BAILII is celebrating 24 years of free online access to the law! Would you
consider making a contribution?
No donation is too small. If every visitor before 31 December gives just £1, it
will have a significant impact on BAILII's ability to continue providing free
access to the law.
Thank you very much for your support!
[New search]
[Printable RTF version]
[Help]
Case No: PTA 1999/5896/C
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM HIDDEN J
Royal Courts of Justice
Strand, London, WC2A 2LL
Wednesday, 19th April 2000
B e f o r e :
LORD JUSTICE ROCH
and
SIR CHRISTOPHER SLADE
- - - - - - - - - - - - - - - - - - - - -
THE
COMMON PROFESSIONAL EXAMINATION BOARD
Ex parte SALLY MEALING-MCCLEOD
|
Appellant
|
|
|
|
|
|
|
|
|
- - - - - - - - - - - - - - - - - - - - -
(Transcript of the Handed Down Judgment of
Smith Bernal Reporting Limited, 180 Fleet Street
London EC4A 2HD
Tel No: 0171 421 4040, Fax No: 0171 831 8838
Official Shorthand Writers to the Court)
- - - - - - - - - - - - - - - - - - - - -
Miss Sally Mealing-McCleod appeared in person
Miss Sarah Christie-Brown (instructed by Messrs Stitt & Co for the
Respondents)
- - - - - - - - - - - - - - - - - - - - -
Judgment
As Approved by the Court
Crown Copyright ©
LORD JUSTICE ROCH:
This is an application for permission to appeal the judgment of Hidden J of the
19th April 1999 in which Hidden J ordered that the sum of £6,000 paid into
court by the applicant on the 21st December 1998 as security for costs and the
interest earned by that money whilst in court should be paid out to the Common
Professional Examination Board (the Board). On the 21st April of last year
this court consisting of the Master of the Rolls and Robert Walker LJ directed
that the applicant's application for permission to appeal should be heard inter
partes with the appeal to follow if permission to appeal were granted. This
court further directed that the hearing of the application should be postponed
until after taxation proceedings relating to a costs order in the applicant's
favour.
The background to this case is that the applicant is reading for the bar. The
Board is the authority responsible for the examinations which have to be passed
by those wishing to become barristers and solicitors and for the courses that
have to be attended to qualify a candidate for such examinations. The
applicant is a person who is a mature student having in the past been a State
Registered Nurse and having also worked as a principal consultant for one of
the leading audit accountancy and consultancy partnerships. More recently the
applicant has been working for the Department of Trade and Industry
Parliamentary Party at Westminster. Thus the applicant has been studying to
qualify as a barrister whilst at the same time earning her living in other
fields.
Unhappily the applicant's career as a student for the Bar, which began in 1990,
has been dogged by disputes and litigation between the applicant and
institutions providing legal education and the Board. The first proceedings
were an action by the applicant in the Brentford County Court commenced in 1992
against Wolsey Hall and Oxford and Middlesex University, in which, at a later
stage in March 1993 the Board were joined as third defendants. The cause of
action pleaded by the applicant was breach of contract.
In those proceedings a number of costs orders were made. On the 25th November
1993 HHJ Zucker ordered that the Boards' costs be paid by the applicant. Later
those costs were taxed at £7,295.43. The applicant was entitled to set
off against that order the costs of an unsuccessful application by the Board to
strike out her claim against them. Those costs were taxed in the sum of
£786.54 and a further sum of £16.50.
The Board on the 17th January 1995 transferred the costs order made in their
favour in those proceedings to the High Court for enforcement purposes and
issued a writ of fieri facias. That writ was executed on the 19th December
1995 by Sheriff's Officers forcing entry to the applicant's home and seizing
her goods. The applicant took proceedings successfully against the Sheriff for
recovery of her goods.
