This is the transcript of the 15th and final day of the Common Issues trial in the Bates and others v Post Office group litigation. It is not the perfected transcript, but the one received by both parties at the end of the day.
Day 15 features the second day of closing submissions from the Post Office's QC David Cavender, and should be read alongside Mr Cavender's written closing submission, which you can read on Scrib'd via this link or embedded on this blog here.
I thoroughly recommend reading Mr Cavender's closing arguments on Day 14 and Day 15. They completely and cogently set out the Post Office's defence for acting in the way that it has. To summarise 70-odd thousand words:
1. It was legal to do so.
2. The claimants case has no basis in law.
3. Because Horizon is generally robust, the Post Office is entitled, in law, to assume it always works correctly.
It's a long read, but an easy one, and you can also scroll to the bottom and enjoy the little vignettes played out between the judge, Mr Cavender and the claimants' QC, Patrick Green.
This is the menu for the other transcripts and the Common Issues Trial Menu which has links to my write-ups and more documents:
Day 1 transcript - Wed 7 November - Opening arguments
Day 2 transcript - Thu 8 November - Claimants: Alan Bates, Pam Stubbs part 1
Day 3 transcript - Mon 12 November - Pam Stubbs part 2, Mohammad Sabir
Day 4 transcript - Tue 13 November - Naushad Abdulla, Liz Stockdale
Day 5 transcript - Wed 14 November - Louise Dar
Day 6 transcript - Thu 15 November - Post Office: Nick Beal, Paul Williams
Day 7 transcript - Mon 19 November - Sarah Rimmer, John Breeden, AvdB part 1
Day 8 transcript - Tue 20 November - AvdB part 2
Day 9 transcript - Wed 21 November - AvdB part 3, Timothy Dance, Helen Dickinson, Michael Shields part 1
Day 10 transcript - Thu 22 November - Michael Shields part 2, Elaine Ridge, David Longbottom, Michael Webb
Day 11 transcript - Mon 26 November - Michael Haworth, Andrew Carpenter, Brian Trotter
Day 14 transcriot - Wed 5 December - Post Office closing argument: David Cavender QC - part 1
Day 15 transcript follows. Read
Day 14 first:
Thursday, 6 December 2018
(10.00 am)
Closing submissions by MR CAVENDER (continued)
MR CAVENDER: Good morning, my Lord.
MR JUSTICE FRASER: Good morning.
MR CAVENDER: In terms of the timetabling, your Lordship
kindly said that you were willing to sit until 5 o'clock
today.
MR JUSTICE FRASER: If necessary.
MR CAVENDER: If necessary. I am going to finish by
4.340 pm whatever to allow some questions from
your Lordship, and my learned friend in case he might
want ten minutes in reply, which of course is fine. So
that is the timetabling.
In terms of the subject matter --
MR JUSTICE FRASER: I'm not sure I am logged on. Yes, it
has just appeared. Go ahead, Mr Cavender.
MR CAVENDER: In terms of subject matter, I was just
finishing off if you remember the agreed implied terms
as a route into relational contract, so I will deal with
that first, then deal with the implied terms separately
that arise out of that and more generally, then deal
with the question of agency and the disputed issues on
that. I hope to do all that this morning. Then this
afternoon, rather more briefly, incorporation contract,
suspension, termination, true agreement and UCTA. Those
last matters will be rather truncated and by reference
to identifying parts of the closings, just to try and
bring those to life.
So, my Lord, that is the menu for today.
Starting with that then, last night we were dealing
with the agreed implied terms and we were at
paragraph 257 of our closing {A/8/97}. I had gone
through the various examples we'd set out of where the
agreed implied terms would or wouldn't react, and we set
that out, and I had taken you through paragraph 255
{A/8/96}. And we say in 256 there would be a degree of
overlap but they are different obligations.
Then this at 257, which is an important point of
principle {A/8/97}, when you stand back from this area
in the dispute, ie do you have these protean agreed
terms or do you go for these -- try and go for these
very specific terms which are unilateral? In that world
we say it would be extremely difficult for the claimants
to show:
"... the parties must have intended the far more
specific implied terms ..."
And in brackets:
"... (and precisely the alleged terms rather than
[any] other terms that might have been chosen) to deal
with factual situations/perceived difficulties."
Obviously at the time of contracting looking
forwards, not with hindsight.
We say:
"Cs cannot, as a matter of law, rely on anything
a reasonable person in their position did not and could
not have anticipated at the date of contract ..."
But which they say arose in practice by reference to
what is clearly inadmissible post-contractual evidence,
and that is of course Marks & Spencer. That is just
a necessary feature of the Marks & Spencer test and the
way terms are implied. Nothing about this case, that is
just how the law works in this area.
So we say that and then we make the point we have
made a number of times, that that is to say nothing of
the difficulty of saying, or my learned friend
persuading your Lordship to imply this raft of
individual terms notwithstanding the existence of the
agreed implied terms.
My Lord, you will note my learned friend has been
very critical more generally about trying to suggest we
hadn't been helpful in relation to our case on this, and
I have said to you that we have, and we clearly have,
and I have just shown you examples where we set out the
detail.
There have been two requests for information, both
of which have been answered. I don't want to take you
there, but for your note on 13 September 2017,
{B4/2/24}, request 61 and its response, and then on
29 December 2007, {B4/3/1}, you will recall you were
shown a table, my learned friend showed you briefly,
where we --
MR JUSTICE FRASER: Is this the punchline table?
MR CAVENDER: My Lord, yes. This one has the punch in it
which is {H/19/1}, and there has been a lot of
correspondence between solicitors about this, which you
will find if you could ever think it necessary to read
it, at {H/7/1} to {H/21/1}.
MR JUSTICE FRASER: It would be surprising at this stage of
an action such as this that it would be necessary to go
to the solicitors' correspondence, I imagine, unless you
are specifically urging me to do so.
MR CAVENDER: All I am trying to do is counteract the
impression my learned friend tries to give that we have
somehow been playing games with this. We have not.
MR JUSTICE FRASER: There is a degree of criticism flowing
in both directions about the way in which a case has
either been presented or there were gaps in it,
et cetera, but by this stage of closing submissions it
probably is unsatisfactory for the trial judge to need
to go back as far as the solicitors' correspondence.
MR CAVENDER: My Lord, that's exactly why I said somewhat
sarcastically if you felt the need to do it, I am not
suggest you would.
But the simple point is if the claimants wanted more
information in relation to this case, granular detailed
information, they could have pleaded what they said
these terms meant. They could have said "As to your
allegation of necessary co-operation, we say this covers
this, this, this. In these notional circumstances we
had this result". And then ask us to plead to it. And
of course we would have had to and your Lordship would
have made us.
So it was in their grasp if they wanted to have more
granular detail they could have got it, but they never
did that. Anyway, that is all history.
So that is all I want to say about the agreed
implied terms as a route into the main debate here which
is relational contract.
We have dealt with this in closing at paragraph 259
to 325 {A/8/98}, which is obviously a massive section of
our closing because of course it is an important point.
But I am going to take you now to Yam Seng and look at
it in some detail.
You know the basic story now and you have been taken
through it by my learned friend, but what I hope to do
is try and tease out firstly what is being said here as
a matter of general principle and what the ratio of case
is, because in my submission they are very different
things. And the ratio of the case is important because
that informs, when you look back at the earlier section
where the learned judge is setting out a very
interesting and learned discussion about the historical
involvement really of this area of the law, and it puts
it in context.
If we go to the case, which is in the opening
authorities bundle behind tab 2 {A1.1/43/1}.
The first thing to pick up is at paragraph 26
{A1.1/43/10}. This was obviously a distribution
agreement and you know the details about the nature of
that, I don't need to go into that, but you can see it
is a short document prepared without the assistants of
lawyers and consists of eight clauses. So that is
the first point to note: this is a homemade agreement,
very short, and prepared without the benefit of lawyers.
We also know that this is a contract with a period
of 2.5 years, assuming that Yam Seng hits the targets.
In fact the parties later removed the requirement for
targets so it became 2.5 years irrespective of targets
and we get that from paragraph 37 {A1.1/43/13}.
So that is the background.
Then in terms of the passages relied upon, we can
start at paragraph 131 {A1.1/43/30}. What the judge is
doing here is dealing with terms implied by law. And as
my learned friend correctly submits on the basis of Geys
in the Supreme Court, there are two types of implied
term: those implied by law, that means they are implied
in any contract of the variety of which they are to be
implied. It doesn't depend on the facts.
So examples are an employment contract. In every
employment contract, irrespective of the terms, there is
an implied term of trust and faith. Mutual trust. That
arises out of BCCI v Ali, employees there, who had
stigma claims as a result of the disastrous performance
of that bank, and it went to the House of Lords and that
term is recognised at that level for the first time.
That is implied in every employment contract
whatever the terms of the contract. Implied by law.
And that is what Baroness Hale says in Geys.
That is what Mr Justice Leggatt is dealing with
here:
"Under English law a duty of good faith is implied
by law as an incident of certain categories of contract,
for example contracts of employment and contracts
between partners or others whose relationship is
characterised as a fiduciary one. I doubt that English
law has reached the stage, however, where it is ready to
recognise a requirement of good faith as a duty implied
by law, even as a default rule, into all commercial
contracts. Nevertheless, there seems to me to be no
difficulty, following the established methodology of
English law for the implication of terms in fact, in
implying such a duty in any ordinary commercial contract
based on the presumed intention of the parties."
Everything after this we therefore know. His
implied terms imply in fact. We also know of course
that this is pre-M&S.
He then goes through the passage my learned friend
took you through starting really at 134, and at 135 he
deals with the paradigm case of expectation of honesty,
135. {A1.1/43/31}
Then at 137 he goes down:
"As a matter of construction, it is hard to envisage
any contract which would not reasonably be understood as
requiring honesty in its performance."
So still dealing with honesty there.
And then at 138 he expands it to say not all bad
faith conduct would necessarily be described as
dishonest. And he then uses a few other words to
describe other behaviour: improper, commercially
unacceptable, unconscionable. And then at 139
{A1.1/43/32} he uses the term "fidelity to the parties'
bargain".
Then he says at 140:
"The two aspects of good faith which I have just
identified ..."
I'm not quite sure what he is referring to there.
I must say I thought he was talking about honesty on the
one hand and fidelity and these other -- commercially
acceptable on the other. I know my learned friend said
he thought that the two were the ones immediately above
even though there are three or four.
MR JUSTICE FRASER: What do you say the two are?
MR CAVENDER: If you look at it in context, I think he was
going back to the start of the debate at 135
{A1.1/43/31}. So honesty on the one hand, and then
these other terms which are more vague: commercially
unacceptable, unconscionable, fidelity as the other. It
may not matter.
139 {A1.1/43/32} starts with "Another aspect", so
maybe that is a hint to where he is getting the two
from.
MR JUSTICE FRASER: So 139 could be the second one.
MR CAVENDER: Indeed.
MR JUSTICE FRASER: He says "Another aspect ... which
overlaps with the first", so maybe he is talking about
two aspects that overlap. The first is honesty and the
second is the one at 139.
MR CAVENDER: Quite.
MR JUSTICE FRASER: But whatever it is ...
MR CAVENDER: Quite. And then 141:
"What good faith requires is sensitive to context.
That includes the core value of honesty."
So he is going back to honesty again here.
"... intending rely on it while knowing the
statement to be untrue. Frequently, however, the
requirements of honesty go further."
And that is the information known to be -- rely on
and then later becomes untrue, those kinds of things.
142 is dealing with deliberate omissions to
disclose. Then we have:
"Arguably at least that dichotomy is too
simplistic."
So on the one hand you have fiduciary obligations,
partnership, trustee on the one hand, and some other
animal he is trying now to describe. And he says
"arguably" so it's discursive.
