cannot substitute its assessment of scientific and technical facts for that of the authorities of the European Union on which alone the TFEU has placed that task (judgments of 21 July 2011 in Etimine , C‑15/10, ECR, EU:C:2011:504, paragraph 60, and 7 March 2013 Bilbaína de Alquitranes and Others v ECHA , T‑93/10, ECR, EU:T:2013:106, paragraph 76). 74. Nevertheless, the broad discretion of the authorities of the European Union, which implies limited judicial review of its exercise, applies not only to the nature and scope of the measures to be taken but also, to some extent, to the finding of the basic facts. However, even though such judicial review is of limited scope, it requires that the European Union authorities which have adopted the act in question must be able to show before the European Union judicature that in adopting the act they actually exercised their discretion, which presupposes that they took into consideration all the relevant factors and circumstances of the situation the act was intended to regulate (judgments of 8 July 2010 in Afton Chemical , C‑343/09, ECR, EU:C:2010:419, paragraphs 33 and 34, and Bilbaína de Alquitranes and Others v ECHA , cited in paragraph 73 above, EU:T:2013:106, paragraph 77). 75. In the light of that case-law, the applicants’ argument must be rejected. 76. It must be noted that the dossier drawn up by the Kingdom of the Netherlands in accordance with Annex XV to Regulation No 1907/2006 indicates that 99% of acrylamide in the European Union was used as an intermediate in the production of polyacrylamides for a number of applications and that there were other uses as an agent in grouting products and for on-site preparation of polyacrylamide gels. Furthermore, it should be noted that the Member State Committee support document, on which the identification of acrylamide as a substance of very high concern was based, does not any contain information on the use of that substance. 77. However, as is clear from the examination of the first plea in the present action, in order to identify a substance as being of very high concern in accordance with the procedure referred to in Article 59 of Regulation No 1907/2006, the intrinsic properties of that substance must be taken into account. Moreover, it should be pointed out that, under Article 59(2) and (3) of that regulation, a dossier prepared for the purpose of identifying a substance of very high concern may be limited, if appropriate, to a reference to an entry in Part 3 of Annex VI to Regulation No 1272/2008 containing the list of harmonised classification and labelling of hazardous substances and may, therefore, contain no information relating to the use of the substance concerned. 78. In any event, it has already been established that it cannot be concluded that all the uses of acrylamide referred to by the Kingdom of the Netherlands in its dossier were intermediate in nature (see paragraphs 49 to 59 above). 79. The second plea must therefore be rejected. The third plea in law, alleging breach of the principle of proportionality 80. The applicants claim that the treatment of acrylamide is disproportionate because ECHA had a choice of measures and the choice of identifying the substance at issue as being of very high concern causes disadvantages which are excessive in relation to the aims pursued. According to the applicants, the identification procedure is designed to ensure that careful attention is paid to the most dangerous substances. Certain types of substances such as intermediates are exempted from Title VII of Regulation No 1907/2006 because they do not pose the same level of risk as other substances. Notwithstanding that legislative intent, it is claimed, ECHA used that procedure to identify a substance that would be used only as an intermediate, which is disproportionate. Furthermore, the risk to workers from exposure to acrylamide is, eliminated or reduced as a result of specific EU legislation on the protection of workers. The authorities had the opportunity to choose a different measure, namely not to act, which would have been more appropriate and more proportionate. In any event, ECHA could have provided that acrylamide is identified as a substance of very high concern only in so far as it is not used as an intermediate or could have decided that the use of acrylamide would be subject to the restrictions provided for in Title VIII of Regulation No 1907/2006. 81. According to settled case-law, the principle of proportionality, which is part of the general principles of EU law, requires that EU measures do not exceed the limits of what is appropriate and necessary in order to achieve the objectives legitimately pursued by the legislation in question; when there is a choice between several appropriate measures recourse must be had to the least onerous, and the disadvantages caused must not be disproportionate to the aims pursued (see judgment in Etimine , cited in paragraph 73 above, EU:C:2011:504, paragraph 124 and the case-law cited). 82. As regards judicial review of the conditions referred to in the previous paragraph, ECHA must be allowed a broad discretion in a field which entails political, economic and social choices on its part, and in which it is called upon to undertake complex assessments. The legality of a measure adopted in that field can be affected only if the measure is manifestly inappropriate having regard to the objective which the legislature is seeking to pursue (see, to that effect, judgment in Etimine , cited in paragraph 73 above, EU:C:2011:504, paragraph 125 and the case-law cited). 83. In the present case, it is apparent from Article 1(1) of Regulation No 1907/2006 that the objective of that regulation is to ensure a high level of protection of human health and the environment, including the promotion of alternative methods for assessment of hazards of substances, as well as the free circulation of substances on the internal market while enhancing competitiveness and innovation. Having regard to recital 16 in the preamble to that regulation, the legislature established the first of those three objectives as the main objective, namely to ensure a high level of protection of human health and the environment. As regards, more specifically, the aim of the authorisation procedure, which includes the identification procedure set out in Article 59 of that regulation, Article 55 of Regulation No 1907/2006 states that its aim is essentially to ensure the good functioning of the internal market while assuring that the risks from substances of very high concern are properly controlled and that those substances are progressively replaced by suitable alternative substances or technologies where these are economically and technically viable (judgment in Bilbaína de Alquitranes and Others v ECHA , cited in paragraph 73 above, EU:T:2013:106, paragraph 116). 84. In the first place, as regards the applicants’ argument that the contested decision is not appropriate for achieving the objectives pursued by Regulation No 1907/2006, it should be recalled that the contested decision identified acrylamide as a substance of very high concern as a result of the procedure set out in Article 59 of that regulation. Where a substance is identified as being of very high concern, the economic operators concerned are subject to information obligations (judgment in Bilbaína de Alquitranes and Others v ECHA , cited in paragraph 73 above, EU:T:2013:106, paragraph 117). 85. As regards the objective of protecting human health and the environment, it must be stated from the outset that the identification of a substance as being of very high concern serves to improve information for the public and professionals as to the risks and hazards incurred and that, consequently, such identification must be regarded as a means of enhancing that protection (see judgment in Bilbaína de Alquitranes and Others v ECHA , cited in paragraph 73 above, EU:T:2013:106, paragraph 118 and the case-law cited). 86. As regards, more specifically, the applicants’ argument that the contested decision is inappropriate in that regard since acrylamide is used as an intermediate only and is therefore exempted from Title VII of Regulation No 1907/2006 pursuant to Article 2(8)(b) thereof, it should be noted that it has already been established that it cannot be concluded that acrylamide was used as an intermediate only (see paragraphs 49 to 59 above). In any event, there is no reason to conclude that uses of acrylamide other than as intermediates are precluded. The identification of that substance does not seem, therefore, to be manifestly inappropriate in relation to the aims pursued. 87. Consequently, the applicants’ argument concerning the allegedly inappropriate nature of the contested decision must be rejected. 88. In the second place, the applicants argue that the contested decision exceeds the limits of what is necessary to achieve the objectives pursued, since the option of not acting, the adoption of restrictions provided for in Title VIII of Regulation No 1907/2006 or the identification of acrylamide as a substance of very high concern only in so far as it is not used as an intermediate, would constitute less onerous measures. Moreover, according to the applicants, the risk to workers is eliminated or reduced as a result of legislation on the protection of workers. 89. First, with regard to the option of not acting, the applicants claim that that would be more proportionate and less onerous since the identification of acrylamide as a substance of very high concern is not designed for intermediates, but for other types of substances which raise greater concerns. That argument must be rejected. Given that it cannot be concluded that acrylamide was used solely as an intermediate and that, in any event, there is no reason to conclude that uses of acrylamide other than as intermediates are precluded (see paragraph 86 above), omission to act does not constitute a measure that is as appropriate as identification of that substance as being of very high concern. 