On the 18th June 1996, the Divisional Court of the Queen's Bench upon an
originating motion issued by the Attorney General seeking an all proceedings
order against the applicant pursuant to s. 42 of the Supreme Court Act, 1981 as
amended by s. 24 of the Prosecution of Offenders Act, 1985 made four orders
upon the applicant
"Undertaking irrevocably that
(1) No civil proceedings shall be instituted by her in any court without the
leave of the High Court to be exercised as if the court were hearing an
application under s. 42(3) of the Supreme Court Act, 1981;
(2) Any civil proceedings instituted by her in any court before the making of
this order shall not be continued by her without the leave of the High Court to
be exercised as if the High Court were hearing an application under s. 42(3) of
the Supreme Court Act, 1981;
(3) No application (other than one for leave as aforesaid) shall be made by her
in any civil proceedings instituted in any court by any person without the
leave of the High Court to be exercised as if the High Court were hearing an
application under s. 42(3) of the Supreme Court Act, 1981;
(4) No information shall be laid by her before a justice of the peace without
the leave of the High Court .....
(5) No application for leave to prefer a Bill of Indictment shall be made by
her without the leave of the High Court......."
The orders made by this court by consent were that the Attorney General's
application be adjourned; that the Attorney General have liberty to apply to
restore this application upon 48 hours written notice to the applicant; the
applicant to have leave to continue certain proceedings which were then in
progress; one an appeal in a Chancery action and the other an action in the
Brentford County Court.
A second costs order was made against the applicant in the High Court action
referred to in those orders in respect of which the applicant had leave to
continue an appeal. The effect of the order, which was made on the 5th June
1997 was that the Board was entitled to recover a further sum of £3,773.68
from the applicant.
On the 19th July 1997 the applicant applied for leave to move for judicial
review and for leave in accordance with the undertaking that she had given the
Divisional Court on the 18th June 1996. The applicant sought judicial review
of two decisions of the Board made between the 8th April 1997 and the 15th July
1997 that she had not qualified for or was not eligible for the Bar Vocational
Course and declining to give the applicant a certificate if the applicant
obtained the diploma for which she had been studying. Those applications came
before Sedley J who granted leave pursuant to the order of the 18th June 1996,
leave to move for judicial review but refused the application for judicial
review.
On the 19th October 1998 this court, consisting of Henry and Clarke LJJ gave
the applicant leave to appeal the order of Sedley J, as he then was, and leave
to adduce further evidence.
On the 18th December 1998 the Board applied to Clarke LJ for an order that the
applicant give security for the costs of the appeal. Clarke LJ ordered the
applicant to give security for costs of the appeal in the sum of £6,000.
The applicant complied with that order by borrowing the £6,000 from Lloyds
Bank, with whom she had an account. The money was paid into court on the 21st
December 1998.
On the 18th February 1999 this court, consisting of myself, Peter Gibson and
Henry LJJ made the following orders:
"1. That the appeal be withdrawn
2. That the applications for payment out of the monies in court together with
interest accrued thereon namely £6,000 be remitted to a High Court Judge,
3. That there be no order as to costs in respect of the hearing before Sedley
J, and
4. That the Board do pay the applicant her costs of the proceedings from the
date of leave to appeal and leave to adduce additional evidence being granted
up to and including the [18th February 1999] ..........."
The applicant and the Board had both made applications in respect of the
£6,000 in court as security for costs and the interest earned by that
money whilst in Court. The Board sought the payment out to them of that money
in part satisfaction of the costs orders made in their favour in 1993 and 1997.
The applicant applied for the money to be returned to Lloyds Bank.
Those applications came before Hidden J on the 19th April last year. He
ordered that the £6,000 and interest should be paid to the Board. Hidden
J refused the applicant leave to appeal; he refused the applicant leave under
the Order made on the 18th June 1996 and refused to stay his order that the
money be paid out to the Board.
Two days later this court having heard the applicant in person but not having
heard anyone on behalf of the Board, albeit that the Board's solicitor was
present, granted a stay of the order made by Hidden J until the applicant's
application for permission to appeal was heard inter partes. The court further
directed that the hearing of the application should be postponed until the
applicant's costs under the Costs Order made in her favour on the 18th February
last year had been taxed. This court also urged the Board to consider whether
the costs of pursuing the £6,000 in court was "a disproportionate and
inappropriate manner for a body such as the respondents to adopt in this case".
This court qualified that observation by recognising that the court had had
only limited information about the case, and had not heard any submission on
the Board's behalf.