Then he gets into the part where he talks about
relational contracts, the elements of which are it goes
beyond a simple exchange and there is a longer term
contract he is talking about here. High degree of
co-operation, predictable performance. And he gives
examples over the page {A1.1/43/33}, some joint venture
agreements, franchise agreements and long-term
distributorship agreements.
Then going over to 149 --
MR JUSTICE FRASER: Are we passing over 144? {A1.1/43/33}
MR CAVENDER: I think my learned friend read that to you.
I don't particularly want to pass over it, I'm not going
to read every paragraph.
MR JUSTICE FRASER: I am not suggesting you should read
every paragraph. But the last sentence of 144
encapsulates, doesn't it --
MR CAVENDER: It's objective. It's not talking about what
people might have --
MR JUSTICE FRASER: Exactly. And we had an exchange about
that yesterday in relation to a possible difference so
far as the NTC and the SPMC are concerned but not in
this context. But it is objective, it is reasonable
people in the situation of these contracting parties.
MR CAVENDER: My Lord, yes. All that is reflecting is the
test in Marks & Spencer, this is pre-Marks & Spencer,
but that is an echo back to -- or an echo forward
really.
MR JUSTICE FRASER: So over to --
MR CAVENDER: 149, my Lord, yes {A1.1/43/34}:
"Third, a further consequence of the fact that the
duty is based on the parties' presumed intention is that
it is open to the parties to modify the scope of the
duty by the express terms of their contract and, in
principle at least, to exclude it altogether. I say 'in
principle at least' because in practice it is hardly
conceivable that contracting parties would attempt
expressly to exclude the core requirement to act
honestly."
Pausing there, that is replete with the possibility
that the express terms of the contract may in fact
prevent the implication of a wide term of good faith.
But what he saying is, well, in principle you could, but
it is hard to see how such a contract term could even
prevent the dishonesty element.
So what that is in my submission is a heavy signal
that even when he is talking about relational contracts,
they don't all necessarily by reason of that label
become contracts in which you imply the good faith term,
whichever one that is, and there is a smorgasbord of
variety, as you can see in the earlier part I've shown
you, namely, the various iterations of commercially
unacceptable, unconscionable, fidelity to the bargain.
What he seems to be saying is he can imagine a world
in which those are excluded but he can't imagine a world
where it would be very easy at least for the contract
term to exclude the core duty of honesty.
That in my submission is a powerful point in support
of my construction which is the proper approach should
be to identify whether you are dealing with a relational
contract in principle, then have regard to what implied
terms of a good faith variety, or any variety, honesty
variety, see if they pass the test in Marks & Spencer if
necessary, and then proceed in that way.
If I was wrong then that paragraph wouldn't make any
sense.
Yes, my learned junior -- 147, the first sentence,
is also supportive of that:
"First, because the content of the duty is heavily
dependent on context and is established through a
process of construction of the contract ..."
Indeed we will go to Globe later. Lord Justice
Beatson in the Court of Appeal says very much the same
thing. So in my submission there is an established
authority, not absolutely clear but clear enough that
that is in my submission the proper approach.
We get at 150 at the end, which is obvious, that
good faith is used in different senses and you have to
be clear as to which sense it is being used in.
154 then:
"I have emphasised in this discussion the extent to
which the content of duty to perform a contract in good
faith is dependent on context. It was Mr Salter's
submission [he was obviously counsel in this case] that
the relevant content of the duty in this case was
captured by two more specific terms which Yam Seng
contends are to be implied into the agreement.
I therefore turn to consider these."
Pausing here. In a case where there is a debate
about what the judge is saying is the content of the
duty, to see what he in fact did in this case is in my
submission illuminating. And we will see what he did,
because what he did was say to Mr Salter, "No, your
terms that you want to imply in this contract are too
wide, they are unilateral, they are too onerous, and
neither of them has the good faith element in them of
either knowledge or dishonesty".
So let's look at paragraph 155 and 156 carefully
{A1.1/43/35}. Because what the judge is saying is he is
dealing here now with -- he is buying the argument there
should be some form of good faith implied term, we are
in that territory, he is saying, and this is how
in fact -- he is not saying "I am implying a term of
good faith, the (inaudible) of good faith to another",
he is saying "I am in that area and I am going to imply
these two terms", and let's see what he does:
"The first more specific term said by Yam Seng to be
implied in the agreement is a term that ‘insofar as
[ITC] instructed or encouraged [Yam Seng] to incur
marketing expenses it would not do so for products which
it was unable or unwilling to supply ..."
Pausing there, that is the first one.
And then the second one is:
"... nor offer false information on which Yam Seng
was likely to rely to its detriment."
They are the two.
The judge says:
"As I see it, the essential difficulty with this
formulation is it does not distinguish between
encouraging expenditure in the expectation that products
would be supplied or providing false information
dishonestly ..."
So doing it of itself would not be a breach of the
good faith term, you have to do it dishonestly.
To carry on:
"... or providing false information dishonestly and
doing so innocently. In my view, such a distinction is
critical."
Pausing there, asking rhetorically why is he saying
that? He is saying that because he sees this -- the
good faith term that he is looking at here having
honesty and good faith and knowledge at its core.
Because if he didn't, he would have been quite happy
with Mr Salter's term which is otherwise
unobjectionable.
If you compare it to my learned friend's terms that
he wants to imply, only one of them has any element of
knowledge or good faith about it. I will take you to
them in due course. They are all vanilla unilateral
terms imposing an obligation on Post Office to do
certain things, not knowing things and then having to do
them, and not doing things dishonestly. They are
vanilla unilateral onerous terms. And under Yam Seng
Mr Justice Leggatt would not have accepted them.
Then:
"To take the first limb of the alleged implied term,
insofar as ITC led Yam Seng to expect the products were
going to be supplied, believing it would be able to
supply them and intending to do so, there would be no
lack of good faith on the part of ITC. The position
would be different if ITC wilfully led Yam Seng to
expect that products would be supplied in circumstances
where ITC did not in fact intend to supply them or knew
that it would be unable to do so."
Again triggering a good faith obligation.
"Conduct of the latter kind would be clearly
contrary to standards of commercial dealing which the
parties would reasonably have taken for granted; but I
can see no basis for implying any more onerous
obligation."
So he is saying it is tethered in knowledge and
dishonesty. So that is the first implied term.
Then he goes on:
"The same distinction need to be drawn in relation
to the second limb of the alleged implied term."
Looking above at 155, that is "nor offer false
information on which Yam Seng was likely to rely to its
detriment".
Carrying on:
"I can see no justification for implying an
unqualified obligation not to provide false information
equivalent to a warranty that any information given by
ITC on which Yam Seng was likely to rely would be true.
By contrast, it was clearly implied that ITC would not
knowingly [in italics] provide false information on
which Yam Seng was likely to rely."
My Lord, in my submission, that is the ratio of this
case. It comes out of the earlier interesting
discussion, but that was the basis on which the judge
was willing to imply terms in this case. That is how he
used -- however he describes it earlier in a discursive
and helpful way, because obviously this is a new area,
the ratio of this case is that the implication of
anything based on Yam Seng of good faith has to have
knowing or honesty in it, and if you put forward implied
terms that don't have those requirements in them the
court will reject it.
MR JUSTICE FRASER: That is not correct. You need to look
at paragraph 159, please {A1.1/43/36}. The ratio of
this case is that on the specific facts, the term that
was found is the one at 159 and 164. Effectively that
ITC would not authorise the sale of any product in
the domestic market of any territory covered by the
agreement at a lower retail price than the duty free
retail price specified in the agreement with Yam Seng.
That is the ratio because that is defining what the term
is.
You are right, he gets to that by doing what you
have explained, but it is 159 to 164 that demonstrates
his application of his earlier principle to the finding
in that case.
MR CAVENDER: My Lord, I am not sure that is right.
MR JUSTICE FRASER: Mr Cavender, I am pretty sure it is
right. Because the putative implied term he is
expressing in 159 --
MR CAVENDER: It is a different one, my Lord. There are two
sets of implied terms. One is what he is dealing with
at 155. The 159 is a completely different term.
MR JUSTICE FRASER: I know, but it doesn't involve honesty.
MR CAVENDER: Exactly --
MR JUSTICE FRASER: And it doesn't involve what you told me
was the ratio, I think at page 16 of today's transcript
at line 16 {Day15/17:22}, that the implication of
anything based on Yam Seng of good faith has to have
knowing or honesty in it. 159 to 164 doesn't have
honesty in it at all.
MR CAVENDER: It doesn't, my Lord. But there was a special
case, I think I said in opening -- let's see what he
says. This is different term entirely.
MR JUSTICE FRASER: I know.
MR CAVENDER: So what I have said so far in relation to 156,
in relation to those two terms is correct. They are
different and separate and distinct from the implied
term he is dealing with at 159. Completely different.
160 says {A1.1/43/36}:
"In ordinary circumstances I would see no
justification for implying such a term. The reasonable
commercial expectation would be that ITC was free to
sell its products to others on such terms as it chose
unless it had expressly agreed otherwise with Yam Seng.
Three particular contextual features of this case,
however, lead me to conclude that there was in fact such
an implied term of the agreement."
Then he goes through "it is skeletal", 162:
"... significant that ... duty free retail price for
each product. Yam Seng was thus constrained by the
agreement from selling or authorising the sale ..."
And then at 163 and 164:
"The third and in my view decisive contextual
feature is that, as was common ground, the background to
the agreement included an industry assumption that
retail prices in domestic markets will be higher than
the corresponding duty-free retail prices at airports or
on board aeroplanes. The parties would reasonably have
understood and expected that their obligations would
reflect this assumption without needing to spell this
out.
"164. In my view these matters, taken together,
lead to the necessary implication that ITC would not
authorise the sale of any product in the domestic market
of any territory covered by the agreement at a lower
retail price than the duty-free retail price for the
product which had been specified in the agreement with
Yam Seng."
That is a distinct and different implied term,
completely, from that being considered at 155.
MR JUSTICE FRASER: But that is the term that he concludes
the duty or the function of the relational contract
imposes on these parties albeit that was not something
which was expressly included within the agreement.
MR CAVENDER: My Lord, 159 in my submission is classic
Marks & Spencer.
MR JUSTICE FRASER: You say he would have got to the
conclusion at 164 with Marks & Spencer.
MR CAVENDER: Indeed.
MR JUSTICE FRASER: All right.
MR CAVENDER: And 155 is the good faith term, that is good
faith, and he is saying "By the way, also I normally
I wouldn't imply the term at 159", and he says as much,
in ordinary circumstances, but then he explains why it
was necessary in this case to do so. You don't see any
hint of him relying on his good faith speech and
reasoning in that. This is free-standing, bog-standard
implied term.
My Lord, that is Yam Seng. In my submission, people
rely on it for -- in a much more broad sense than the
words of the decision and the ratio of the decision
permit.
If we then go to Al Nehyan, which is the opening
authorities in the same bundle at tab 8. {A1.1/72/1}
Of course this is a rather different case. You
might have called it back in the day a quasi-partnership
type thing, and the judge here talks about it
potentially being a JV if you want to call it that. But
there of course was no written agreement here. It was
a classic example of two friends, one of whom was richer
than the other and using his money to try and assist in
the creation of this travel business.
If we go to 140 to make that good. {A1.1/72/37}
MR JUSTICE FRASER: The nature of the relationship.
MR CAVENDER: Exactly.
"Mr Kent’s pleaded case is that, from 2008 onwards,
he and Sheikh Tahnoon were in a partnership together, or
alternatively in another form of joint venture in which
they owed each other fiduciary duties."
And he set out the case there, says there is no
fiduciary duties owed.
142 {A1.1/72/38} is worth dealing with in passing.