90. Secondly, with regard to restriction measures concerning the use of acrylamide, on the one hand, it must be observed that the mere fact that a substance appears in the candidate list of substances does not prevent that substance from being subject to restrictions rather than to an authorisation. As is apparent from Article 58(5) and Article 69 of Regulation No 1907/2006, the Commission or a Member State may always propose that the manufacture, the placing on the market or the use of a substance be managed by restrictions rather than by an authorisation (judgment in Bilbaína de Alquitranes and Others v ECHA , cited in paragraph 73 above, EU:T:2013:106, paragraph 128). In the present case, it is apparent, in particular, from the judgment in Polyelectrolyte Producers Group and Others v Commission , cited in paragraph 52 above (EU:T:2013:53), that acrylamide was subject to restrictions for grouting applications as from 5 November 2012. 91. On the other hand, as is apparent from Annex XVII to Regulation No 1907/2006, restrictions applicable to the manufacture, the placing on the market and the use of certain dangerous substances, mixtures and articles, adopted in accordance with the procedure set out in Title VIII of that regulation, may range from specific conditions imposed on the manufacture or the placing on the market of a substance to a total ban on the use of a substance. Even if restriction measures are also appropriate for the achievement of the objectives pursued by that regulation, they thus do not constitute, as such, less onerous measures compared with the identification of a substance which solely entails information obligations (judgment in Bilbaína de Alquitranes and Others v ECHA , cited in paragraph 73 above, EU:T:2013:106, paragraph 129). 92. Thirdly, in so far as the applicants take the view that the existing legislation concerning the protection of workers allows the risk to those workers to be eliminated or reduced, suffice it to point out that that legislation, which provides for risk management measures for workers, cannot constitute an appropriate and less onerous measure for the achievement of the objectives pursued by Regulation No 1907/2006 as regards the treatment of substances of very high concern and, in particular, of the objective of progressively replacing substances of very high concern by suitable alternative substances or technologies where these are economically and technically viable (see paragraph 83 above). 93. Fourthly, the applicants claim that ECHA could have provided that acrylamide is identified as a substance of very high concern only in so far as it is not used as an intermediate. In that regard, it suffices to note that the legislature introduced specific rules relating to intermediates in Article 2(1)(c) and Article 2(8)(b) of Regulation No 1907/2006 (see paragraph 48 above). 94. In the light of the foregoing considerations, it cannot be concluded that the contested decision breached the principle of proportionality. 95. The third plea in law must therefore be rejected. The fourth plea in law, alleging breach of the principle of equal treatment 96. The applicants claim that the identification of acrylamide as a substance of very high concern breaches the principle of equal treatment because other substances in an identical situation are not subject to such identification. According to the applicants, acrylamide was classified among carcinogenic and mutagenic category 2 substances and toxic for reproduction category 3 substances along with a considerable number of other substances which have the same or higher properties. No reasoning was given as to why acrylamide had been chosen and not other substances having identical properties, even though it is established that at least 99% of its use is exempt from the identification procedure. 97. It must be observed that, by Regulation No 1907/2006, the legislature set up a system for the registration, assessment and authorisation of chemical substances and the restrictions applicable to those substances, in order to ensure, inter alia, according to recital 1 in the preamble to that regulation, a high level of protection of human health and the environment as well as the free movement of substances in the internal market, while enhancing competitiveness and innovation. In particular, Regulation No 1907/2006 provides, in Title VII, for an authorisation procedure. The objective of that procedure, according to Article 55 of the regulation, is to ensure the good functioning of the internal market while assuring that the risks from substances of very high concern are properly controlled and that these substances are progressively replaced by suitable alternative substances or technologies where these are economically and technically viable (judgment in Bilbaína de Alquitranes and Others v ECHA , cited in paragraph 73 above, EU:T:2013:106, paragraph 69). 98. The authorisation procedure applies to all substances meeting the criteria set out in Article 57 of Regulation No 1907/2006. The first phase of the authorisation procedure is the identification of the substances referred to in that article, for which a procedure in several stages is set out in Article 59 of Regulation No 1907/2006. According to recital 77 in the preamble to the regulation, in view of workability and practicality considerations, both as regards natural or legal persons, who have to prepare application files and take appropriate risk management measures, and as regards the authorities, who have to process authorisation applications, only a limited number of substances should be subjected to the authorisation procedure at the same time. As regards the choice of substances, Article 59(2) and (3) of Regulation No 1907/2006 provides that it is for the Commission or the Member State concerned to decide whether substances meet the criteria set o ut in Article 57 of the regulation. The legislature thus gave the Commission and the Member States a wide discretion, allowing a progressive implementation of the rules on the substances of very high concern set out in Title VII of Regulation No 1907/2006 (judgment in Bilbaína de Alquitranes and Others v ECHA , cited in paragraph 73 above, EU:T:2013:106, paragraph 70). 99. In the light of the foregoing observations, the identification procedure does not confer on ECHA any power as regards the choice of the substance to be identified; that prerogative belongs exclusively to the Commission and the Member States pursuant to Article 59 of Regulation No 1907/2006 (order of 22 May 2014 in Bilbaína de Alquitranes and Others v ECHA , C‑287/13 P, EU:C:2014:599, paragraph 51, and judgment in Bilbaína de Alquitranes and Others v ECHA , cited in paragraph 73 above, EU:T:2013:106, paragraph 71). 100. In the present case, the identification procedure laid down by Article 59 of Regulation No 1907/2006 was observed as regards the choice of the substance to be identified. It appears from the dossier that acrylamide was chosen by the Kingdom of the Netherlands because it considered that that substance met the criteria listed in Article 57 of that regulation. Moreover, in the absence of the production of a dossier prepared by a Member State relating to a substance that also has carcinogenic, mutagenic or toxic properties, or a request from the Commission for the preparation of such a dossier by ECHA, ECHA cannot proceed to identify that substance, pursuant to the procedure set out in Article 59 of Regulation No 1907/2006, without exceeding its powers. It follows that, by identifying acrylamide, and not the allegedly comparable substances, as a substance of very high concern, ECHA did not breach the principle of equal treatment (see, to that effect, judgment in Bilbaína de Alquitranes and Others v ECHA , cited in paragraph 73 above, EU:T:2013:106, paragraph 72). 101. Finally, as regards the argument that no reasoning was given as to why acrylamide had been chosen and not other substances having identical properties, even though it is established that at least 99% of its use is exempt from the identification procedure, it should be noted that it is apparent from the contested decision that the Kingdom of the Netherlands presented its proposal to identify acrylamide as a substance of very high concern due to its carcinogenic and mutagenic properties. Given that, under Article 59(3) of Regulation No 1907/2006, any Member State may prepare a dossier in accordance with Annex XV to that regulation for substances which in its opinion meet the criteria set out in Article 57 of that regulation, no other reasoning was necessary. 102. In the light of the foregoing considerations, given that the legality of the procedure set out in Article 59 of Regulation No 1907/2006 was not disputed by the applicants and ECHA observed that procedure, the fourth plea in law must be rejected. 103. Consequently, the action must be dismissed as unfounded. Costs 104. In the judgment on appeal, the Court of Justice reserved the costs. It is therefore for the General Court to decide, in the present judgment, on all the costs relating to the various proceedings, in accordance with Article 219 of the Rules of Procedure of the General Court. 105. Under Article 134(1) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party’s pleadings. Under Article 138(1) of those rules, Member States and institutions which intervene in the proceedings are to bear their own costs. 