I would simply observe at this stage that the applicant had had to take
proceedings for judicial review before the Board would recognise that the
applicant was entitled to make application for a place on the Bar Vocational
Course. Once that concession had been made, the applicant's appeal to this
court was withdrawn. The outcome, from the financial point of view of the
applicant is, that in addition to paying the fees for the Bar Vocational Course
and having to maintain herself throughout the period of that course, she will
have to find other substantial sums to pay the costs orders which the Board has
obtained against her. On the other hand, I recognise the statement of Mr
Crawford, the Board's solicitor to the effect that the Board is likely to face
bills of costs from the Board's lawyers which greatly exceed the sums the
applicant has been ordered to pay the Board.
The remainder of the story is that the applicant's costs which the Board were
ordered by this court to pay on the 18th February 1999 have been taxed by
Master Campbell at £1,732.92. The Master having first decided in a
reasoned judgment given on the 5th November 1999 that the applicant was only
entitled as a litigant in person to remuneration at the rate of £9.25 per
hour; the applicant had failed to establish actual financial loss in excess of
this figure, as required by CPR 48.6(2) and the Costs Practice Direction. The
Master then proceeded to tax the applicant's bill at the sum indicated and
awarded the Board the costs of the taxation proceedings because the Board had
on the 5th August 1999 offered the applicant £2,500 by way of costs, which
offer the applicant had refused. The Master assessed these costs at
£4,136 including VAT and ordered that those costs should be set off
against the costs he had awarded the applicant.
The applicant appealed that taxation to Buckley J sitting with two assessors.
That appeal was heard on the 10th March this year. The appeal succeeded to the
extent that two further sums of £189 and £40.25 were added to the
costs awarded by Master Campbell bringing the total cost recoverable by the
applicant to £1,897.89. Buckley J made no order for the costs of the
appeal to him and the two assessors. Thus on those taxation proceedings, there
is a further balance in the Board's favour of £2,238.11. The applicant's
total indebtedness to the Board on the three costs orders now outstanding
against her plus the interest which has accrued on those orders is
approximately £20,000.
There are in the witness statements of the applicant and the Board's solicitor
sharp differences as to what has been said and done at various stages of the
proceedings between the applicant and the Board. In my judgment these
conflicts do not concern this court. We are concerned simply with two points;
first, whether the applicant is shut out from making an application for
permission to appeal by the order made and undertakings given to the Divisional
Court on the 18th June 1996. Second, whether there is an arguable appeal that
the judgment of Hidden J of the 19th April 1999 was wrong and, if that is
arguable, whether the applicant's appeal against that judgment should be
allowed.
The first issue raised a difficult procedural point, which in the end we were
not called upon to decide. The reason for this was that the Board, as might be
expected of such a body, indicated that they would not wish to shut out the
applicant's application for permission to appeal or, were that application to
be granted, the appeal itself by relying upon the undertaking that the
applicant had given the Divisional Court on the 18th June 1996. Our attention
was drawn to several authorities, one of which is the recent case of Johnson
-v- Valks [2000] 1 All ER 450, a decision of this court consisting of the
Vice-Chancellor, Swinton Thomas and Robert Walker LJJ. In that case it was
held that a person who had been granted permission by the High Court to
institute proceedings under s. 42 of the 1981 Act, required the High Court's
further permission before bringing a substantive appeal in those proceedings to
the Court of Appeal. Such an appeal was caught by s. 42(1A) since it
constituted either the institution of proceedings under paragraph (a) or an
application in existing proceedings under paragraph (c). However in that case
Sir Richard Scott, Vice-Chancellor at page 455G observed:
"As a general principle, if a judge of the High Court, to whom application is
made by a vexatious litigant for permission to institute proceedings, grants
that permission, the leave that is granted franks the proceedings. Every
judgment at first instance now requires permission to appeal for the case to be
taken further. An application for that permission will receive the attention
of either the first instance judge or, as it maybe, the Court of Appeal. A
vexatious appeal will not be permitted. So once the High Court has given
permission for proceedings to be instituted, a further application to the High
Court for permission to institute an appeal is, as it seems to me, superfluous.
As at present, however, there is no escape from the requirement that a further
application for permission to appeal must be made to the High Court. I
propose, the point having come to my attention via Mr Johnson's proposed
appeal, to raise the question with the Rules Committee and see whether we are
able to amend the Rules so as to make it clear that no further application
under s. 42 of the 1981 Act is needed once permission to institute proceedings
has been granted."