Two points to note here dealing with the background to
the relationship:
"First, what the parties have contractually agreed
may determine whether their relationship is o f a
fiduciary nature – for example, whether they have
entered into a partnership or whether one has agreed to
act as agent for the other. Second, where the parties
are in a fiduciary relationship the scope and content of
the fiduciary duties owed by one to the other will be
shaped and may be circumscribed by the terms of the
contract between them."
MR JUSTICE FRASER: Here you rely I think on -- they might
be two sides of the same coin or they might be different
aspects of it, but you say the SPMs are agents.
MR CAVENDER: Indeed.
MR JUSTICE FRASER: And they are fiduciaries.
MR CAVENDER: Indeed.
MR JUSTICE FRASER: But their fiduciary is the fiduciary
status only as a function of them being agent, or is it
also as a function of the fact they are dealing with
money et cetera, et cetera?
MR CAVENDER: No, it's a function of them dealing with money
as agent. They have a fiduciary duty to account and
faithfully serve their principal in that regard.
The important point here, my Lord, and why he is
saying this, is because that fills the space. When you
are saying "I am going to impose some other relationship
in here", namely, this relational contract relationship,
that is a heavy hint, in my submission, that where you
have a pre-existing relationship of agent and fiduciary
relationship then that is not going to be easy. He
doesn't say it expressly but it is implicit, in my
submission, in the way he is setting this out.
He then goes on to dealing with joint ventures at
153 {A1.1/72/41} and he cites the case of Ross River at
153. That was a joint venture case where there was
a written agreement --
MR JUSTICE FRASER: In a joint venture I think --
MR CAVENDER: Indeed.
MR JUSTICE FRASER: -- there are often fiduciary duties owed
in both directions.
MR CAVENDER: Quite.
MR JUSTICE FRASER: You are not -- you don't say that you
owed fiduciary duties to the subpostmasters.
MR CAVENDER: No.
MR JUSTICE FRASER: So this is a unilateral fiduciary
relationship.
MR CAVENDER: What, where we are? Yes, in this case,
my Lord, yes.
MR JUSTICE FRASER: Yes, the instant one.
MR CAVENDER: Also in Ross River as it happens it was the
same. But the reason I take you to it is simply what
the judge is going through and, as your Lordship knows,
joint ventures may or may not have fiduciary
relationships in them, either express or implication.
But everyone knows what a joint venture is potentially.
It's similar to a relational contract in the fact that
there are certain ingredients of it that lead you to
believe it falls within that recognised status of
contract. What terms are implied into it or not depend
on the terms of that contract and all the circumstances,
and Ross River shows you that in the JV context.
Then go to 166, please {A1.1/72/45}. That is
the conclusion here the judge reaches that for the
reason he sets up at 165 and before:
"... the relationship between Mr Kent and Sheikh
Tahnoon in the present case did not give rise to any
legitimate expectation on the part of Mr Kent that
Sheikh Tahnoon would put aside his own self- interest
and consider only what was in the best interests of the
companies or of Mr Kent in making decisions about
whether to increase or liquidate his investment.
Accordingly, while I accept that Mr Kent and Sheikh
Tahnoon can be described as participants in a joint
venture, I think it clear that Sheikh Tahnoon did not
owe any fiduciary duties to Mr Kent."
So that is the context. He goes through all that,
he goes through the fact you can have a relationship of
agency and other things. He then goes through you can
have a joint venture with the implied term of good
faith, but there is none of that here. So he is saying,
well, what can you have? That in my submission is
a strong indication. If you have agency relationship
with fiduciary duties that he mentions before then you
have dealt with the space. You can't then impose some
lesser form of relationship upon that.
So let's see what he says about the duty of good
faith:
"It does not follow from the conclusion that he did
not owe any fiduciary duties to Mr Kent that the
Sheikh’s entitlement to pursue his own self- interest
was untrammelled."
And then he goes to Yam Seng.
MR JUSTICE FRASER: Which paragraph are we in?
MR CAVENDER: 167, my Lord. He is saying you can't treat
all other contracts as if they are alike:
"In particular, I drew attention to a category of
contract in which the parties are committed to
collaborating with each other, typically on a long term
basis, in ways which respect the spirit and objectives
of their venture but which they have not tried to
specify, and which it may be impossible to specify ..."
Pausing there. Post Office here has done, it has
got a full professional contract. It has within that
a whole myriad of express terms including as to
accounting. It does have within that the express
appointment of an agent and a fiduciary. So we are
a million miles from the kind of territory the judge has
in mind here which is in this case no contract at all,
in Yam Seng a homemade contract of I think of eight
terms. Very different territory. And what he is saying
is notwithstanding that, the court can say this is a
relational contract, and then look at it in that light
to see what kind of terms may be appropriate, depending
on the facts and the terms of any contract there are, to
see what it is going to do. But you will notice he is
talking about a long-term contract, a long-term
situation.
And then in 170 {A1.1/72/46} he deals a couple of
cases post-Yam Seng. In fact you will see from our
written closing there has been a whole range of cases
that haven't followed, or his more discursive parts of
his judgment have not fallen on fertile ground at all in
terms of the wider -- the wider way in which the
discursive part of the judgment goes.
What Lord Justice Leggatt, as he then was by this
stage, recalls -- I will go to Globe Motors in a moment
in 170:
"Beatson LJ in the Court of Appeal endorsed the view
that, in certain categories of long-term contract of the
kind mentioned in the Yam Seng case, courts may be more
willing to imply a duty of good faith - which he
characterised essentially as a duty to cooperate."
That is quite interesting because there is obviously
confusion there as to quite what Lord Justice Leggatt is
talking about and what he is saying Lord Justice Beatson
is talking about in Globe. We will go to that. But you
can see the merging of these two ideas.
In 173 {A1.1/72/47} what the judge does is identify,
173 and 174, the key paragraphs where the judge
identifies lacuna in this situation. So he sets out:
"I have held that Sheikh Tahnoon did not agree to
provide funding on an open-ended basis and did not owe
any fiduciary duties to Mr Kent. But I think it clear
that the nature of their relationship was one in which
they naturally and legitimately expected of each other
greater candour and cooperation and greater regard for
each other's interests than ordinary commercial parties
dealing with each other at arm’s length."
So the judge has identified a gap, and now he is
working to fill it, but there must be a gap.
MR JUSTICE FRASER: Where were you just reading from? The
middle of 173?
MR CAVENDER: The top four or five lines, my Lord.
MR JUSTICE FRASER: Yes.
MR CAVENDER: He then goes in the middle about
the collaboration based on personal friendship, greater
trust than is inherent in ordinary contractual bargain.
He then says at the bottom:
"The pursuit of the venture therefore required
a high degree of co-operation between two participants."
Then he says at 174, as a result of all that, that
this is an instance of a classic relational contract:
"In my view, the implication of a duty of good faith
is essential to give effect to the parties' reasonable
expectations ..."
And he says complying with the Marks & Spencer test.
So that is really -- that is the ratio, essentially.
The last bit of 173 is important:
"They did not attempt to formalise the basis of
their co-operation in any written contract ..."
Unlike the present case.
MR JUSTICE FRASER: I don't think that is particularly
important because Yam Seng has shown that the presence
of a written contract or the -- this case shows the
absence of a written contract. They are factual aspects
you take into account but they are not essential one way
or the other. They are not determinative.
MR CAVENDER: Not determinative, my Lord, no. But it is
relevant that in this particular case he outlines, if
you like, 173, why he is willing to do it. One of the
reasons is there is no written contract, firstly, and no
written contract which formalises the basis of the
co-operation. In our case we have a written contract
which contains the basis of co-operation, namely, the
express terms and agency.
MR JUSTICE FRASER: I understand that. The first two
sentences of paragraph 174 show that at least so far as
this judgment is concerned, this judge is treating
a relational contract as being one that leads to
an implication of a duty of good faith.
MR CAVENDER: He certainly -- he doesn't break it down. He
jumps, you are quite right --
MR JUSTICE FRASER: I wouldn't say he jumps. He is using
them as interchangeable, you are saying one is a subset
of the other. Because you say you can have a relational
contract that doesn't have a duty of good faith.
MR CAVENDER: Correct.
MR JUSTICE FRASER: So that is a subset of being relational.
MR CAVENDER: And I think in the bit of Yam Seng I showed
you, about it depends on the contract and all the rest
of it, that Mr Justice Leggatt, as he then was,
anticipates that too. But you are quite right, my Lord,
here he uses the term in this judgment as if relational
contract means his implied term goes in.
MR JUSTICE FRASER: And if, because obviously that is
a point for me to decide, if the term "relational
contract" means a duty of good faith is imported, you
say this isn't a relational contract. In fact you say
it is not a relational contract anyway, regardless of
what that term means.
MR CAVENDER: I do in fact, yes.
MR JUSTICE FRASER: Yes. Understood.
MR CAVENDER: But your Lordship is quite right, here he
doesn't break it down in that way. But that is not to
say it is necessarily right that he didn't --
MR JUSTICE FRASER: It is only persuasive anyway because it
is first instance. It is highly persuasive but it is
first instance.
MR CAVENDER: The second point here that I need to draw to
your attention where I say the judge went wrong is
the -- because the first part of 174 is fine, he implies
it on -- as a question of fact. He then goes on, when
I would reach the same conclusion, by applying the test
for the implication of a term in law.
MR JUSTICE FRASER: Yes.
MR CAVENDER: "... on the basis that the nature of contract
as a relational contract implicitly requires treating it
as involving an obligation of good faith."
In my submission he goes wrong there.
MR JUSTICE FRASER: He goes wrong.
MR CAVENDER: Yes, he goes too far. I think it is obiter
but he goes too far. Because as is clear if you go to
Yam Seng itself, back to that, at paragraph 131
{A1.1/43/30}. This is the passage I took you to
earlier. It is very clear in Yam Seng he is not
implying this term by law, he is implying it in fact.
But in Al Nehyan he says he also would get to the same
result by applying it in law.
As I said earlier on today, if you apply a term in
law you imply it whatever the terms of the contract. It
goes in as of right. It doesn't matter what the terms
of the employment contract are, it goes in. So on that
basis, and sticking with this point, we will go to Globe
again in a moment, if we go to Globe Motors and what
Lord Justice Beatson says.
MR JUSTICE FRASER: So are we going to Globe now?
MR CAVENDER: If we can, my Lord, yes, behind tab 7
{A1.1/62/1}.
MR JUSTICE FRASER: Yes.
MR CAVENDER: It's really paragraph 65 {A1.1/62/19},
starting with 65, talking about long-term contracts,
et cetera. 64 getting into 65. And he says at the end:
"There are no special rules of interpretation
applicable to long-term contracts of the type that are
sometimes called relational contracts. But in an
appropriate case ..."
The court will do so, effectively.
And then if we go to 67 {A1.1/62/20}:
"One manifestation of a flexible approach referred
to by Professor McKendrick and Lord Steyn is that in
certain categories of long-term contract ..."
I emphasise those words.
"... the court may be more willing ..."
"May be", not will, "may be more willing".
" ... to imply a duty to co-operate, or, in the
language used by Leggatt J in Yam Seng, a duty of good
faith."
So not in every case, they "may be more willing".
That in my submission supports the approach I urge the
court to take:
"Leggatt J had in mind contracts between those whose
relationship is characterised as a fiduciary one and
those involving a longer-term relationship between
parties who make a substantial commitment. The contracts
in question involved a high degree of communication,
co-operation and predictable performance based on mutual
trust and confidence ..."
And then opposite F he gave as examples franchise
agreements and long-term distribution agreements, so he
gave examples, he's talking about here, of relational
contracts. And Lord Justice Beatson says this:
"Even in the case of such agreements, however, the
position will depend on the terms of the particular
contract."
So it depends. Not that they go in as of right. He
uses the word "may" in the third line of 67, and here he
says it depends on the terms of the contract.