106. As the applicants have been unsuccessful, they must be ordered to pay their own costs and those incurred by ECHA, in accordance with the form of order sought by ECHA. The Kingdom of the Netherlands and the Commission must bear their own costs. Operative part On those grounds, THE GENERAL COURT (Fifth Chamber, Extended Composition) hereby: 1. Dismisses the action; 2. Orders Polyelectrolyte Producers Group GEIE (PPG) and SNF SAS to pay their own costs and those incurred by the European Chemicals Agency (ECHA); 3. Orders the Kingdom of the Netherlands and the European Commission to bear their own costs. JUDGMENT OF THE GENERAL COURT (Fifth Chamber, Extended Composition) 25 September 2015 ( *1 ) ‛REACH — Identification of acrylamide as a substance of very high concern — Intermediates — Action for annulment — Whether directly concerned — Admissibility — Proportionality — Equal treatment’ In Case T‑268/10 RENV, Polyelectrolyte Producers Group GEIE (PPG), established in Brussels (Belgium), SNF SAS, established in Andrézieux-Bouthéon (France), represented by R. Cana, D. Abrahams and E. Mullier, lawyers, applicants, v European Chemicals Agency (ECHA), represented by M. Heikkilä, W. Broere and T. Zbihlej, acting as Agents, and by J. Stuyck and A.-M. Vandromme, lawyers, defendant, supported by Kingdom of the Netherlands, represented by B. Koopman, acting as Agent, and by European Commission, represented by D. Kukovec, E. Manhaeve and K. Talabér-Ritz, acting as Agents, interveners, APPLICATION for annulment of the decision of ECHA (EC No 201-173-7) identifying acrylamide as a substance fulfilling the criteria referred to in Article 57 of Regulation (EC) No 1907/2006 of the European Parliament and of the Council of 18 December 2006, concerning the Registration, Evaluation, Authorisation and Restriction of Chemicals (REACH), establishing a European Chemicals Agency, amending Directive 1999/45/EC and repealing Council Regulation (EEC) No 793/93 and Commission Regulation (EC) No 1488/94 as well as Council Directive 76/769/EEC and Commission Directives 91/155/EEC, 93/67/EEC, 93/105/EC and 2000/21/EC (OJ 2006 L 396, p. 1), in accordance with Article 59 thereof, THE GENERAL COURT (Fifth Chamber, Extended Composition), composed of A. Dittrich (Rapporteur), President, F. Dehousse, J. Schwarcz, V. Tomljenović and A.M. Collins, Judges, Registrar: L. Grzegorczyk, Administrator, having regard to the written procedure and further to the hearing on 15 April 2015, gives the following Judgment Background to the dispute The first applicant, Polyelectrolyte Producers Group GEIE (PPG), is a European economic interest grouping established in Belgium. It represents the interests of companies that are producers or importers of polyelectrolytes, polyacrylamide or other polymers containing acrylamide. The member companies of the first applicant are also users of acrylamide and manufacturers or importers of acrylamide or polyacrylamide. All European Union producers of acrylamide are members of the first applicant. The second applicant, SNF SAS, is a member company of the first applicant. It is principally active in the manufacture of acrylamide and polyacrylamide which it sells directly to its customers. It has production plants in France, the United States, China and South Korea. Polyelectrolytes are water-soluble, synthetic and organic polymers that are produced from different monomers; one of these monomers is acrylamide. They are used, for example, to purify drinking water, treat waste water, produce paper and extract precious minerals. Polyacrylamide is a polymer formed by polymerisation of the monomer acrylamide that is most commonly used in water treatment, the paper industry, the mining industry, the oil industry, in agriculture, as a textile additive and in the cosmetics and personal-care fields. On 25 August 2009, the Kingdom of the Netherlands submitted to the European Chemicals Agency (ECHA) a dossier that it had drawn up concerning the identification of acrylamide as a substance fulfilling the criteria set out in Article 57(a) and (b) of Regulation (EC) No 1907/2006 of the European Parliament and of the Council of 18 December 2006 concerning the Registration, Evaluation, Authorisation and Restriction of Chemicals (REACH), establishing a European Chemicals Agency, amending Directive 1999/45/EC and repealing Council Regulation (EEC) No 793/93 and Commission Regulation (EC) No 1488/94 as well as Council Directive 76/769/EEC and Commission Directives 91/155/EEC, 93/67/EEC, 93/105/EC and 2000/21/EC (OJ 2006 L 396, p. 1), subsequently amended, inter alia, by Regulation (EC) No 1272/2008 of the European Parliament and of the Council of 16 December 2008 on classification, labelling and packaging of substances and mixtures, amending and repealing Directives 67/548/EEC and 1999/45/EC (OJ 2008 L 353, p. 1), making reference to the classification of acrylamide as a category 2 carcinogen and a category 2 mutagen in Annex VI, Part 3, to Regulation No 1272/2008. On 31 August 2009, ECHA published a notice on its website inviting interested parties to submit comments on the acrylamide dossier. On the same day, ECHA also invited competent authorities from other Member States to submit comments on this subject. After receiving comments on the dossier in question, in particular from the first applicant, and the responses to those comments from the Kingdom of the Netherlands, ECHA referred the dossier to its Member State Committee, which, on 27 November 2009, unanimously agreed on the identification of acrylamide as a substance of very high concern, because acrylamide fulfilled the criteria set out in Article 57(a) and (b) of Regulation No 1907/2006. On 22 December 2009 the Executive Director of ECHA adopted Decision ED/68/2009 to include acrylamide, on 13 January 2010, in the list of substances identified with a view to their eventual inclusion in Annex XIV to Regulation No 1907/2006 (‘the candidate list of substances’). Following an application for interim relief brought by the second applicant in Case T‑1/10 R, by order of the President of the Court of 11 January 2010, operation of the decision of ECHA identifying acrylamide as a substance fulfilling the criteria set out in Article 57 of Regulation No 1907/2006, pursuant to Article 59 of that regulation, was suspended until the order terminating those proceedings for interim relief had been made. Following that order, ECHA suspended the inclusion of acrylamide in the candidate list of substances. By order of 26 March 2010 in PPG and SNF v ECHA (T‑1/10 R, EU:T:2010:128), the second applicant’s application for interim relief was dismissed. On 30 March 2010, ECHA published the candidate list of substances including acrylamide. Procedure before the General Court and the Court of Justice and forms of order sought By application lodged at the Registry of the General Court on 10 June 2010, the applicants brought an action for annulment of the decision of ECHA identifying acrylamide as a substance fulfilling the criteria set out in Article 57 of Regulation No 1907/2006 and including acrylamide in the candidate list of substances, in accordance with Article 59 of that Regulation (‘the contested decision’). By letters registered at the Registry of the General Court on 19 and 25 November 2010 respectively, the Kingdom of the Netherlands and the European Commission sought leave to intervene in support of the form of order sought by ECHA. After hearing the principal parties, that leave was granted by order of 10 January 2011. By order of 21 September 2011 in PPG and SNF v ECHA (T‑268/10, ECR, EU:T:2011:508), the General Court (Seventh Chamber, Extended Composition) dismissed the action as being inadmissible. By application lodged at the Registry of the Court of Justice on 30 November 2011, the applicants brought an appeal against the order in PPG and SNF v ECHA, cited in paragraph 13 above (EU:T:2011:508). By judgment of 26 September 2013 in PPG and SNF v ECHA (C‑625/11 P, ECR, EU:C:2013:594; ‘the appeal judgment’), the Court of Justice set aside the order in PPG and SNF v ECHA, cited in paragraph 13 above (EU:T:2011:508). The Court of Justice held that the General Court had erred in law in so far as it held that the action had been brought out of time due to the fact that the rule, according to which the time period for bringing proceedings starts to run from the end of the 14th day following the date of publication of the contested decision, provided for in Article 102(1) of the Rules of Procedure of the General Court of 2 May 1991, applied only to measures published in the Official Journal of the European Union and not to measures published on the Internet (appeal judgment, paragraph 37). Since the state of the proceedings did not permit final judgment to be given in the matter, the Court of Justice referred the case back to the General Court and reserved the costs. The case was allocated to the Fifth Chamber (Extended Composition) of the General Court in accordance with Article 118(1) of the Rules of Procedure of 2 May 1991. Since the written procedure had not been completed when the appeal judgment was delivered, ECHA was invited, by decision of the General Court (Fifth Chamber, Extended Composition) of 24 October 2013, to lodge a defence in accordance with Article 119(2) of the Rules of Procedure of 2 May 1991. By document lodged at the Registry of the General Court on 5 December 2013, ECHA raised an objection of inadmissibility pursuant to Article 114(1) of the Rules of Procedure of 2 May 1991. By order of the General Court (Fifth Chamber, Extended Composition) of 17 June 2014, consideration of the objection of inadmissibility was reserved for the final judgment and the costs were reserved. The Kingdom of the Netherlands lodged its statement in intervention on 16 September 2014. By documents lodged at the Court Registry on 10 November 2014, ECHA and the applicants submitted their observations on that document. The Commission lodged its statement in intervention on 17 September 2014. By document lodged at the Court Registry on 10 November 2014, ECHA submitted its observations on that statement in intervention. The applicants have submitted no observations on that statement in intervention. Upon hearing the report of the Judge-Rapporteur, the General Court (Fifth Chamber, Extended Composition) decided to open the oral procedure. In the context of measures of organisation of procedure provided for in Article 64 of the Rules of Procedure of 2 May 1991, the Court requested, first, ECHA to provide documents and, secondly, all parties to respond to certain questions. The parties complied with those