In this case the applicant was defending the Boards' application for this money
to be paid to the Board. Normally a vexatious litigant does not require
permission to defend proceedings. It seems that if such a defence fails, the
vexatious litigant does require permission to institute appellate proceedings.
At present, on the authorities, it appears to be the law that if the first
instance judge is a High Court Judge and not merely refuses permission to
appeal but also refuses permission under s. 42 of the 1981 Act, there is no way
that further consideration can be given to the matter by this court. There is
a danger that the judge at first instance, being convinced that his decision is
correct, will refuse permission under s. 42 although this court might take a
different view of his decision.
I would merely express my appreciation of the stance taken by the Board in this
case and my respectful support for the observations of the Vice-Chancellor
which I have cited above. A change in the rules of the type envisaged by the
Vice-Chancellor might well remove a potential difficulty when the Human Rights
Act comes into force in October of this year.
In my judgment the applicant has an arguable appeal and I would grant her
leave.
The appellant's case is simple and straight forward. On the 18th December 1988
Clarke LJ ordered her to give security for costs of the appeal that was
disposed of on the 18th February 1999. The applicant gave security by
borrowing £6,000 from Lloyds Bank for that purpose. The applicant
succeeded on the appeal because although the appeal was withdrawn, the reason
for that withdrawal was that the Board reversed their earlier decisions that
the applicant was not qualified for the Bar Vocational Course. That was why
this court on the 18th February 1999 ordered that the Board should pay the
applicant's costs from the 19th October 1998 up to and including the 18th
February 1999. A subsidiary point, which has arisen and which counsel for the
Board, Miss Christie-Brown has agreed to our resolving is the scope of the
second order made by Clarke LJ on the 18th December 1988 namely:
"Such payment be made on condition that if the applicant's appeal is
successful, the respondent shall pay the applicant's reasonable costs of
providing such security."
I shall return to that matter later in this judgment. The appellant submits
that once this court made the order of the 18th February 1999 she was entitled
to the return of the £6,000 so that she could repay that money to Lloyds
Bank who had lent her that money for that purpose and for that purpose alone.
Now that that purpose had been accomplished the applicant was under an
equitable obligation to return the money to the bank. The applicant relies, as
she did before Hidden J, on the authority of Barclays Bank Ltd -v-
Quistclose Investments Ltd [1970] AC 567.
In that case a company R Ltd were in serious financial difficulties. The
company's overdraft with the appellant bank was almost twice its permitted
limit. The company sought a loan of £1 million from a financier, who was
willing to lend the company that sum provided the company found the money
necessary to pay the ordinary share dividend, a sum of £209,719-8s-6p.
The company succeeded in obtaining a loan in that sum and for that purpose from
the respondents. The respondents cheque was paid into a special account opened
by the company with the appellants which was to be used only for the purpose of
paying the dividend. The company went into voluntary liquidation, before the
dividend was paid. The respondents brought an action against the company and
the appellants claiming the money in the special account. The respondents
argued that the money had been handed over for a specific purpose and had
therefore been held by the company in trust to be used for that purpose. That
purpose having failed, the money was subject to a resulting trust in favour of
the respondents. Those submissions were upheld by the House of Lords. The
only speech delivered was that of Lord Wilberforce with whom the other members
of the House agreed. At page 580 B Lord Wilberforce observed:
"The mutual intention of the respondents and of Rolls Razor Ltd, and the
essence of the bargain, was that the sum advanced should not become part of the
assets of Rolls Razor Ltd, but should be used exclusively for payment of a
particular class of its creditors, namely those entitled to the dividend. A
necessary consequence from this, by process simply of interpretation, must be
that if, for any reason, the dividend could not be paid, the money was to be
returned to the respondent: the word "only" or "exclusively" can have no other
meaning or effect."
Lord Wilberforce then set out earlier cases in which arrangements of this
kind had been recognised as creating a primary trust in favour of the creditors
and a secondary trust if the primary trust failed. At page 581 A Lord
Wilberforce observed:
"These cases have the support of longevity, authority, consistency and, I would
add, good sense. But they are not binding on your Lordships and it is
necessary to consider such arguments as have been put why they should be
departed from or distinguished."