Then he deals with Carewatch --
MR JUSTICE FRASER: Are you talking about 68 now?
MR CAVENDER: Yes. And at the end of 68 {A1.1/62/20}:
"The second is that, as seen from the Carewatch Care
Services case, an implication of a duty of good faith
will only be possible where the language of the contract
viewed against its context, permits it."
So again it depends on the contract whether or not
a relational contract, otherwise so-called, can have
such a term implied.
"It is thus not a reflection of a special rule of
interpretation for this category of contract."
MR JUSTICE FRASER: He makes that -- that is the second of
his observations flowing on from the first sentence of
paragraph 68 which explains why in this judgment the
court is not considering the potential for implied
duties of good faith and English law because in that
case the question is one of interpretation or
construction, and not one of implication, and they are
two different approaches.
MR CAVENDER: My Lord, he says that, but then goes on and
are does so a bit. He is saying this isn't the time to
write ten pages on it. But his comments are obviously
addressed to that question.
MR JUSTICE FRASER: His comments are then addressed on the
fact that this is a construing of the terms or
interpretation case, not an implication case, isn't it?
MR CAVENDER: It is obiter, certainly, but he is dealing
with the same subject matter --
MR JUSTICE FRASER: Obviously he is dealing with the same --
what I am saying is the sentence you have just read out,
which starts at the bottom of page 620, is the second of
his two observations against h:
"It suffices to make two observations ..."
Which follow on from him saying in this case we, the
court, are dealing with interpretation or construction
of terms, we are not dealing with implication, and
implication is done differently because of what
Lord Neuberger has said, and then he quotes I think
Lord Bingham in Philips Electronique.
MR CAVENDER: My Lord, yes. But when he says --
MR JUSTICE FRASER: It is a more ambitious undertaking to
get into implying contract terms rather than construing
the terms themselves.
MR CAVENDER: My Lord, yes. But when you read the last line
of 68, when he is talking about "this category of
contract" he is talking about relational contract.
MR JUSTICE FRASER: Obviously.
MR CAVENDER: And the important point is this, my Lord, in
connection with whether Lord Justice Leggatt has gone
slightly too far and is obiter in Al Nehyan is that if
you imply it as a matter of law, it doesn't matter what
the terms of the contract say. So if Lord Justice
Beatson is saying, as in my submission he is clearly
here, and indeed as Mr Justice Leggatt, as he was in
Yam Seng, says, it depends on the terms of the contract,
then that is not fertile ground to imply a term as
a matter of law.
MR JUSTICE FRASER: I see.
MR CAVENDER: That is a very strong indication that ... And
the other thing, my Lord, of course, is that to do so
you, would need to be very clear what qualifies as
a relational contract and what term you are actually
going to apply, ie you have to be further down the road
than we are at the moment with what a relational
contract really is and what the term of good faith
really is.
Yam Seng tells us that the content of that duty will
depend and differ -- the contract in Yam Seng in the
term that I focused on of course there was a knowledge
and knowing dishonesty requirement, in other cases it
may be framed in a different way, but it is very
difficult in those circumstances to say, well --
MR JUSTICE FRASER: Mr Cavender, you ignored the term that
he found in Yam Seng.
MR CAVENDER: My Lord, I didn't. What I concentrated on is
the one that in my submission is and remains the
relevant one for the purposes of this argument. He then
implied a term on a standard necessary basis based on
pricing. That was not part of the good faith analysis.
MR JUSTICE FRASER: I have your submissions on that.
MR CAVENDER: My Lord, yes, you do.
MR JUSTICE FRASER: It is clear it is done on a case by
case -- it is clear that the scope of the duty of good
faith is fact-specific.
MR CAVENDER: And whether to imply it as well is
fact-specific. Whether you are able to do so, as
Lord Justice Beatson says, depends on the terms of the
contract. And as Lord Justice Leggatt says in
Al Nehyan, if you have an existing relationship -- or he
says it implicitly, I say, in the earlier part of that
judgment. If you have fiduciary duties or agency or
partnership or other relationships, then that is an
indication -- there is no space, there is no lacuna to
put in some other type of relationship the parties
hadn't contracted for.
In relation to this point on implication in law, if
I can take you to Sir Kim Lewison's book Interpretation
of Contracts. You will find that in volume 2, tab 50,
the sixth edition.
MR JUSTICE FRASER: Have we finished with Globe?
MR CAVENDER: I was going to take you to that separately.
MR JUSTICE FRASER: Right. So we're going to Lewison.
Which tab?
MR CAVENDER: Volume 2, my Lord, tab 50. If you go to
page 303 of the extract you will see at the bottom of
the page a citation, Societe Generale. Lady Hale
effectively in Geys, we have seen that, reflected what
Dyson, Lord Justice, had said in an earlier case.
MR JUSTICE FRASER: So where are we on 303?
MR CAVENDER: At the bottom, Societe Generale. My learned
friend showed you that, if you remember, the dichotomy
that Lady Hale identified. So we are dealing here with
implications of fact or law. Then if we go over to 305,
the second main paragraph, where Sir Kim Lewison writing
extrajudicially says:
"It must be recognised, however, that the
relationship giving rise to the implication of a term as
an incident of that relationship must be defined with
care."
MR JUSTICE FRASER: "Sometimes the description is a general
one."
MR CAVENDER: Exactly. So if you have an employer/employee
then of course that is well-known, and so on.
Then at the bottom of this page:
"There has been some debate whether the approach to
standardised implied terms ..."
That is shorthand for terms implied by law.
MR JUSTICE FRASER: Where are we?
MR CAVENDER: At the bottom of 305:
"There has been some debate ... that is in terms
implied in law."
And then he refers to Yam Seng.
MR JUSTICE FRASER: "... enables the court ..."
Yes.
MR CAVENDER: Then at the bottom of that page:
"However, in TSG ...(Reading to the words)...
commercial contracts."
MR JUSTICE FRASER: Yam Seng says it is not all commercial
contracts.
MR CAVENDER: Exactly.
At footnote 86 the author agrees:
"Leggatt J's general analysis has not been
enthusiastically received. Look at Compass Group UK,
Mid Essex, Carewatch ..."
And a number of other cases.
Then over the page the author says at the top of
307:
"It is not considered that at least English law
recognises a general indication of the term of good
faith."
So my Lord, the important point here I was getting
at was the point as to whether the judge was right,
Lord Justice Leggatt in Al Nehyan was right obiter to
say although I have implied it in fact, I would have
done it in law as well. In my submission he went too
far in that respect, not that it makes any difference to
the result of that.
Supporting that point as well, can I take you to
Monde Petroleum.
MR JUSTICE FRASER: Shall I put Lewison away?
MR CAVENDER: Yes, thank you.
Volume 2, tab 41, please. {A1.1/69/1} The decision
of Richard Salter QC sitting as a deputy. I dare say he
may have been the same Mr Salter.
MR JUSTICE FRASER: I think he is. Mr Draper says he isn't.
I'm not sure about that, Mr Draper.
MR CAVENDER: It may not matter, my Lord.
MR JUSTICE FRASER: It almost certainly doesn't matter.
MR CAVENDER: For the points I wanted to --
MR JUSTICE FRASER: This Mr Salter is sitting as a deputy in
Monde Petroleum.
MR CAVENDER: Indeed. It is really at 247 and following --
MR JUSTICE FRASER: I think Mr Draper is right, it is
in fact a different Mr Salter, I hope.
MR CAVENDER: As your Lordship says, it doesn't really
matter. It was an aside.
MR JUSTICE FRASER: It was to wake everyone up, except you
and I because obviously we are awake anyway.
MR CAVENDER: So 247 and following {A1.1/69/70}, "Analysis".
249:
"There is no general doctrine of ‘good faith’ in
English contract law. A duty of good faith is implied
by law as an incident of certain categories of contract
(for example, contracts of employment and contracts
between partners or others whose relationship is
characterised as a fiduciary one)."
MR JUSTICE FRASER: Where are we looking, sorry?
MR CAVENDER: Paragraph 249:
"However, in all other categories of contract --
including the CSA -- such a duty will only be implied
where the contract would lack commercial or practical
coherence without it and where all the other
requirements for implication are met. By reference to
Baroness Hale’s classification of implied terms in Geys,
such a term falls into the first category, not the
second."
MR JUSTICE FRASER: What is the first category there?
MR CAVENDER: Implied by fact. I will take you to Geys --
MR JUSTICE FRASER: No, I thought he was talking about
an identification of the categories in this paragraph.
He is talking about her categories.
MR CAVENDER: Indeed. Do you remember, the first was fact,
the second was law. I will take you to it.
Then the judge deals with Yam Seng. And it is
really the passage at the top of the following page
{A1.1/69/71}:
"... and in which the implication of the term
requiring the parties to perform their obligations of
good faith might therefore sometimes be justified.
However, it is clear the mere fact a contract is a
long-term or relational one is not of itself sufficient
to justify such an implication. As Beatson LJ recently
noted in Globe '... an implication of a duty of good
faith will only be possible where the language of the
contract viewed against the context permits it. It is
thus not a reflection of the special rule of
interpretation for this category of contract ...'"
In my submission, paragraphs 249 and 250 accurately
reflect the law as at the present moment and I recommend
them to you --
MR JUSTICE FRASER: What do, sorry?
MR CAVENDER: 249 and 250 represent a summary --
MR JUSTICE FRASER: I think it is a bit more complicated
than those two paragraphs.
MR CAVENDER: It is, but if one wanted a summary then in my
submission that contains the basic elements of it.
MR JUSTICE FRASER: There is appellate authority that this
is a contentious area.
MR CAVENDER: Can I take you to Geys?
MR JUSTICE FRASER: I think between you, I started keeping
a tally this week of how many times each of you had told
me you were in fact involved in a case and when I got to
double figures I decided I would stop keeping count.
But just remind me how one pronounces it.
MR CAVENDER: "Gees", my Lord. My learned friend was saying
"Gaze". He's a Belgian national. {A1.1/42/1}
The important passage of course is where -- and
of course you understand the context of this. There is
a dispute about a merchant banker and a bonus and being
terminated, and terminated in quite a vicious way
because his bonus is too big and they want to terminate
before year-end. He's given three months' notice: out
the door, pack your stuff. And that is relevant to
later submissions about termination. My learned friend
says there should be some cog on the right. This is
almost similar to an employment contract, he says, the
Post Office situation. Of course I don't accept that.
But even if it was, Geys is a good example where three
months' notice is given for good bad or other reason,
and the Supreme Court of course had nothing --
MR JUSTICE FRASER: Just remind me where we were looking at
this. I have currently got four volumes on the go.
MR CAVENDER: My Lord, you can put them all away apart from
this one.
MR JUSTICE FRASER: Which is "this one"?
MR CAVENDER: Which is behind tab 31 in Geys.
MR JUSTICE FRASER: This is what we were calling V1,
I think.
MR CAVENDER: The relevant paragraph you were shown was 55
by my learned friend. {A1.1/42/25} Having dealt with
the facts of the case and Mr Geys and the two
submissions, what I said at 51 and what Mr Jeans said at
53, the judge said:
"In this connection, it is important to distinguish
between two different kinds of implied terms. First,
there are those terms which are implied into a
particular contract because, on its proper construction,
the parties must have intended to include them: see
Attorney General of Belize v Belize ..."
This of course was before Marks & Spencer.
"Such terms are only implied where it is necessary
to give business efficacy to the particular contract in
question."
So those terms are implied in fact.
"Second, there are those terms which are implied
into a class of contractual relationship, such as that
between landlord and tenant or between employer and
employee, where the parties may have left a good deal
unsaid, but the courts have implied the term as a
necessary incident of the relationship ..."