requests within the time allowed. The parties presented oral argument and answered the questions put by the Court at the hearing on 15 April 2015. The applicants claim that the Court should: — declare the action to be admissible and well founded; — annul the contested decision; — order ECHA to pay the costs. ECHA, the Kingdom of the Netherlands and the Commission contend that the Court should: — dismiss the action as being inadmissible or, in the alternative, as being unfounded; — order the applicants to pay the costs. Law Before examining the parties’ substantive pleas and arguments, it is appropriate to examine the objection of inadmissibility raised by ECHA. Admissibility In support of its objection of inadmissibility, ECHA, supported by the Kingdom of the Netherlands and the Commission, raises a plea of inadmissibility on the ground that the applicants are not directly concerned. Under the fourth paragraph of Article 263 TFEU, any natural or legal person may, under the conditions laid down in the first and second paragraphs of that article, institute proceedings against an act addressed to that person or which is of direct and individual concern to them, and against a regulatory act which is of direct concern to them and does not entail implementing measures. In the present case, it is common ground that since the contested decision was not sent to the applicants, they are not addressees of that act. That being the case, in accordance with the fourth paragraph of Article 263 TFEU, the applicants may institute proceedings for annulment of that act only if it is of direct concern to them. As regards the admissibility of the first applicant’s action, it must be observed that it has already been held that an association responsible for defending the collective interests of its members, was, as a rule, entitled to bring an action for annulment only if the undertakings that it represented or some of these undertakings themselves had locus standi or if it could prove an interest of its own (see, to that effect, judgment of 22 June 2006 in Belgium and Forum 187 v Commission, C‑182/03 and C‑217/03, ECR, EU:C:2006:416, paragraph 56 and the case-law cited). That rule also applies to a European economic interest grouping which, like the first applicant, was created in order to defend the interests of a category of undertakings (see order of 24 June 2014 in PPG and SNF v ECHA, T‑1/10 RENV, EU:T:2014:616, paragraph 30 and the case-law cited). In the present case, the first applicant did not produce any evidence to show that its own interests were directly affected. Even on the assumption that it is under a duty to organise and coordinate a harmonised approach to the obligations under Regulation No 1907/2006 for the entire sector in question, it did not assert its own interests, but those of its members. Consequently, the first applicant is entitled to bring an action for annulment only if its members or some of them, such as the second applicant, are directly concerned by the contested decision. As regards direct concern, it has consistently been held that that condition requires (i) that the impugned measure directly affect the individual’s legal situation and (ii) that it leave no discretion to the addressees of that measure who are entrusted with the task of implementing it, such implementation being purely automatic and resulting from the EU rules alone, without the application of other intermediate rules (judgments of 5 May 1998 in Dreyfus v Commission, C‑386/96 P, ECR, EU:C:1998:193, paragraph 43; 29 June 2004Front national v Parliament, C‑486/01 P, ECR, EU:C:2004:394, paragraph 34; and 10 September 2009Commission v Ente per le Ville vesuviane and Ente per le Ville vesuviane v Commission, C‑445/07 P and C‑455/07 P, ECR, EU:C:2009:529, paragraph 45). The applicants claim that the contested decision is of direct concern to them in that the legal situation of the first applicant’s members and that of the second applicant are affected because of the obligations provided for in Article 31(9)(a) of Regulation No 1907/2006. As a result of the identification of acrylamide as a substance of very high concern, the first applicant’s members and the second applicant are required to update the safety data sheet for acrylamide in accordance with that provision. It must be pointed out that, in accordance with Article 31(1)(a) of Regulation No 1907/2006, suppliers of a substance or a mixture must provide the recipient of that substance or mixture with a safety data sheet where the substance meets the criteria for classification as hazardous in accordance with Regulation No 1272/2008. Article 31(9)(a) of Regulation No 1907/2006 provides in that regard that suppliers must update that safety data sheet without delay as soon as new information which may affect the risk management measures, or new information on hazards becomes available. In the present case, it is not disputed that the first applicant’s members and the second applicant had to provide the recipients of acrylamide with a safety data sheet since that substance met the criteria for classification as hazardous in accordance with Regulation No 1272/2008. Acrylamide has inter alia been classified among category 2 carcinogens and category 2 mutagens (see paragraph 5 above). However, it is disputed that the identification of acrylamide as a substance of very high concern, resulting from the procedure provided for by Article 59 of Regulation No 1907/2006, pursuant to Article 57(a) and (b) of that regulation, constitutes, as the applicants argue, new information within the meaning of Article 31(9)(a) of that regulation, capable of triggering the obligation referred to in that provision, namely the updating of the safety data sheet, with the result that the contested decision directly affects the legal situation of the first applicant’s members and that of the second applicant. As regards the safety data sheet, Article 31(1) of Regulation No 1907/2006 provides that it must be compiled in accordance with Annex II to that regulation. That annex sets out the requirements that the supplier must fulfil for the compilation of a safety data sheet that is provided for a substance in accordance with Article 31 of Regulation No 1907/2006. The safety data sheet must enable users to take the necessary measures relating to protection of human health and safety at the workplace, and protection of the environment. According to the applicants, the identification of acrylamide as a substance of very high concern as a result of the procedure laid down in Article 59 of Regulation No 1907/2006, on the ground that that substance meets the criteria referred to in Article 57(a) and (b) of that regulation, constitutes new information relating, in particular, to Article 31(6)(15) of that regulation, as amended by Commission Regulation (EU) No 453/2010 of 20 May 2010, amending Regulation No 1907/2006 (OJ 2010 L 133, p. 1), which refers to regulatory information. As regards Article 31(6)(15) of Regulation No 1907/2006, Section 15 of Part A of Annex II to that regulation, as amended by Regulation No 453/2010, states that that section of the safety data sheet is to describe the other regulatory information on the substance that has not already been provided in the safety data sheet. The information to be provided under Section 15.1 of Part A of Annex II to Regulation No 1907/2006 is, first, information regarding relevant European Union safety, health and environmental provisions, for example, Seveso category and named substances in Annex I to Council Directive 96/82/EC of 9 December 1996 on the control of major-accident hazards involving dangerous substances (OJ 1997 L 10, p. 13), or national information on the regulatory status of the substance or mixture, including the substances contained in the mixture, including advice regarding action that should be taken by the recipient as a result of these provisions. Secondly, if the substance or mixture covered by the safety data sheet is the subject of specific provisions in relation to protection of human health or the environment at EU level, such as authorisations granted under Title VII of Regulation No 1907/2006 or restrictions applied under Title VIII of that regulation, those provisions are to be mentioned. The ECHA decision resulting from the procedure laid down in Article 59 of Regulation No 1907/2006 constitutes a European Union safety, health and environmental measure concerning the regulatory status of a substance. By that decision, a substance is identified as of very high concern which may be included in Annex XIV to that regulation, which annex contains the list of substances subject to authorisation. Consequently, the suppliers of such a substance or of mixtures containing that substance must mention that identification on the safety data sheet and provide advice as to the obligations on recipients as a consequence of that identification and, inter alia, as to the information obligations under Articles 7 and 33 of Regulation No 1907/2006. Therefore, the identification of a substance as being of very high concern as a result of the procedure laid down in Article 59 of Regulation No 1907/2006, on the ground that that substance meets the criteria referred to in Article 57(a) and (b) of that regulation, constitutes new information that may require the suppliers of that substance to update the safety data sheet concerned. It follows that the ECHA decision identifying a substance as being of very high concern as a result of the procedure laid down in Article 59 of Regulation No 1907/2006 may directly affect the legal situation of the suppliers of that substance as a result of the obligation which it sets out. In the present case, that conclusion is not called into question either by the fact that, at the time of lodging the application on 10 June 2010, when the conditions of admissibility of the action must be determined (see order of 7 September 2010 in Etimine and Etiproducts v Commission, T‑539/08, ECR, EU:T:2010:354, paragraph 76 and the case-law