At page 581 D Lord Wilberforce said:
"The second, and main, argument for the appellant was of a more sophisticated
character, the transaction, it was said, between the respondents and Rolls
Razor Ltd, was one of loan, giving rise to a legal action of debt. This
necessarily excluded the implication of any trust, enforceable in equity, in
the respondent's favour: a transaction may attract one action or the other, it
could not admit of both.
My Lords, I must say that I find this argument unattractive. Let us see what
it involves. It means that the law does not permit an arrangement to be made
by which one person agrees to advance money to another, on terms that the money
is to be used exclusively to pay debts of the latter, and if, and so far as not
so used, rather than becoming a general asset of the latter available to his
creditors at large, is to be returned to the lender. The lender is obliged, in
such a case, because he is a lender, to accept, whatever the mutual wishes of
lender and borrower may be, that the money he was willing to make available for
one purpose only should be freely available for others of the borrowers
creditors for whom he has not the slightest desire to provide.
I should be surprised if an argument of this kind - so conceptualist in
character - had ever been accepted. In truth it has plainly has been rejected
by the eminent judges who from 1819 onwards have permitted such arrangements of
this type to be enforced, and have approved them as being for the benefit of
creditors and all concerned. There is surely no difficulty in recognising the
coexistence in one transaction of legal and equitable rights and remedies: when
the money is advanced the lender acquires an equitable right to see that it is
applied for the primary designated purpose .....: when the purpose has been
carried out (i.e. the debt paid) the lender has his remedy against the borrower
in debt: if the primary purpose cannot be carried out, the question arises if a
secondary purpose (i.e. repayment to the lender) has been agreed, expressly or
by implication: if it has, the remedies of equity may be invoked to give effect
to it, if it has not (and the money is intended to fall within the general fund
of the debtor's assets) then there is the appropriate remedy for recovery of a
loan. I can appreciate no reason why the flexible interplay of law and equity
cannot let in these practical arrangements, and other variations if desired: it
would be to the discredit of both systems if they could not. In the present
case the intention to create a secondary trust for the benefit of the lender,
to arise if the primary trust, to pay the dividend could not be carried out,
is clear and I can find no reason why the law should not give effect to it."
Hidden J held that apart from the above case, where the money had been brought
into court as security for costs, then a court has the power to order payment
out of that money to the other party to the proceedings in satisfaction or part
satisfaction of costs orders already made in that other party's favour either
in those proceedings or in other proceedings, relying on the observations of
Danckwerts J in London County Council -v- Monks [1959] 1 Ch 239, which
were based on earlier decisions of this court in Brereton -v- Edwards
[1888] 21 QBD 488 and in re Prior [1921] 3KB 333. That power must be
subject to the money in court being that of the party who brought the money
into court free of any prior interest of some third party.
That was the ground raised by the appellant. It was based on the decision of
the House of Lords in the Quitclose case and was one of six grounds
relied upon by the appellant before Hidden J for saying that an order that the
money be paid to the Board should not be made. Hidden J rejected the
appellant's argument for three reasons. First, the agreement between the Bank
and the appellant created a trust with respect to the money which ended the
moment the appellant deposited the money in court. The limit of the trust was
that the appellant should pay the money into court. Secondly, even were there
to be a trust which endured after the money was paid into court, it was a trust
of which the court had no notice. The court knew nothing of the Bank's
interest in the money. Third, this submission by the appellant represented the
making by the appellant of a claim which was the Bank's and not the appellant's
to make.
The conclusion that I have reached is that the appellant's appeal should
succeed. The basis on which I reach that conclusion are the facts of the loan
as witnessed by the loan document and circumstances surrounding the loan. The
loan documents have to be read in the light of the making of Clarke LJs order
on the 18th December 1998. The applicant then resorted to her bank telling
them that she had been ordered to give security for costs of the appeal in the
sum of £6,000. If she were to lose her appeal she will be unable to
pursue the Bar Vocational Course and she will lose the £6,000. The bank
know that if the appellant is unable to pursue the Bar Vocational Course she
will continue in the well paid work which she was doing, and from which she
will be well able to meet the loan instalments. If the appellant wins her
appeal the £6,000 will be returned to the bank so the prospect of the
appellant not earning during the time that she is attending the Bar Vocational
Course will not be of concern to the bank. These matters are set out in the
affidavit of the appellant of the 19th April 1999 at paragraphs 13, 14 and
15.