So that is where the dichotomy at Supreme Court
level has been confirmed. My learned friend said
really, well, that is Supreme Court authority. Well, it
is of course for the dichotomy, but not for the fact as
to whether in a relational contract you have an implied
term of fact or of law. But what it does do is identify
there are two categories.
MR JUSTICE FRASER: Yes, and in Al Nehyan the judge there
said he would reach the same route in both categories
you and you say he is wrong on the second one.
MR CAVENDER: Exactly. He went too far, it is obiter and he
didn't need to. And it is contrary to what he said in
Yam Seng, it is contrary to what Lord Justice Beatson
says in Globe, it is contrary to what Sir Kim Lewison
says in Interpretation of Contracts, and it is contrary
to principle in a situation where again Mr Justice
Leggatt says in Yam Seng it depends on the terms of the
contract.
The whole point of a term implied in law, what Lady
Hale says are standardised terms, is they are
standardised. It doesn't matter what the contract says,
they are in.
So then in terms of what Court of Appeal authority
there is, could we go to Mid Essex Hospital, which was
the case cited by Sir Kim Lewison in his book.
Volume 1, tab 33, please. {A1.1/44/1} I think if we go
straight to paragraph 82 {A1.1/44/21} you will see there
the citation of the Geys decision I have just taken you
to.
MR JUSTICE FRASER: What does "intrinsic" mean? Fact or
law?
MR CAVENDER: I'm not sure the way Lord Justice Jackson is
using that term here.
MR JUSTICE FRASER: I am not either but I can work it out.
Because that could potentially apply to either, but then
the second sentence makes it clear that he is dealing
with commercial coherence.
MR CAVENDER: It is clear by 82, isn't it, the last
sentence:
"By reference to Baroness Hale's classification ..."
MR JUSTICE FRASER: Yes. Am I to interpret the word
"intrinsic" as meaning the first category?
MR CAVENDER: Indeed, yes.
MR JUSTICE FRASER: You think so.
MR CAVENDER: That is what the whole paragraph --
MR JUSTICE FRASER: No, I mean generally. I don't mean in
the sense of that paragraph, I mean generally.
"Intrinsic" could apply to either --
MR CAVENDER: It is an unhelpful word, I think.
MR JUSTICE FRASER: All right. So that is fact. Her first
category is fact, isn't it?
MR CAVENDER: Indeed. This was a case of course where there
was an express term of good faith, if you recall, and
what the Court of Appeal says in passing is in 105 about
Yam Seng {A1.1/44/24}:
"... I start by reminding myself that there is no
general doctrine of 'good faith' in English contract
law, although a duty of good faith is implied by law as
an incident of certain categories of contract ..."
He seems to misunderstand I think Yam Seng because
he says {A1.1/44/25}:
"If the parties wish to impose such a duty they must
do so expressly."
MR JUSTICE FRASER: I think he is talking about all
contracts. And even Mr Justice Leggatt didn't say it
applied to all, he said it just applied to relational.
MR CAVENDER: Indeed. And in passing at 112 {A1.1/44/26} it
is quite interesting what meaning he gives to an express
term of good faith. He says:
"The parties have worked together honestly
endeavouring to achieve the two stated purposes."
That is what he says good faith means. So there is
that.
If we go then to MSC Mediterranean, in the same
volume, tab 21. Another Court of Appeal authority
bearing on this issue. {A1.1/63/1}
This is the Court of Appeal's decision appealing
against the decision of Mr Justice Leggatt at first
instance.
MR JUSTICE FRASER: Is this V1/21?
MR CAVENDER: It is indeed, my Lord. It was about delivery
and bills of lading and particularly demurrage and a
payment for containers. One sees that from the
headnote. One of the grounds of repudiation Mr Justice
Leggatt had found below was a breach of duty of some
kind of good faith, so that is how it comes up in this
case. You see that at paragraph 29 {A1.1/63/14} where
he says:
"The judge rightly recognised [this is Lord Justice
Moore-Bick] that a repudiatory breach of contract does
not automatically discharge the parties from further
performance ..."
And he refers to White & Carter and referring to
what the judge, he referred to what he described as:
"An increasing recognition in common law world of
the need for good faith and contractual dealings, he
reached the following conclusion ..."
And it is set out there. So that is the context of
the debate.
You can see reference at 36 to 37 {A1.1/63/16} about
the repudiation argument, which Geys also dealt with,
and you see that at 36 to 37 so that is that context.
Then we come to good faith itself at 45
{A1.1/63/19}:
"The judge drew support for his conclusion from what
he described as an increasing recognition in the common
law world of the need for good faith in contractual
dealings ... a significant step in the development of
our law of contract with potentially far-reaching
consequences and I do not think it is necessary or
desirable to resort to it in order to decide the outcome
of the present case. It is interesting to note that in
the case to which the judge referred as providing
support for his view, Bhasin v Hrynew, the Supreme Court
of Canada recognised that in Mid Essex Hospital Services
NHS Trust v Compass Group this court had recently
reiterated that English law does not recognise any
general duty of good faith in matters of contract."
And he refers then to Interfoto and "piecemeal
solutions". Then the judge says:
"In my view the better course is for the law to
develop along established lines rather than to encourage
judges to look for what the judge in this case called
some ‘general organising principle’ drawn from cases of
disparate kinds. For example, I do not think that
decisions on the exercise of options under contracts of
different kinds, on which he also relied, shed any real
light on the kind of problem that arises in this case.
There is in my view a real danger that if a general
principle of good faith were established it would be
invoked as often to undermine as to support the terms in
which the parties have reached agreement. The danger is
not dissimilar to that posed by too liberal an approach
to construction ..."
So that is fairly clear, a clear warning against the
more general debate in Yam Seng that there is some
organising principle. That is not to say you can't say,
in Globe of course, the fact of a relational contract is
now a thing. The question is what kind of thing and
that is still developing. And simply because one thinks
in an organising principle that it is a relational
contract doesn't -- misusing one of my learned friend's
favourite subjects, all roads lead to Rome. They may or
may not. You have to decide where the road leads and
what map you have got. And that warning from Lord
Justice Moore-Bick, in my submission, is timely.
Lord Justice Tomlinson and Mr Justice Keehan agree,
see paragraphs 52 and 65 respectively.
So that is Court of Appeal authority saying --
disapproving, effectively, I think one can say, of the
more general aspects of Yam Seng. I am not saying
Yam Seng is wrong, it was decided on its facts perfectly
properly on the basis of Marks & Spencer and necessary
implication.
And that applies, my Lord, that submission, both to
the implied terms I was dealing with in ... the first
one I dealt with as well as the one your Lordship then
took me to.
If one goes back to Yam Seng to make sure
your Lordship has the point, it applies both to the term
at 155 and 156 as it does to the term starting at 159.
{A1.1/43/1}
And Globe Motors, I don't think I need to take you
to that again as I took you to the main parts of that.
So we have three Court of Appeal decisions:
Mid Essex, Lord Justice Jackson; MSC, Lord Justice
Moore-Bick; and Globe, Lord Justice Beatson, who either
are disapproving of, or at the very least not approving
of, the more general approach of implying good faith
into a species of contract as a category. In my
submission when you stand back, the proper approach is
that set out by Mr Salter in Monde Petroleum, and that
proper approach is to look through the prism of
Marks & Spencer. That post-dates Yam Seng, and as
Lord Justice Beatson says, is the ultimate arbiter in
Globe. That is the Supreme Court authority.
And just because the implied term is coming in
through the relational contract route doesn't make it
any less of an implied term. It doesn't make
Marks & Spencer any less applicable. The fact that it
is potentially or may be a relational contract just
emphasises to the court that there may be features of
such contracts where an implied term might be able to be
implied depending on the circumstance, depending on the
terms of the contract, but not necessarily so. In the
same way as a JV, you can say there is potentially --
I call it a joint venture, and therefore I might look to
see whether on the express terms and circumstances of
that it is possible to imply a term into that, like good
faith, see Ross River.
In terms of application of that principle, if we can
go to Carewatch which is in the opening submissions
bundle at tab 3, a decision of Mr Justice Henderson as
he then was {A1.1/53/1}.
The key part of the judgment for our purposes is
paragraph 151 and following. The thing about this case
is it is the nearest you get to the kind of job that is
being done in our case, namely, to rewrite the contract
by a whole list of implied terms, and you will see those
set out at paragraph 101. {A1.1/53/31}
Here the claimants are doing what my learned friend
is trying to do here which is to completely re-order the
relationship by importing a whole range of implied terms
and it is instructive to see what the court did.
Again this is another long-term contract. What the
judge does, having set out the implied terms, is he sets
out the arguments at 102 {A1.1/53/32}, Carewatch is
saying the alleged terms implied are far from clear,
multifaceted purpose, and not really implied terms at
all.
What then the judge does in 103 is he says
effectively there is force in both those points. He
then goes, 104, to Attorney General of Belize v Belize.
This was pre-M&S.
And then at 106 {A1.1/53/33} reference to Mr Justice
Dyson, as he then was, in Bedfordshire County Council:
"The court should be in any event be very slow to
imply into a contract a term, especially one couched in
rather general terms where the contract contains
numerous detailed express terms such as the contract in
this case."
In my submission, the same could be said in our
case.
Then 107 {A1.1/53/33} referring to His Honour
Judge Coulson QC, as he then was, in Jani-King:
"The term which it was sought to imply into the
franchise agreement in that case was that the franchisor
would not act so as to destroy or seriously damage the
relationship of trust and confidence ..."
The same as here is being done.
"'I am in no doubt that, as a matter of common
sense, and on the authorities, the relationship is much
closer to an ordinary commercial relationship, than one
between employer and employee.'
"I respectfully agree."
In this case we have a commercial relationship,
business-to-business, and to say it is more like
something or something else isn't really the point. To
say there are certain elements of it which you could say
have an employment feel to them doesn't really get you
very far because you have to stand back and look at the
whole relationship, it is clearly business-to-business,
and we know from BCCI v Ali that it is only employment
contracts in which such an implied term of mutual trust
and confidence goes, not that or contracts like it.
That would be a huge step.
Then the judge over the page deals with Yam Seng at
paragraph 108 {A1.1/53/34}, so after:
"I respectfully agree."
108 refers to Mr Justice Norris in Hamsard where he
interprets Yam Seng and says effectively that he did not
read Yam Seng as authority for the proposition that in
commercial contracts:
"'... it may be taken to be the presumed intention
of the parties that there is a general obligation of
good faith. I readily accept that there will generally
be an implied term not to do anything to frustrate the
purpose of the contract.'"
That is obviously the Stirling v Maitland term.
"'But I do not accept that there is to be routinely
implied some positive obligation upon a contracting
party to subordinate its own commercial interests to
those of the other contracting party boots was not
obliged as a matter of good faith to order from Hamsard
goods that it did not want …'
"Again, I respectfully agree."
Mr Justice Henderson says.
109 really is the critical paragraph:
"In the light of these principles, the first point
to make about the Norwich agreement is that --"
MR JUSTICE FRASER: Where are you reading from?
MR CAVENDER: 109, my Lord:
"... dealing with all aspects of the franchised
business from its inception to termination. The
agreement is for a commercial relationship from which
both parties hoped to profit, and where both sides had
interests of their own to protect."
Pausing there. Exactly the same as our case.
Precisely so.
"I can find no clear lacuna in the detailed
provisions of the agreement which has to be filled if
the agreement is to work commercially, let alone by
terms framed in such wide and imprecise language as
those which are pleaded."
My Lord, again in my submission that reflects
properly the law and what I invite your Lordship to
apply in this case.
MR JUSTICE FRASER: The sentence in the middle:
"... commercial relationship from which both parties
hoped to profit and where both sides have interests of
their own to protect."
Which you say is exactly the same here.
MR CAVENDER: My Lord, yes.