cited), Regulation No 453/2010 had not yet entered into force, nor by the fact that, according to the applicants, acrylamide was a substance registered and used exclusively as an intermediate. In the first place, as regards the fact that, at the time of lodging the application on 10 June 2010, Regulation No 453/2010 had not yet entered into force, it is true that, according to Article 3, that regulation entered into force on the 20th day following its publication in the Official Journal. The regulation having been published in the Official Journal on 31 May 2010, it therefore entered into force on 20 June 2010. However, the possibility that Regulation No 453/2010 would not enter into force following its adoption on 20 May 2010 and its publication in the Official Journal was, at the time of lodging the application, purely theoretical (see, to that effect, judgment of 17 January 1985 in Piraiki-Patraiki and Others v Commission, 11/82, ECR, EU:C:1985:18, paragraph 9). In that regard, the Court rejects ECHA’s argument, which refers to paragraph 76 of the order in Etimine and Etiproducts v Commission, cited in paragraph 44 above (EU:T:2010:354), according to which the question of the admissibility of an action must be resolved on the basis of the rules in force at the date on which it was brought. The present case does not concern the question of the temporal application of the rules determining the conditions of admissibility of an action for annulment brought by an individual before the European Union judicature. Regulation No 435/2010 is a substantive rule. With regard to the fact that Annex II to Regulation No 1907/2006 was amended, in accordance with Article 1 of Regulation No 453/10, only with effect from 1 December 2010, it suffices to note here that the fact that the effects of an act do not materialise until a subsequent date determined in the same act does not preclude an individual from being directly affected by it as a result of an obligation entailed by that act (see, to that effect, order of 11 July 2005 in Bonino and Others v Parliament and Council, T‑40/04, ECR, EU:T:2005:279, paragraphs 46 and 47). In the second place, with regard to the fact that, according to the applicants, acrylamide was a substance registered and used exclusively as an intermediate, it should be noted that, under Article 2(1)(c) of Regulation No 1907/2006, that regulation is not applicable to non-isolated intermediates and that, under Article 2(8)(b) of that regulation, isolated intermediates are exempt from Title VII of that regulation relating to the authorisation procedure, which includes the procedure for identifying a substance as of very high concern. In the present case, it is unnecessary to rule on the question whether, under those provisions, the applicants are exempt from the information requirements set out in Article 31(9)(a) of Regulation No 1907/2006 since, in any event, at the time of lodging the application, the acrylamide supplied by the first applicant’s members and by the second applicant was not used exclusively as an intermediate. According to the definition set out in Article 3(15) of Regulation No 1907/2006, an intermediate is a substance that is manufactured for and consumed in or used for chemical processing in order to be transformed into another substance (‘synthesis’). In accordance with Article 3(15)(a) of that regulation, a non-isolated intermediate is an intermediate that, during synthesis, is not intentionally removed, except for sampling, from the equipment in which the synthesis takes place. Article 3(15)(b) and (c) of that regulation contains the definition of an on-site isolated intermediate and a transported isolated intermediate. The former is an intermediate not meeting the criteria of a non-isolated intermediate and where the manufacture of the intermediate and the synthesis of (an)other substance(s) from that intermediate take place on the same site, operated by one or more legal entities. The latter is an intermediate not meeting the criteria of a non-isolated intermediate and transported between or supplied to other sites. It is true that it is apparent from Section 1.1 of the dossier drawn up by the Kingdom of the Netherlands on acrylamide, which concerns ‘information on exposure’, that 99.9% of acrylamide was used as an intermediate. However, in that regard, it is correctly pointed out that there were other uses as an agent in grouting products and for on-site preparation of polyacrylamide electrophoresis gels. First, with regard to the use of acrylamide for grouting products, that consists, inter alia, in its use for water shut-off, concrete repair and salt damp remediation (judgment of 1 February 2013 in Polyelectrolyte Producers Group and Others v Commission, T‑368/11, EU:T:2013:53, paragraph 2). It is apparent from the description of that use, set out in paragraph 1.1 of the file drawn up by the Kingdom of the Netherlands on acrylamide and which, according to the applicants, is correct, that when the acrylamide grout polymerises or gels, it solidifies into a stiff gel that is impervious to water. The applicants argue that that process demonstrates that acrylamide is used as an intermediate in accordance with the definition set out in Article 3(15) of Regulation No 1907/2006. Acrylamide is manufactured or imported in order to be consumed or used in the synthesis of another substance, namely a water-impervious polymer. A polymer is defined as being a substance in Article 3(5) of that regulation. That argument cannot be accepted. According to the definition set out in Article 3(15) of Regulation No 1907/2006, an intermediate is a substance that is manufactured for chemical processing and consumed in or used in that processing in order to be synthesised. In the present case, it is true that the acrylamide-based grouting agent is used in the manufacture of another substance during which it is itself transformed into that other substance, namely a polymer. However, as ECHA states, the acrylamide is not used for the purposes of undergoing synthesis, as defined in Article 3(15) of Regulation No 1907/2006. It is not used with the aim of manufacturing that other substance, the main purpose of the chemical process being to obtain a sealing function that occurs when the acrylamide grouting agent polymerises. Upon polymerisation, it solidifies into a rigid gel that is waterproof when used in grouting applications. The use of acrylamide as a grouting agent is not an intermediate use, but rather an end use of the substance. That conclusion is supported, moreover, by the ‘Definition of intermediates as agreed by Commission, Member States and ECHA on 4 May 2010’. According to Section 4 of that definition, which concerns industrial end use other than in manufacturing of another substance, where a substance A is used by the manufacturer himself or by a downstream user and chemically reacts in a process other than the manufacturing of another substance, the substance A cannot be an intermediate. Further, it provides where the main aim of the chemical process is not to manufacture another substance, but rather to achieve another function, specific property, or a chemical reaction as an integrated part of producing articles, the substances used for this activity should not be regarded as intermediates under Regulation No 1907/2006. Those considerations are also reflected in Section 2 of that definition, which contains an analysis of the definition of an intermediate within the meaning of Article 3(15) of Regulation No 1907/2006. Secondly, as regards the use of acrylamide for the preparation of polyacrylamide electrophoresis gels, it is apparent from Section 1.1 of the file drawn up by the Kingdom of the Netherlands on acrylamide, which concerns ‘information on exposure’, that the gels were used as research tools for separating nucleic acids in research establishments, universities and hospitals. The applicants argue that the use of acrylamide in the manufacture of polyacrylamide electrophoresis gels is an intermediate use since the acrylamide is transformed into another substance, namely the gel which is a polymer. As ECHA states, unless the context under which the chemical reaction leading to polyacrylamide gels takes place is specified, such an argument is not sufficient to establish that the acrylamide used in the manufacture of electrophoresis gels was used exclusively as an intermediate. It has already been noted (see paragraphs 54 and 55 above) that acrylamide constituted an intermediate where that substance was used for the purpose of undergoing synthesis. As ECHA states, this is not the case, in particular, as regards the use of acrylamide in the preparation of polyacrylamide gel handcasts. The intention behind the handcast preparation, which is one of the steps in the electrophoresis protocol, is not the manufacturing of polyacrylamide but the analytical separation of molecules by electrophoresis. Thirdly, as regards the applicants’ argument that the three registration dossiers for acrylamide listed on the ECHA database of registered substances all identified that substance as an intermediate, it should be noted that, in accordance with the first paragraph of Article 20(2) of Regulation No 1907/2006, ECHA undertakes a completeness check of the registration dossier, which does not include, however, an assessment of the quality or adequacy of the data or justifications submitted. Furthermore, it is apparent from Article 6(1) of that Regulation that, save where that regulation provides otherwise, any manufacturer or importer of a substance, either on its own or in one or more mixture(s), in quantities of one tonne or more per year, is to submit a registration to ECHA. It cannot therefore be excluded that certain manufacturers or importers do not register acrylamide because they use lower quantities of it. The fact that there were only registration dossiers for acrylamide as an intermediate does not mean, therefore, that that substance was used exclusively as an intermediate. In the light