The loan agreement sets out the purpose of the loan as "deposit to court
funds". Although the loan agreement had a section for security, in this case
no security was required. The loan agreement contained this condition,
condition 2 (c):
"You must use the cash loan for any purpose specified overleaf (see "The
Loan"). You will hold that loan, or any part of it, on trust for us until you
have used it for this purpose"
The judge held that the trust ended as soon as the money was paid into court.
With the greatest respect to the judge, I disagree. The condition uses the
imperative. The purpose of the loan was the deposit of the money in court as
security for costs. The money was being used as security for costs until the
appeal was completed. The trust did not end when the money was paid into
court. In my view the loan agreement, if it did not expressly provide,
provided by necessary implication that if the appellant's appeal was successful
and the Board did not in respect of the appeal obtain an order for costs
against the appellant which they would be entitled to satisfy out of the money
in court, the money in court would go back to the bank. The loan agreement
would only operate long term in the event of the appellant's appeal failing.
I consider that the judge was wrong to rely on the absence of notice to the
court. The court had given no consideration for the receipt of the money.
Further, as Lord Wilberforce made clear in the first passage from his speech
cited above, it is the mutual intention of the appellant and Lloyd's Bank and
not that of the person with whom the money is deposited that has to be
considered.
The final point on which the judge found against the appellant was that the
claim the appellant was making was in effect that of the bank and not her
claim. This point is undermined if I am correct that the trust did not cease
at the moment the money was paid into court. If the trust created by the loan
agreement continued after the money was paid into court, then as trustee of
that money the appellant was under an obligation to take steps to see that the
money was returned to the bank.
I return to the subsidiary issues which arose as to the scope of the order made
by Clarke LJ:
"If the appellants appeal is successful the Board shall pay the appellant's
reasonable costs of providing such security."
Counsel for the Board conceded that the appellant is entitled to the fees that
the bank charged the appellant for providing the £6,000 for her to pay
into court as security for costs, namely £75 and £10. The Board
submit that the appellant is not entitled to the interest she had to pay the
bank on the money. The appellant claims that that interest was part of her
costs of providing such security; the interest was reasonable in that the rate
of interest was a competitive rate for money borrowed in December 1998, namely
a final rate of 12.12% per annum.
In my judgment, Clarke LJ contemplated that the appellant would not be able to
provide the security required out of her own assets but would have to raise the
money. The reasonable costs would include both the arrangement fee and the
interest payable on the money. The appellant is entitled to the interest she
has had to pay the bank.
The appellant has indicated that the sum required to discharge the indebtedness
to the bank is £5,218.38 and that she is willing for the balance of the
money in court namely £1,182.92 to be paid to the Board in part
satisfaction of the costs orders they have against her. But for that
concession by the appellant I would have held that she would have had to allow
the Board to set off the interest earned by the money whilst in court against
the interest the appellant has had to pay to the bank.
I would order the payment of the sum of £5,218.38 to the bank and the
balance of £1,182.92 to be paid to the Board's solicitors. I would
further direct that the sums of £75 and £10 and the interest paid by
the appellant to the bank on the £6,000 from the 18th December 1998 to
date be deducted from those sums which the appellant presently owes the Board
under the three costs orders.
SIR CHRISTOPHER SLADE:
I agree with the judgment of Roch LJ and wish to add only a few observations
as to the legal effect of the Loan Agreement entered into by the applicant with
Lloyds Bank on 18th December 1998 ("the Agreement").
In the letter under cover of which the Agreement was sent to the applicant, the
loan was described as "Express Business Loan". The Agreement itself, under the
printed heading "Loan Agreement", contained the printed words "For business
loans up to and including £25,000". The printed form itself thus indicated
that this particular form was not intended to be used for loans to borrowers
for their general purposes but was intended to be used for loans to borrowers
connected with their "business", which in its context would no doubt include
their profession. A few lines below, in the printed form used in the present
case, under the heading "The Loan" and sub-heading "Purpose of cash loan",
there were inserted in manuscript the words "Deposit to Court Funds". In my
judgment evidence as to the circumstances in which the Agreement was concluded
would necessarily be admissible for the purpose of explaining the meaning of
the words last quoted.