MR JUSTICE FRASER: What the are interests of the
subpostmasters to protect?
MR CAVENDER: The footfall in their branch and the growing
of their business.
Paragraph 285 of our closing, please {A/8/106}.
What we do there is summarise the other first instance
decisions.
MR JUSTICE FRASER: 285, yes. Which I think you have gone
through.
MR CAVENDER: I think I have.
MR JUSTICE FRASER: Not Myres v Kestrel but that's not.
MR CAVENDER: No. And Greenclose v National at the top,
Mr Justice Andrews. Monde Petroleum I have been
through. We summarise really at 287 and following
{A/8/109} the three points that emerge from the
authorities:
"First, the categorisation of an agreement as
a relational contract does not, without more, result in
the implication of a term ..."
See Globe, Carewatch and Monde.
"Second, whether or not a term as to good faith may
be appropriate depends on the particular terms of the
contract and whether the language of the contract,
viewed against..."
MR JUSTICE FRASER: I don't think these are all the first
instance?
MR CAVENDER: No, it is not meant to be compendious,
I think.
"Third, a term as to good faith should only
ultimately be implied if it satisfies ...
Marks & Spencer ..."
The characteristics of what is truly to be seen as
a relational contract itself is open to debate. We say
at paragraph 300 and following {A/8/112} there are two
essential ingredients of a relational contract. One is
that it requires co-operation and collaboration rather
than being a mere and simple exchange, and second that
the agreement is long-term.
As to the first, of course these contracts did
require collaboration and co-operation, however here the
extent of that is not large. It is set out in very
detailed contractual provisions and manuals. So
although of course the contract did require
collaboration, it is not a simple exchange, it is a case
where that has in fact been provided for in huge detail.
And I think when Mr Justice Leggatt is saying it
requires co-operation and things of that kind, go to
Yam Seng and Al Nehyan, there is no contract in one of
them, and the other one has a homemade ten clause
agreement we have seen. So that is important to bear in
mind.
The second characteristic, this agreement is
long-term, is not present here. The question of whether
or not an agreement is relational, ie whether or not
terms are to be implied, is to be decided at the time of
contracting at the beginning of the relationship. At
the beginning of the relationship the parties and the
objective person know the terms of the contract and they
know the notice provisions in that contract.
MR JUSTICE FRASER: I am aware that you say the presence of
those notice provisions means it doesn't qualify on the
temporal requirement for relational contract.
MR CAVENDER: Indeed.
MR JUSTICE FRASER: But absent those notice provisions,
I don't think they are term contracts at all, are they?
MR CAVENDER: No, quite.
MR JUSTICE FRASER: There is no term, and you say you rely
on the short notice provisions to say that by definition
it can't be a long-term contract.
MR CAVENDER: Exactly. There is not an obligation -- it's
the point my Lord made in argument -- there is no
obligation to stick within the relationship formed by
the contract for a long-term, unlike virtually all the
other cases, and certainly the Court of Appeal case
your Lordship alighted on, the 25-year, the PFI one, it
is central to an understanding of why the
Court of Appeal said that at the end. It is quite
illuminating really. They say in a contract of that
length, with that degree of co-operation required, then
that may be relational, or it is relational.
MR JUSTICE FRASER: It says it is relational. But it also
says it is a very contentious area.
MR CAVENDER: My Lord, yes. I don't think they had argument
in that case on that --
MR JUSTICE FRASER: The reason for mentioning that to both
sides is I wasn't necessarily sure either of you knew
about it. It is Court of Appeal authority for saying
there is such a specie of contract and also it is very
contentious.
MR CAVENDER: Yes. And you can see I have taken you through
Court of Appeal authorities that have mentioned it.
MR JUSTICE FRASER: Four including that.
MR CAVENDER: Four including that, yes. But the important
point, my Lord, is your point, but no one has
articulated it, and it is this: the reason for this
being a thing, a requirement of a relational contract,
is because you are tied in, and if you are tied in and
you have to have this constant co-operation and
closeness and all the rest of it, and you can't get out
of it, then the court says, well, in that situation then
maybe we will come to your aid with a slightly different
approach to try and see whether we can imply a term if
it is necessary by reason of that fact. "That fact"
meaning you can't get out of it.
Let's assume a change because of Brexit or something
in relation to a contract. It completely changes the
nature of the contractual expectations. If it operates
badly on one party, they can give notice and say "I am
out because things have changed and I don't want to do
this any more. It doesn't work commercially". If you
are tied into a long-term contract and the other party
uses the term cynically to make it uncommercial for you,
then it is that kind of situation you can't leave, you
are in for a term and that is the engine of this
requirement, in my submission, as a relational contract.
And indeed if you recall in the Court of Appeal
cases you referred us to, the Court of Appeal said that,
that they would expect in a long-term contract --
MR JUSTICE FRASER: It is intended to run for 25 years, it
is said, but it is PFI contract, and PFI contracts
usually have very detailed provisions in terms of
notice, deductions for service, value points, et cetera.
Mid Essex is probably --
MR CAVENDER: My Lord, yes. On the longer term thing --
MR JUSTICE FRASER: I think Mid Essex is effectively
a long-term contract with notice provisions, isn't it?
I might be wrong.
MR CAVENDER: I don't think so.
MR JUSTICE FRASER: It is a four-year contract with
an option to extend for three years in Mid Essex.
MR CAVENDER: Exactly.
MR JUSTICE FRASER: But you are saying the reason for it or
the rationale is a contract of a particular duration
where a party doesn't have the ability to extract itself
in changing circumstances.
MR CAVENDER: Correct. And the long-term part of that
of course is the longer you are in a contract, the more
likely in the way of the world things change over time.
MR JUSTICE FRASER: Yes.
MR CAVENDER: No one has actually said this, but in my
submission it is implicit in what people have said.
MR JUSTICE FRASER: No one has said ...
MR CAVENDER: The rationale, no one has explained that
rationale in that way. Because there must be
a justification for it, otherwise you are just
identifying different features of a contract that
requires one to look carefully about implication of
a term.
We have set out at 304 the notice provisions in the
various cases that are referred to, including those
referred to by Mr Justice Leggatt, if you go 304(a)
through (f). {A/8/113}
MR JUSTICE FRASER: Yes. Understood. So is that -- have we
reached the end of the relational contract chapter of
today?
MR CAVENDER: My Lord, yes, subject to the point --
I don't know if you are at all interested in the point
about HIH. My learned friend tried to draw a line
between HIH and Mr Justice Bingham through to
Lord Bingham. I don't know if you know about HIH but it
is not really to the point, good faith. It's talking
about insurance contract and exclusion. I don't know if
you want me to take you to that.
MR JUSTICE FRASER: It is entirely up to you if you want to.
I know about it and I have read it, it is mentioned in
the submissions, but I'm not sure -- it is up to you how
you craft the time available.
MR CAVENDER: If you want to read it in 136 and following,
Yam Seng, where the court deals with the reality of it,
and compare that to what my learned friend says at
Day 12, page 40, line 1 {Day12/40:1} to page 41, line
15, where he seems to use it as a building block
somewhere to say that good faith in performance of
contracts has anything to do with HIH which is about the
interpretation of an exclusion, and whether the
exclusion excludes fraud or not. So the two are really
miles away.
My Lord. I think that is probably time for a break
if that is convenient.
MR JUSTICE FRASER: I just have one question on relational
contracts.
MR CAVENDER: My Lord, yes.
MR JUSTICE FRASER: It is obviously a developing field.
I drew both of your attentions to the Amey v Birmingham
City Council case simply because as part of reading for
this trial it crossed my radar.
In paragraph 92, it mentions what I believe to be
an Australian article, I'm not sure if either of you has
read it or if it will be of any assistance to you to
read it, but what I was going to suggest is that you
tell me whether you think I ought to read it, whether
you object to me reading it, or whether you think
I should read it but you would like the opportunity to
just maybe put in some written submissions and say there
are parts of it you want to draw my attention to or
parts of it I should ignore. It is mentioned in
a Court of Appeal authority.
MR CAVENDER: My Lord, obviously I wouldn't want you not to
read anything. Read anything you want to. I think
perhaps if we could reserve the right to put a note in
to identify certain passages.
MR JUSTICE FRASER: If you are going to put a note in,
I think I will give both sides the opportunity to do it,
you can have 14 days to do it, and keep it to two pages
of A4, if you would. It just didn't seem to me
necessarily fair to be planning to read it without
bringing it to your attention.
We will break until 11.45 am.
(11.37 am)
(A short break)
(11.47 am)
MR CAVENDER: My Lord, before I move on to the terms that
are sought to be implied under the Yam Seng umbrella,
could I take you back to Yam Seng to make one further
point based on your Lordship's observation. So we are
in the opening bundle, tab 2, and go to paragraph 155
again {A1.1/43/35} in light of what your Lordship put to
me and having read it again.
MR JUSTICE FRASER: Which paragraph? 155?
MR CAVENDER: Indeed, my Lord. 155 was the paragraph, the
implied term, a duty not to give false information that
was split into two, and the one your Lordship put to me
is at 157, the duty not to undercut duty-free prices.
Another way to look at the latter, a duty not to
undercut duty-free prices, is that this too has
knowledge elements based in it when you look carefully.
MR JUSTICE FRASER: There is no doubt it has knowledge
elements but it doesn't have honesty. That was the
point.
MR CAVENDER: True.
MR JUSTICE FRASER: The reason for my observation to you was
how I interpreted your submission about what the ratio
was of case.
MR CAVENDER: But it is knowingly, my Lord. It reflects if
you like what the learned judge says at the end of 156
about knowingly provide false information in relation to
the duty not to give false information test.
Let's see the way the judge describes it in relation
to a duty not to undercut duty-free prices. He says at
157:
"The second more specific terms ...(Reading to the
words)... than Yam Seng ... offer."
And then the judge at 158 outlines various
objections.
Then at 159:
"The highest the putative implied term could
therefore be put is an obligation not to approve ..."
Obviously "approve" contains knowledge.
MR JUSTICE FRASER: I agree. In fact the conclusion is at
164.
MR CAVENDER: Indeed. So it says authorise. So, my Lord,
that is another way of looking at this implied term.
MR JUSTICE FRASER: Yes, because the issue in that case was
not some sort of a warranty from ITC that nobody would,
it is that ITC themselves would not be involved in
a situation where the price that was available from
other people selling it could or would undercut the
price that their partner could sell it at, or not
partner but contracting party.
MR CAVENDER: My Lord, yes. And the first stage is they
know about it, so knowingly --
MR JUSTICE FRASER: I understand. I don't think it is any
part of that case that they were doing it unaware that
they were doing it.
MR CAVENDER: And it is that knowing which is -- or
dishonesty in the first one which is the engine of the
principle. So when we go to the implied terms now as we
will, my learned friend's implied terms, we will
contrast whether and to what extent any of his implied
terms have that quality about them or whether they go
much further and are much more what Mr Justice Leggatt
said, went too far when he was dealing with 155 and 156
where he says:
"I see no basis for implying a more onerous
obligation ..."
MR JUSTICE FRASER: A different way of making the same point
is could a party breach a duty to act in good faith
without knowing it was doing so?
MR CAVENDER: Quite, indeed. And the answer is no based on
that case, my Lord.
MR JUSTICE FRASER: So are we putting the authorities away?
MR CAVENDER: We are, my Lord. I am going to go to the
implied terms which is in bundle B1 at B3, particularly
at {B3/1/35}. My Lord probably has it in hard copy.
So as we have seen at 63, my learned friend, what he
does is plead all sorts of versions of the duty of good
faithful. Pausing there, by way of reflection on
a different point, is that if you are going to imply
something by law it has to be clear, and so if one --
how do you know what you are going to imply if there is
a smorgasbord of different duties which are in this area
being used? The answer is you can't.