of the above, the applicants are directly concerned by the contested decision as a result of the information requirements set out in Article 31(9)(a) of Regulation No 1907/2006. The objection of inadmissibility must therefore be rejected. Consequently, as the other conditions of admissibility have been fulfilled, which, moreover, is not contested by the parties, the action is admissible. Substance In support of the action, the applicants put forward four pleas in law which allege (i) infringement of Article 2(8)(b) and Article 59 of Regulation No 1907/2006, (ii) manifest error of appraisal, (iii) breach of the principle of proportionality and, (iv) breach of the principle of equal treatment. The first plea in law, alleging infringement of Article 2(8)(b) and Article 59 of Regulation No 1907/2006 The applicants claim that, by identifying acrylamide as a substance of very high concern, ECHA infringes Article 2(8)(b) and Article 59 of Regulation No 1907/2006 because acrylamide is a substance registered and used exclusively as an intermediate and is therefore exempt from Title VII of that regulation. According to the applicants, during the procedure provided for in Article 59 of Regulation No 1907/2006, only evidence to the effect that acrylamide is an intermediate substance was advanced. That is the case, in particular, where that substance is used in grouting products and for the manufacture of electrophoresis gels, which are the only uses referred to by the Kingdom of the Netherlands in its dossier on acrylamide as examples of the use of that substance as such and not as an intermediate. It should be noted that, by the contested decision, acrylamide was identified as a substance of very high concern in accordance with the procedure referred to in Article 59 of Regulation No 1907/2006. That procedure is included in the authorisation procedure set out in Title VII of that regulation. Under Article 2(8)(b) of that regulation, on-site isolated intermediates and transported isolated intermediates are exempted from that title. It is therefore appropriate to examine whether, as a result of that exemption, the contested decision is unlawful in so far as it identified acrylamide as a substance of very high concern. In the first place, it should be noted that the procedure provided for by Article 59 of Regulation No 1907/2006 concerns the identification of substances. It should also be noted that, in accordance with Article 1(2) of Regulation No 1907/2006, the latter lays down provisions on substances and mixtures, within the meaning of Article 3 thereof, that apply to the manufacture, placing on the market or use of such substances on their own, in mixtures or in articles, and to the placing on the market of mixtures. According to the definition set out in Article 3(1) of that regulation, a substance is a chemical element and its compounds in the natural state or obtained by any manufacturing process, including any additive necessary to preserve its stability and any impurity deriving from the process used, but excluding any solvent which may be separated without affecting the stability of the substance or changing its composition. A substance is therefore defined by its intrinsic properties. In the light of those provisions, and since it is established that acrylamide constitutes a substance within the meaning of that definition, it could properly be subject to the identification procedure provided for by Article 59 of Regulation No 1907/2006. In the second place, it must be noted that the fact that a substance may have intermediate status does not mean that it is exempt from identification as being of very high concern in accordance with the procedure referred to in Article 59 of Regulation No 1907/2006. It is true that, under Article 2(8)(b) of that regulation, on-site isolated intermediates and transported isolated intermediates are exempted from Title VII of that regulation with regard to the authorisation procedure that includes the identification procedure. However, it is apparent from the definition of an intermediate, laid down in Article 3(15) of Regulation No 1907/2006, that the classification of a substance as an intermediate depends on the intended purpose of its manufacture and use. As has already been pointed out (see paragraph 50 above), according to that definition, an intermediate is a substance that is manufactured for chemical processing and consumed in or used in that processing in order to be synthesised. In so far as any substance may, in principle, be manufactured for chemical processing and consumed in or used in that processing in order to be synthesised and, therefore, have the status of an intermediate, the fact that a substance has, in a specific case, the status of an intermediate cannot exempt it from the identification procedure provided for by Article 59 of Regulation No 1907/2006. Those considerations are confirmed by the fact that the criteria laid down in Article 57 of Regulation No 1907/2006, in order to identify a substance as being of very high concern in accordance with the procedure referred to in Article 59 of that regulation, relate to the instrinsic properties of that substance. Under Article 57(a) to (e) of that regulation, a substance may be identified if it meets the criteria for classification as carcinogenic, germ cell mutagenic or toxic for reproduction or if it is persistent, bioaccumulative and toxic or very persistent and very bioaccumulative. Article 57(f) of Regulation No 1907/2006 allows identification of a substance that has serious effects on human health or the environment which give rise to a level of concern equivalent to that resulting from the use of other substances listed in Article 57(a) to (e). Whereas a substance within the meaning of Regulation No 1907/2006 is defined by its intrinsic properties (see paragraph 65 above), the concept of an intermediate laid down in that regulation does not relate to the properties of a substance and does not change those properties in any way, but defines an intermediate according to the intended purpose of the manufacture and use of a substance. In that regard, in relation to the applicants’ claim that the exemption for intermediates provided for in Article 2(8)(b) of Regulation No 1907/2006 is not expressly based on the uses of a substance, it must be noted that, according to the definition of intermediate laid down in Article 3(15) of that regulation, it is necessary to take into account the intended objective of the manufacture and use of that substance in order to determine whether it has the status of an intermediate. In so far as the applicants claim that, under Article 59 of Regulation No 1907/2006, the identification of acrylamide should have been based on all the information contained in the dossier drawn up by the Kingdom of the Netherlands pursuant to Annex XV to that regulation, according to which that substance is used as an intermediate only, that argument must also be rejected. Even if that dossier refers only to examples of the use of that substance as an intermediate, that is not relevant for the purposes of identifying acrylamide as a substance of very high concern meeting the criteria referred to in Article 57 of Regulation No 1907/2006, given that that information does not concern the intrinsic properties of acrylamide. As ECHA states, that information could become relevant in the later stages of the authorisation procedure provided for under Title VII of Regulation No 1907/2006, namely during the procedure for submitting a substance for authorisation and during the procedure for granting authorisations for specific uses. In any event, it has already been established that it cannot be concluded that all the uses of acrylamide referred to by the Kingdom of the Netherlands in its dossier were intermediate in nature (see paragraphs 49 to 59 above). Furthermore, as regards the applicants’ claim that ECHA infringed the principle of good administration in that it did not justify the identification of acrylamide as a substance of very high concern, having regard to its alleged exclusive use as an intermediate, it should be noted, first, that use of that substance as an intermediate did not preclude its identification as a substance of very high concern and, secondly, that the dossier drawn up by the Kingdom of the Netherlands, which constituted the basis of the identification procedure, indicated two uses of acrylamide which were, according to that dossier, other than intermediate. That argument must therefore be rejected. Consequently, the first plea in law must be rejected. The second plea in law, alleging a manifest error of appraisal The applicants claim that ECHA committed a manifest error of assessment in so far as it relied, for the purposes of identifying acrylamide as a substance of very high concern, on the proposal of the Kingdom of the Netherlands which contained no information proving that 0.1% of acrylamide is not used as an intermediate. According to the applicants, the use of that substance in grouting products and for the manufacture of electrophoresis gels, which are the only uses referred to by the Kingdom of the Netherlands in its dossier on acrylamide as examples of the use of that substance as such and not as an intermediate, are not conclusive. Those are uses of acrylamide as an intermediate. In the absence of information on a use of acrylamide other than as an intermediate, the contested decision is arbitrary. First of all, it should be pointed out that, in accordance with settled case-law, where the authorities of the European Union have a broad discretion, in particular as to the assessment of highly complex scientific and technical facts in order to determine the nature and scope of the measures which they adopt, review by the European Union judicature is limited to verifying whether there has been a manifest error of assessment or a misuse of powers, or whether those authorities have manifestly exceeded the limits of their discretion. In such a context, the European Union