This evidence would show that the "Deposit to Court Funds" thus referred to was
the payment into court of £6,000 directed by Clarke LJ on 18th December
1998 by way of security for the respondent's costs of and occasioned by the
applicant's appeal from the order of Sedley J dated 4th November 1997. This was
an appeal which, for the reasons explained by Roch LJ, the applicant had to
pursue and pursue successfully if she were to be called to the Bar.
The printed words of the Agreement went on to provide on the second page, in
paragraph 2(c):-
"You must use the cash loan for any purpose specified overleaf (see "The Loan")
You will hold that loan (or any part of it) on trust for us until you have used
it for this purpose".
The decision in Quistclose Investments v Rolls Razor Limited [1970] AC 567 confirmed that it is open to a lender and a borrower, if they so agree,
to enter into an arrangement under which money is to be lent to the borrower on
terms that the borrower is to become a trustee of the money lent, the terms of
the trust being that the money (a)is never to become part of the general assets
of the borrower, but (b) is to be used exclusively by the borrower for a
specified purpose and (c) except to the extent that it is required for that
specified purpose, is to be held on a resulting trust for the lender. That was
the nature of the trust found to exist in the Quistclose case. The
specified purpose was the payment of a dividend. Since in the events that
happened there was a failure of the specified purpose because the relevant
dividend could not be paid, the money reverted to the lender.
In the present case, one point concerning the effect of the Agreement is common
ground. The moneys lent were to be held by the applicant in trust for the Bank
at very least until the payment into court was made. The Judge, however,
accepted the respondent's argument that because clause 2(c) of the Agreement
expressly provided that the applicant was to hold the money lent on trust for
the bank "until you have used it for this [the stated] purpose" this
necessarily meant that the trusteeship ceased altogether and for all purposes
immediately the £6,000 was paid into court. As he put it:
" ...the only trust which arose was that provided for by clause 2(c) of the
Loan Agreement which expressly came to an end when the money was paid into
court"
I respectfully disagree with the Judge's conclusion on this short point of
construction, which in my judgment overlooked the significance of the first
sentence of clause 2(c) and, as a result, drew a wrong inference from the
second sentence. When the first and second sentences are read together, in my
judgment they make it clear that the mutual intention of the lender and
borrower was that the loan was to be used solely for the "business"
purpose of making the payment into court (required to enable the applicant to
pursue a career at the Bar) and for no other purpose; they make it clear that
the money lent was not to form part of the applicant's general assets. A
necessary consequence of this, by a process simply of construction of the
Agreement, was that if for any reason the money was not required, or was no
longer required, for the purpose of the payment into court, it was to be
returned to the lender, the sole permissible use by the applicant of the money
having been exhausted:. (see and compare the observations of Lord Wilberforce
in the Quistclose case at p. 580A-B; see also Carreras Rothmans Ltd v
Freeman Mathews Treasure Ltd [1985] 1 All ER 155 at p. 165 f-g per Peter
Gibson J)
If my conclusions thus far are correct, the applicant was not only entitled but
bound, in her capacity as trustee, to seek to maintain this trust in favour of
the Bank as against her other creditors such as the respondent. The court has
given no consideration for the receipt of the moneys; it was effectively in
the position of a stakeholder. Now that it has notice of the trust in favour of
the Bank, it is in my judgment bound to give effect to it, the money no longer
being required for the purpose of providing security. The judgment of
Danckwerts J in London County Council v Monks [1959] 1 Ch 239 has no
relevance to the facts of the present case since the moneys in court do not
form part of the debtor's general assets.
For these reasons and the reasons given by Roch LJ on the other points arising
in this appeal, I would concur in giving the applicant permission to appeal, in
allowing the appeal and in the form of order which he proposes.
Order: Appeal allowed no order as to costs here or below; order of
Hidden J to be set aside; £5,218.38 money paid onto court by applicant to
be paid out to Lloyds TSB plc; balance to be paid to respondent's Solicitors;
interest paid by Applicant from 18/12/98 to date (£800.13) to be deducted
from money owed by applicant from money owed by Applicant to be Board (see
separate judgment for permission for leave to appeal and for the costs here and
below).
(Order does not form part of the approved judgment)
BAILII:
Copyright Policy |
Disclaimers |
Privacy Policy |
Feedback |
Donate to BAILII
URL: http://www.bailii.org/ew/cases/EWCA/Civ/2000/138.html