But at 63 you can recognise some of the words from
the cases. And then what my learned friend does is then
list 21 implied terms, cast your eye through them. None
of them I think are based on knowledge, dishonesty,
turning your face one way whilst thinking the other,
apart from perhaps 64.8 has that quality in it, namely,
you knowing something and decide to conceal it. That
one does have that quality in it. But the rest of
them --
MR JUSTICE FRASER: 64.9 says not to conceal as
an alternative {B3/1/36}. But I have your general --
I have the thrust of your point. You are saying the
majority if not all of them don't have those necessary
ingredients of what in fact a duty such as that would
require.
MR CAVENDER: Indeed. They are much wider, they are much
more utilitarian, and just place an absolute obligation
in the same way that the ones in Yam Seng did in
the first of the two terms we dealt with. It has to be
knowing or dishonest and in the second one, as we have
seen, effectively knowing. Whereas these are -- so
64.5:
"... seek to identify such causes itself, in any
event ..."
It goes on and on. 64.11:
"... fully and fairly to investigate any alleged or
apparent shortfalls ..."
They are of a different species and they are not
justified. My learned friend has not taken you to
a single case where any term of this variety has been
implied under the authority of Yam Seng. I have
taken -- we have both taken you to Yam Seng and we have
seen the terms there that were asked for and those that
were provided. In both cases either knowledge or
dishonesty was a necessary part of the term the judge
accepted. These do not qualify.
So even if there is a relational contract here, even
if there is an element of good faith here, whatever that
might mean in this context, these implied terms are not
the kind of terms that can be implied on that basis.
That is to say nothing of the M&S filter that then
would apply. Whether you apply that in the relational
contracts sense or whether you are looking at the
free-standing sense, and my learned friend pleads the
alternative, the same result will ensue, particularly in
a case where you have to show they are necessary despite
the existence of both the express terms of the
agreement, the agency relationship and the fiduciary
duty associated with it, and the agreed implied terms.
To show that these 21 implied terms are nonetheless
necessary to imply in those circumstances in my
submission is hopeless. Nothing in Yam Seng --
MR JUSTICE FRASER: Or --
MR CAVENDER: Or the developing jurisprudence on relational
contract in my submission alters that submission.
Furthermore, as I said yesterday, if you are minded
to imply any of these terms, of course you need to
justify it term by term, or at least group them together
saying, well, I am considering implying these terms on
whatever your Lordship thinks, based on whatever
evidence you think is relevant. And having done that,
and you then look at another group of the 21, you have
to apply the test again to say, well, I have plugged
a given gap or lacuna with these, do I still go on and
think that there is a requirement, it is necessary, to
imply yet further terms or do I not?
My learned friend has given you no roadmap as to
that at all. He has effectively just said, "Well, here
they are", rather unhelpfully. But your Lordship will
have to do your best with that, obviously.
I don't really have a case to tilt at really
specifically as to particular implied terms or groups of
them in various sort of forms of priority. What we do
in our written submissions, if you go to paragraph 326
of our closing {A/8/121}, if we keep the implied terms
out for the moment, we set out there the many implied
terms by topic area but five of those alleged relate to
the nature and content of the contractual relationship
and can be taken together, they are 64.15 to 19, and
there we set them out and make submissions on those in
particular.
These are the more general ones if we look at
{B3/1/37}, these are the ones at the end about
undermining the relationship, things of that kind.
MR JUSTICE FRASER: Acting capriciously ... those ones?
MR CAVENDER: Indeed the four or five at the end.
MR JUSTICE FRASER: Yes.
MR CAVENDER: In our written opening at paragraph 370 we
deal with --
MR JUSTICE FRASER: Written closing?
MR CAVENDER: Closing, yes, sorry, my Lord, we deal with
specific implied terms {A/8/136} and we go through
carefully in relation to each why it is that the said
implied term should not be implied, and of course
your Lordship has read that and I don't intend to go
through those specifically. If you go through them, you
will see for instance at paragraph 394, maintenance of
accounts, going through the accounting terms, implied
terms at 64.2 and 64.3, obligations to communicate,
training and support, shortfall investigation.
We go through them all and there is not a lot I can
really say I think usefully in addition to that in
the time I have. And there is no particular case being
put other than, well, these are all there and we want
them all in, as we say of course you shouldn't for the
reasons we identify. {A/8/144}
When we come to suspension and termination there are
specific implied terms there that I will deal with
separately, because there are particular points to be
made about them and I will make them under that heading.
So, my Lord, that is what I was going to say about
implied terms generally based on both the free-standing,
the Marks & Spencer basis and of course on the
relational contract basis.
Which then takes us into agency and accounting.
My Lord, the first point here and we had a debate about
this yesterday, is to identify what the true nature of
the debate is between the parties within the four
corners of the issue. We say it is in terms of issues
12 and 13, they are primarily issues of law. It's at
{B1/2/1} in terms of the agreed list of issues.
MR JUSTICE FRASER: 12 and 13. {B1/2/13}
MR CAVENDER: 12 is on one page and 13 is on the following
page.
What I want to do is track through, because as
your Lordship said in this version of course the parties
have put the pleading references in as to what they say
the relevant issues are. So for Common Issue 12 the
Defence paragraphs there are 90 to 91. So if we can
turn those up and trace through the various provisions.
The paragraphs are in the pleading.
MR JUSTICE FRASER: So we are going to the Generic Defence,
yes?
MR CAVENDER: Indeed. It's paragraph 90 of the Generic
Defence {B3/2/41}. You will see there as to
paragraph 53 those terms are the terms appointing SPMs
as agents, and 91 admits:
"The terms of the SPMC temporary SPMC and NTC are
admitted and averred. Terms are ..."
2:
"In accordance with those terms, Post Office
appoints subpostmasters and subpostmistresses...(Reading
to the words)... that of principal and agent."
You will remember, my Lord, my learned friend
accepted in submissions, he has to of course, that with
that goes a fiduciary relationship.
Paragraph 91.1 then pleads the consequences of the
appointment of agents:
"Agents ... subpostmasters owe fiduciary duties."
We plead the fiduciary duties and none of that is in
dispute, but they are in law and follow as a result of
the appointment. For your Lordship's note we make that
point good at paragraph 99 to 100 of our written
closing. {A/8/41}
91(2) then pleads what results from that, which
I think again is common ground that there is a duty to
account to Post Office.
The reply. In terms of going back to the issue, the
reply paragraphs noted there on the issue are
paragraphs 59 to 60. The reply we will see behind tab 3
of this bundle. {B3/3/1}.
MR JUSTICE FRASER: Which paragraph in the reply?
MR CAVENDER: 59 to 60, my Lord.
MR JUSTICE FRASER: Section B5.
MR CAVENDER: Indeed. If cast your eye over 59 and 60, 59
is really argument, 60 doesn't really respond in terms
to paragraph 90 or 91 but sets out what it says makes
the relationship different, arguing the usual agency
principles do not apply. I'm not sure if that is
persisted in given they obviously accept they are
fiduciaries. 61(a) is an assertion as to what normally
happens in an old-fashioned agency relationship, (b) is
a characterisation of the Horizon system and (c) is
a conclusion based on the argument that precedes it and
(d) simply relies on -- it is part of an argument on
admissions and Generic Defence.
So the only part that seems to raise any factual
issue on its face is paragraph 60.2. But that paragraph
is not about what the lead claimants or any other SPM
did in terms of their accounting, it is about
representations Post Office is alleged to have made and
they are not of course matters for issue in this trial.
So this paragraph too doesn't give rise to any factual
issue as to SPMs actually account to the Post Office and
it provides no justification, in my submission, for
leading evidence as to what happened in practice or what
Post Office's internal procedures were. What one sees
in this issue, as I said yesterday, is essentially our
contention you are agents, there are certain rules that
apply to that and unsurprisingly they apply here.
Importantly, my Lord, there is nothing in my learned
friend's case that says the terms of the contract alters
the normal accounting principles. That is where it
would have to come. Not in what happened in fact but in
terms of the contract. So that is Common Issue 12.
Common Issue 13, the references are to the defence at
69(3). If we go back to the defence and go to 69(3).
{B3/2/33} you will see there --
MR JUSTICE FRASER: Where?
MR CAVENDER: 69(3) of the defence. These are the two
references under Common Issue 13. 69(3) and 183. So
I am going to 69.3 first:
"As indicated in paragraphs 184 and 185 Post Office
may hold subpostmasters who sign branch trading
statements ...(Reading to the words)... true state of
the account in the relevant branch, the court should
make all presumptions of fact against them."
That is again a principle of law, the second one.
MR JUSTICE FRASER: It is a principle of law that
Post Office may hold subpostmasters who sign branch
trading statements to the accounts they signed off. Is
that what you mean?
MR CAVENDER: That, but also the second part, my Lord.
Focusing particularly that if --
MR JUSTICE FRASER: The making of the presumptions of fact.
MR CAVENDER: Exactly.
MR JUSTICE FRASER: This might be a minor point and it is
just something that occurred to me when I was re-reading
my notes last night, branch trading statements are
identified in your pleading in various places. They are
identified in terms in Common Issue 13. I don't think
I have ever seen one yet, have I?
MR CAVENDER: I think you might have seen one in passing.
They are quite small type documents -- I think we saw
one or two. We will check.
MR JUSTICE FRASER: It would just be helpful, and not now,
because I don't want to knock you off your course, but
if one per lead claimant, an actual one, or were we
using a pro forma?
MR CAVENDER: No, we have actual ones for Mrs Stubs. I know
that, for a couple of months --
MR JUSTICE FRASER: Because the format of them may have
change over time.
MR CAVENDER: We can give you certainly a Mrs Dar one and
a Mrs Stubbs one. Dar and Stubbs we have. Just
perchance.
MR JUSTICE FRASER: So is it the case there aren't any for
the others?
MR CAVENDER: There are, but there has been no disclosure --
MR JUSTICE FRASER: Whether there has been disclosure or
not, Mr Cavender, it is expressly mentioned in the
Common Issue --
MR CAVENDER: No, quite. But the reason it hasn't been is
not because we have been careless -- I will give you
them now, my Lord. Mrs Dar is {E5/229.1/1}, Stockdale
{E6/176/1}.
MR JUSTICE FRASER: Sorry, can you give me the Dar one
again?
MR CAVENDER: {E5/229.1/1}. Stockdale {E6/176/1} and Stubbs
is {E2/36/1}.
MR JUSTICE FRASER: Those ones aren't signed, are they? Or
are they?
MR CAVENDER: The second page. Some were and some weren't,
I think.
MR JUSTICE FRASER: The reason it occurred to me is last
night I went through both your pleading and Mr Green's
pleading again on these two specific issues, so I did
this exercise that you are doing, and it just occurred
to me, and I quickly checked back through my custom
bundles and I couldn't find one -- the reason I started
with Mr Bates was just because he was the first person
and then I started to doubt whether I had seen any of
them.
MR CAVENDER: I think they were referred to in passing.
There is no particular point made on them. But you can
see what they do unsurprisingly. At rollover you have
a snapshot of what has been going on in that trading
period.
MR JUSTICE FRASER: In that period. Because it seemed to me
that, certainly in later periods, they weren't actually
signed, they were just returned. Is that right? The
Common Issue uses "signed and/or returned".
MR CAVENDER: I think that is right. If you want a signed
one {E5/229.1/1}, page 2 of the Mrs Dar one is signed.
MR JUSTICE FRASER: {E5/229.1/2}.
MR CAVENDER: Indeed. The requirement is to sign them
and keep them in branch. But you are right, my Lord,
certainly in the later period. In the later period they
are submitted --
MR JUSTICE FRASER: My intention, Mr Cavender, was not to
knock you wildly off course or lead to a flurry of
activity behind and next to you.
MR CAVENDER: One never knows when that is going to happen.