judicature cannot substitute its assessment of scientific and technical facts for that of the authorities of the European Union on which alone the TFEU has placed that task (judgments of 21 July 2011 in Etimine, C‑15/10, ECR, EU:C:2011:504, paragraph 60, and 7 March 2013Bilbaína de Alquitranes and Others v ECHA, T‑93/10, ECR, EU:T:2013:106, paragraph 76). Nevertheless, the broad discretion of the authorities of the European Union, which implies limited judicial review of its exercise, applies not only to the nature and scope of the measures to be taken but also, to some extent, to the finding of the basic facts. However, even though such judicial review is of limited scope, it requires that the European Union authorities which have adopted the act in question must be able to show before the European Union judicature that in adopting the act they actually exercised their discretion, which presupposes that they took into consideration all the relevant factors and circumstances of the situation the act was intended to regulate (judgments of 8 July 2010 in Afton Chemical, C‑343/09, ECR, EU:C:2010:419, paragraphs 33 and 34, and Bilbaína de Alquitranes and Others v ECHA, cited in paragraph 73 above, EU:T:2013:106, paragraph 77). In the light of that case-law, the applicants’ argument must be rejected. It must be noted that the dossier drawn up by the Kingdom of the Netherlands in accordance with Annex XV to Regulation No 1907/2006 indicates that 99% of acrylamide in the European Union was used as an intermediate in the production of polyacrylamides for a number of applications and that there were other uses as an agent in grouting products and for on-site preparation of polyacrylamide gels. Furthermore, it should be noted that the Member State Committee support document, on which the identification of acrylamide as a substance of very high concern was based, does not any contain information on the use of that substance. However, as is clear from the examination of the first plea in the present action, in order to identify a substance as being of very high concern in accordance with the procedure referred to in Article 59 of Regulation No 1907/2006, the intrinsic properties of that substance must be taken into account. Moreover, it should be pointed out that, under Article 59(2) and (3) of that regulation, a dossier prepared for the purpose of identifying a substance of very high concern may be limited, if appropriate, to a reference to an entry in Part 3 of Annex VI to Regulation No 1272/2008 containing the list of harmonised classification and labelling of hazardous substances and may, therefore, contain no information relating to the use of the substance concerned. In any event, it has already been established that it cannot be concluded that all the uses of acrylamide referred to by the Kingdom of the Netherlands in its dossier were intermediate in nature (see paragraphs 49 to 59 above). The second plea must therefore be rejected. The third plea in law, alleging breach of the principle of proportionality The applicants claim that the treatment of acrylamide is disproportionate because ECHA had a choice of measures and the choice of identifying the substance at issue as being of very high concern causes disadvantages which are excessive in relation to the aims pursued. According to the applicants, the identification procedure is designed to ensure that careful attention is paid to the most dangerous substances. Certain types of substances such as intermediates are exempted from Title VII of Regulation No 1907/2006 because they do not pose the same level of risk as other substances. Notwithstanding that legislative intent, it is claimed, ECHA used that procedure to identify a substance that would be used only as an intermediate, which is disproportionate. Furthermore, the risk to workers from exposure to acrylamide is, eliminated or reduced as a result of specific EU legislation on the protection of workers. The authorities had the opportunity to choose a different measure, namely not to act, which would have been more appropriate and more proportionate. In any event, ECHA could have provided that acrylamide is identified as a substance of very high concern only in so far as it is not used as an intermediate or could have decided that the use of acrylamide would be subject to the restrictions provided for in Title VIII of Regulation No 1907/2006. According to settled case-law, the principle of proportionality, which is part of the general principles of EU law, requires that EU measures do not exceed the limits of what is appropriate and necessary in order to achieve the objectives legitimately pursued by the legislation in question; when there is a choice between several appropriate measures recourse must be had to the least onerous, and the disadvantages caused must not be disproportionate to the aims pursued (see judgment in Etimine, cited in paragraph 73 above, EU:C:2011:504, paragraph 124 and the case-law cited). As regards judicial review of the conditions referred to in the previous paragraph, ECHA must be allowed a broad discretion in a field which entails political, economic and social choices on its part, and in which it is called upon to undertake complex assessments. The legality of a measure adopted in that field can be affected only if the measure is manifestly inappropriate having regard to the objective which the legislature is seeking to pursue (see, to that effect, judgment in Etimine, cited in paragraph 73 above, EU:C:2011:504, paragraph 125 and the case-law cited). In the present case, it is apparent from Article 1(1) of Regulation No 1907/2006 that the objective of that regulation is to ensure a high level of protection of human health and the environment, including the promotion of alternative methods for assessment of hazards of substances, as well as the free circulation of substances on the internal market while enhancing competitiveness and innovation. Having regard to recital 16 in the preamble to that regulation, the legislature established the first of those three objectives as the main objective, namely to ensure a high level of protection of human health and the environment. As regards, more specifically, the aim of the authorisation procedure, which includes the identification procedure set out in Article 59 of that regulation, Article 55 of Regulation No 1907/2006 states that its aim is essentially to ensure the good functioning of the internal market while assuring that the risks from substances of very high concern are properly controlled and that those substances are progressively replaced by suitable alternative substances or technologies where these are economically and technically viable (judgment in Bilbaína de Alquitranes and Others v ECHA, cited in paragraph 73 above, EU:T:2013:106, paragraph 116). In the first place, as regards the applicants’ argument that the contested decision is not appropriate for achieving the objectives pursued by Regulation No 1907/2006, it should be recalled that the contested decision identified acrylamide as a substance of very high concern as a result of the procedure set out in Article 59 of that regulation. Where a substance is identified as being of very high concern, the economic operators concerned are subject to information obligations (judgment in Bilbaína de Alquitranes and Others v ECHA, cited in paragraph 73 above, EU:T:2013:106, paragraph 117). As regards the objective of protecting human health and the environment, it must be stated from the outset that the identification of a substance as being of very high concern serves to improve information for the public and professionals as to the risks and hazards incurred and that, consequently, such identification must be regarded as a means of enhancing that protection (see judgment in Bilbaína de Alquitranes and Others v ECHA, cited in paragraph 73 above, EU:T:2013:106, paragraph 118 and the case-law cited). As regards, more specifically, the applicants’ argument that the contested decision is inappropriate in that regard since acrylamide is used as an intermediate only and is therefore exempted from Title VII of Regulation No 1907/2006 pursuant to Article 2(8)(b) thereof, it should be noted that it has already been established that it cannot be concluded that acrylamide was used as an intermediate only (see paragraphs 49 to 59 above). In any event, there is no reason to conclude that uses of acrylamide other than as intermediates are precluded. The identification of that substance does not seem, therefore, to be manifestly inappropriate in relation to the aims pursued. Consequently, the applicants’ argument concerning the allegedly inappropriate nature of the contested decision must be rejected. In the second place, the applicants argue that the contested decision exceeds the limits of what is necessary to achieve the objectives pursued, since the option of not acting, the adoption of restrictions provided for in Title VIII of Regulation No 1907/2006 or the identification of acrylamide as a substance of very high concern only in so far as it is not used as an intermediate, would constitute less onerous measures. Moreover, according to the applicants, the risk to workers is eliminated or reduced as a result of legislation on the protection of workers. First, with regard to the option of not acting, the applicants claim that that would be more proportionate and less onerous since the identification of acrylamide as a substance of very high concern is not designed for intermediates, but for other types of substances which raise greater concerns. That argument must be rejected. Given that it cannot be concluded that acrylamide was used solely as an intermediate and that, in any event, there is no reason to conclude that uses of acrylamide other than as intermediates are precluded (see paragraph 86 above), omission to act does not constitute a measure that is as appropriate as identification of that substance as being of very high concern. Secondly, with regard to restriction measures concerning the use of acrylamide, on the one hand, it must be observed that the mere fact that a substance appears in the candidate list of substances does not prevent that substance from being subject to restrictions rather than to an authorisation. As is apparent from Article 58(5) and Article 69 of Regulation No 1907/2006, the Commission or a Member State may always propose that the manufacture, the placing on the market or the use of a substance be managed by restrictions rather than by an authorisation (judgment in Bilbaína de Alquitranes and Others v ECHA, cited in paragraph 73 above, EU:T:2013:106, paragraph 128). In the present case, it is apparent, in particular, from the judgment in Polyelectrolyte Producers Group and Others v Commission, cited in paragraph 52 above (EU:T:2013:53), that acrylamide was subject to restrictions for grouting applications as from 5 November 2012. On the other hand, as is apparent from Annex XVII to Regulation No 1907/2006, restrictions applicable to the manufacture, the placing on the market and the use of certain dangerous substances, mixtures and articles, adopted in accordance with the procedure set out in Title VIII of that regulation, may range from specific conditions imposed on the manufacture or the placing on the market of a substance to a total ban on the use of a substance. Even if restriction measures are also appropriate for the achievement of the objectives pursued by that regulation, they thus do not constitute, as such, less onerous measures compared with the identification of a substance which solely entails information obligations (judgment in Bilbaína de Alquitranes and Others v ECHA, cited in paragraph 73 above, EU:T:2013:106, paragraph 129). Thirdly, in so far as the applicants take the view that the existing legislation concerning the protection of workers allows the risk to those workers to be eliminated or reduced, suffice it to point out that that legislation, which provides for risk management measures for workers, cannot constitute an appropriate and less onerous measure for the achievement of the objectives pursued by Regulation No 1907/2006 as regards the treatment of substances of very high concern and, in particular, of the objective of progressively replacing substances of very high concern by suitable alternative substances or technologies where these are economically and technically viable (see paragraph 83 above). Fourthly, the applicants claim that ECHA could have provided that acrylamide is identified as a substance of very high concern only in so far as it is not used as an intermediate. In that regard, it suffices to note that the legislature introduced specific rules relating to intermediates in Article 2(1)(c) and Article 2(8)(b) of Regulation No 1907/2006 (see paragraph 48 above). In the light of the foregoing considerations, it cannot be concluded that the contested decision breached the principle of proportionality. The third plea in law must therefore be rejected. The fourth plea in law, alleging breach of the principle of equal treatment The applicants claim that the identification of acrylamide as a substance of very high concern breaches the principle of equal treatment because other substances in an identical situation are not subject to such identification. According to the applicants, acrylamide was classified among carcinogenic and mutagenic category 2 substances and toxic for reproduction category 3 substances along with a considerable number of other substances which have the same or higher properties. No reasoning was given as to why acrylamide had been chosen and not other substances having identical properties, even though it is established that at least 99% of its use is exempt from the identification procedure. It must be observed that, by Regulation No 1907/2006, the legislature set up a system for the registration, assessment and authorisation of chemical substances and the restrictions applicable to those substances, in order to ensure, inter alia, according to recital 1 in the preamble to that regulation, a high level of protection of human health and the environment as well as the free movement of substances in the internal market, while enhancing competitiveness and innovation. In particular, Regulation No 1907/2006 provides, in Title VII, for an authorisation procedure. The objective of that procedure, according to Article 55 of the regulation, is to ensure the good functioning of the internal market while assuring that the risks from substances of very high concern are properly controlled and that these substances are progressively replaced by suitable alternative substances or technologies where these are economically and technically viable (judgment in Bilbaína de Alquitranes and Others v ECHA, cited in paragraph 73 above, EU:T:2013:106, paragraph 69). The authorisation procedure applies to all substances meeting the criteria set out in Article 57 of Regulation No 1907/2006. The first phase of the authorisation procedure is the identification of the substances referred to in that article, for which a procedure in several stages is set out in Article 59 of Regulation No 1907/2006. According to recital 77 in the preamble to the regulation, in view of workability and practicality considerations, both as regards natural or legal persons, who have to prepare application files and take appropriate risk management measures, and as regards the authorities, who have to process authorisation applications, only a limited number of substances should be subjected to the authorisation procedure at the same time. As regards the choice of substances, Article 59(2) and (3) of Regulation No 1907/2006 provides that it is for the Commission or the Member State concerned to decide whether substances meet the criteria set out in Article 57 of the regulation. The legislature thus gave the Commission and the Member States a wide discretion, allowing a progressive implementation of the rules on the substances of very high concern set out in Title VII of Regulation No 1907/2006 (judgment in Bilbaína de Alquitranes and Others v ECHA, cited in paragraph 73 above, EU:T:2013:106, paragraph 70). In the light of the foregoing observations, the identification procedure does not confer on ECHA any power as regards the choice of the substance to be identified; that prerogative belongs exclusively to the Commission and the Member States pursuant to Article 59 of Regulation No 1907/2006 (order of 22 May 2014 in Bilbaína de Alquitranes and Others v ECHA, C‑287/13 P, EU:C:2014:599, paragraph 51, and judgment in Bilbaína de Alquitranes and Others v ECHA, cited in paragraph 73 above, EU:T:2013:106, paragraph 71). In the present case, the identification procedure laid down by Article 59 of Regulation No 1907/2006 was observed as regards the choice of the substance to be identified. It appears from the dossier that acrylamide was chosen by the Kingdom of the Netherlands because it considered that that substance met the criteria listed in Article 57 of that regulation. Moreover, in the absence of the production of a dossier prepared by a Member State relating to a substance that also has carcinogenic, mutagenic or toxic properties, or a request from the Commission for the preparation of such a dossier by ECHA, ECHA cannot proceed to identify that substance, pursuant to the procedure set out in Article 59 of Regulation No 1907/2006, without exceeding its powers. It follows that, by identifying acrylamide, and not the allegedly comparable substances, as a substance of very high concern, ECHA did not breach the principle of equal treatment (see, to that effect, judgment in Bilbaína de Alquitranes and Others v ECHA, cited in paragraph 73 above, EU:T:2013:106, paragraph 72). Finally, as regards the argument that no reasoning was given as to why acrylamide had been chosen and not other substances having identical properties, even though it is established that at least 99% of its use is exempt from the identification procedure, it should be noted that it is apparent from the contested decision that the Kingdom of the Netherlands presented its proposal to identify acrylamide as a substance of very high concern due to its carcinogenic and mutagenic properties. Given that, under Article 59(3) of Regulation No 1907/2006, any Member State may prepare a dossier in accordance with Annex XV to that regulation for substances which in its opinion meet the criteria set out in Article 57 of that regulation, no other reasoning was necessary. In the light of the foregoing considerations, given that the legality of the procedure set out in Article 59 of Regulation No 1907/2006 was not disputed by the applicants and ECHA observed that procedure, the fourth plea in law must be rejected. Consequently, the action must be dismissed as unfounded. Costs In the judgment on appeal, the Court of Justice reserved the costs. It is therefore for the General Court to decide, in the present judgment, on all the costs relating to the various proceedings, in accordance with Article 219 of the Rules of Procedure of the General Court. Under Article 134(1) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party’s pleadings. Under Article 138(1) of those rules, Member States and institutions which intervene in the proceedings are to bear their own costs. As the applicants have been unsuccessful, they must be ordered to pay their own costs and those incurred by ECHA, in accordance with the form of order sought by ECHA. The Kingdom of the Netherlands and the Commission must bear their own costs. On those grounds, THE GENERAL COURT (Fifth Chamber, Extended Composition) hereby: 1. Dismisses the action; 2. Orders Polyelectrolyte Producers Group GEIE (PPG) and SNF SAS to pay their own costs and those incurred by the European Chemicals Agency (ECHA); 3. Orders the Kingdom of the Netherlands and the European Commission to bear their own costs. Dittrich Dehousse Schwarcz Tomljenović Collins Delivered in open court in Luxembourg on 25 September 2015. [Signatures] ( *1 ) Language of the case: English.