MR JUSTICE FRASER: That is undoubtedly true. Thank you
very much. So I have got some of them but we don't have
them for three of the claimants?
MR CAVENDER: No. So going back to Common Issue 13,
paragraph 69 of the pleading, and paragraph 69.3, this
is all about false accounting, this part of the
pleading. And you will recall I asked for no findings
about false accounting in this trial, but what this
paragraph does is it sets out our arguments that we may
make and the reference to legal principles we will make,
and bear in mind at this early stage setting out as
comprehensive a case as possible in light of the
generality of the pleading of the general Particulars of
Claim covers all bases.
We have seen one of the principles at 69(3), the
first sentence, reference to ordinary principle, that an
account stated is presumptively binding. The second
sentence invokes the principle:
"The court will make presumptions of fact against
those who destroy or falsify evidence."
So that is 69(3). Then paragraph 183, this is the
second item on the list cited and that is short and
sweet:
"If and insofar as claimants are alleging the branch
accounts they have rendered to Post Office are
incorrect, they bear the burden of proving ..."
So that is simply the result of the legal principle.
MR JUSTICE FRASER: 183 was that?
MR CAVENDER: My Lord, yes. The reply, staying on this
point, if we go to the reply, our paragraphs 64 and 92;
64 just challenges the contention on burden of proof and
92 similarly. It is just the general defence and
averment.
So what one sees, my Lord, standing back from issues
12 and 13 is not a dispute about the facts but a dispute
about the law. In essence, they are agents, they owe
fiduciary duties. There are certain consequences from
that. They apply to them as they do to any other agent
and so what in fact happened doesn't strictly matter
because, insofar as it complies with those obligations,
it is fine. Insofar as it doesn't, there is a breach of
contract. My learned friend has no case that the
contract altered the normal accounting principles.
There is no such case.
So all the evidence that goes into the accounting
relationship in fact, what happened, what you had to do
et cetera, is strictly irrelevant. Of course, I am not
trying to blind the court, the court has had regard to
it and you have seen it. Indeed my learned friend and
I have agreed overnight -- can I hand it up -- the page
of the relevant manual about accepting TCs. Can I hand
that up now. (Handed). You will see that, as
your Lordship will appreciate, does the very thing you
outlined and I agreed yesterday. You have the "accept
now" button and for certain items the "seek evidence"
button on the right. Then you settle by cash, by cheque
or settle centrally.
MR JUSTICE FRASER: Are they both December 2006 or is the
first one older and the second one is December 2006?
MR CAVENDER: You say "the second", my Lord?
MR JUSTICE FRASER: They have two different references. The
first page is {F4/135/11} which doesn't have a date on
it and the second one is {F4/21/11} that
says December 2006.
MR CAVENDER: I think it is from the same manual -- no, it's
not. It is not from the same manual. I think one point
that my learned friend will probably want to draw your
attention to is on the second page:
"Please note not all transaction corrections will
have the 'seek evidence' option at the time they are
issued."
I think that came in later and also not in relation
to every type of product. My learned friend wants to
explain.
MR JUSTICE FRASER: Just before you do, let me just check
what it is you have just given me. These are two pages
taken from the contemporaneous documents potentially at
different times, which we will come on to in a moment,
out of the Horizon manual about how a subpostmaster
should deal with or their options for dealing with a TC.
MR CAVENDER: A standard TC.
MR JUSTICE FRASER: A standard TC, which it is agreed
represents the flowchart which I said yesterday I would
find helpful for what the options are.
MR CAVENDER: Exactly. There is no dispute about it.
MR JUSTICE FRASER: That is why I am just checking what it
is. But it looks like it is two pages of two different
documents. I will hear from Mr Green.
MR GREEN: My Lord, it is only one point. We thought this
was the most helpful way of doing it.
MR JUSTICE FRASER: If you decided to do something different
to what I asked you to do, that is fine. It is not
actually what I asked you to do, but that is fine.
MR GREEN: Because there was already a flowchart there, we
thought it might be useful to use --
MR JUSTICE FRASER: Tell me what date the --
MR GREEN: This is one is 2013.
MR JUSTICE FRASER: Page 1 is 2013?
MR GREEN: Page 1 is 2013.
MR JUSTICE FRASER: Yes, and page 2 is 2006.
MR GREEN: Page 2 is 2006, but it is referring back to the
same boxes and process.
MR JUSTICE FRASER: Sorry, what is referring back to the
same process?
MR GREEN: Does your Lordship see "(F3) seek evidence" on
the first page, top right? The "seek evidence" button
is F3. So your Lordship sees the explanation for the
"seek evidence" button we can find at "seek evidence
(F3)" on the second page in the 2006 version. It is the
same button.
MR JUSTICE FRASER: Right.
MR GREEN: So your Lordship has a picture over at least
seven years.
MR JUSTICE FRASER: I am not sure I do to be honest. The
2013 document shows me the options available in terms of
pressing whichever button in 2013, yes?
MR GREEN: Indeed.
MR JUSTICE FRASER: Prior to 2013, where do I get what
I asked for yesterday from this?
MR GREEN: My Lord, we believe this fairly sets out the
first page in 2013 --
MR JUSTICE FRASER: No, I have seen that --
MR GREEN: Consistently sets out -- the reason we provided
it is because we have agreed it fairly sets out the
options that were available over the period.
MR JUSTICE FRASER: Over the period? Right, that makes
a big difference.
MR GREEN: That is why we thought --
MR JUSTICE FRASER: So the fact it is 2013 I can safely put
stage right because these are the options.
MR GREEN: Indeed --
MR CAVENDER: My Lord, the other reason we do it, there is
actually a mistake in the bundling. That date has been
put on manually I think by my learned friend's side. It
is actually the wrong date. It is actually,
I understand, a 2005/6 document.
MR JUSTICE FRASER: Right. But if it is agreed it
represents the period that I am concerned with from
Horizon onwards ...
MR GREEN: My Lord, yes. There is only one wrinkle; that
there was a slightly different arrangement in relation
to suspense accounts, which your Lordship has heard
evidence about, prior to 2005, prior to the first
version of this document. Subject to that wrinkle,
about which your Lordship has heard evidence, the basic
principle remains the same and the 2006 document on
page 2 explains, just underneath "Transaction Correction
Options":
"Alongside details of each transaction correction
are a range of options depending on the type of branch
involved, as described below ..."
There are different provisions for multiples and
directly managed branches, neither of which
your Lordship is concerned with here. Then:
"The text supplied with the transaction correction
may explain the way in which you need to accept each
particular correction, so you should take special care
to read any instructions that are provided."
Your Lordship has heard evidence about
the construction of some of those TCs.
MR JUSTICE FRASER: I wasn't so much interested in
references to the evidence, Mr Green, what I wanted was
an agreement between the parties about what the options
were for a subpostmaster or subpostmistress when they
received a transaction correction in terms of the
flowchart of buttons that they were able to press on the
Horizon terminal in the branch, and it looks to me like
that is page 1.
MR GREEN: It is, with the rider that, on the second page at
the bottom, which I was just about to come to -- I am
sorry for going too slowly --
MR JUSTICE FRASER: But not all TCs have "seek evidence".
MR GREEN: Indeed, and also when a new TC comes having
sought evidence --
MR JUSTICE FRASER: I can read it. I don't need you to read
it out to me. But that is amplification of the "seek
evidence" function.
MR GREEN: Precisely, and no more.
MR JUSTICE FRASER: Right. Thank you very much.
MR CAVENDER: My Lord, we have been through the pleadings
then to identify the nature of the issues the parties
agree are under the accounting issues 12 and 13 and, in
my submission, they are issues of law arising out of the
particular principle of agency that applies here and the
legal consequences of that. As I said, the important
point is my learned friend has no case that as a matter
of interpretation or anything else that the normal
accounting principles do not apply.
Perhaps I can go back to Al Nehyan {A1.1/72/47} to
remind you of a bit in this connection. So that is
the opening authorities bundle, tab 8, paragraph 142 in
the judgment of Lord Justice Leggatt. It's really the
second part of 142 where he says -- my Lord, authorities
bundle for opening, tab 8.
MR JUSTICE FRASER: Yes.
MR CAVENDER: At paragraph 142. I referred you to this
earlier in a different connection. So talking about:
"There are two important points to notice here.
First, what the parties have contractually agreed may
determine ...(Reading to the words)... where the parties
are in a fiduciary relationship, the scope and content
of the fiduciary duties owed by one to another will be
shaped and may be circumscribed by the terms of the
contract between them."
So what that is telling my Lord is that the agency
here and the terms of it are circumscribed by the terms
of the contract between them.
In terms of this issue, as I say, you don't need in
my submission -- can't properly have regard to the acres
of evidence we have had on accounting, and nor do you
need to, because your Lordship to decide the issue is
really being asked: do the normal accounting principles
apply as a matter of law to these agents? We know what
the agency accounting principles are, they are
incorporated by contract. What are they really?
My learned friend runs no case worthy of the name
that they don't apply. But the one concession I have
made, just a sensible one really based on the evidence
we have heard, is to make the obvious point -- not
really a concession, an obvious point that the accounts
stated, the principle I am relying upon, does not apply
to parts of the account that aren't stated ie those
parts that are contemporaneously disputed. That again
is a basic principle that the principle can only apply
by definition to that part that the agent is confirming.
And where you have a system, as is in place here, it is
accepted that you can dispute amounts in the account and
you do so, then of course they are not saying and you
are not bound by that element of the account.
In terms of the importance or otherwise of this
issue, you remember yesterday when I went through 12(12)
in particular, my two examples with and without the
accounting stated imprimatur, the only real difference
on analysis is that, in a case where there is an account
stated, there is an initial burden on the postmaster to
identify by evidence or argument the mistake. That its
effect in our debate.
If the claimants want in any case to apply under the
normal common law principles of duress or all these
other things, to set the account aside or things of that
nature, of course they can seek to do that. The law
allows them to do it in an individual case. Nothing
your Lordship is deciding prevents the normal law
applying in that way.
My learned friend says at paragraph 339.1 that --
his case on this is that somehow this isn't a real
agency, something called a "hollowed out" agency.
I haven't come across that as a legal term of art; you
are an agent or you are not unless and until the
contract which you have agreed to hollows it out
ie limits it in some way, in which case it would have to
do so expressly. And, again, there is no case we have
heard that that happens here either.
It is quite an extreme and rather contrary case to
say it is a hollowed out agency but also accepting you
owe fiduciary duties to account in relation to cash and
stock. I don't myself understand how you can say those
two things simultaneously. And, of course, it is not
a hollowed out agency because we know from the express
terms of the accounting obligations, which are fiduciary
obligations to account under 12(12) in the SPMC and 4.1
of the NTC, that they need to account. Otherwise you
might ask the question: on what basis are they holding
the cash and stock? As bailey or something? Are they
just holding it with more residual kind of obligations
of that kind? Of course they are not.
MR JUSTICE FRASER: But this flowchart that you and Mr Green
have handed up, it is agreed that that is the sequence
that would be followed by a subpostmaster or
postmistress to reach the branch trading statement
stage, is that right?
MR CAVENDER: When you say "reach it", that is a TC.
MR JUSTICE FRASER: For a TC.
MR CAVENDER: That is for a TC.
MR JUSTICE FRASER: Yes.
MR CAVENDER: And then, as you know, at branch trading stage
you can't have outstanding TCs, so you have a time
before then to decide what to do, seek more evidence or
whatever, at that stage it becomes part of your account
and you can dispute it in the normal way.
MR JUSTICE FRASER: At the end of the trading period.
MR CAVENDER: Indeed.
MR JUSTICE FRASER: And then when you say "in the normal
way" ...
MR CAVENDER: It becomes part -- if it is a negative TC and
it results in a deficit, that would be reflected in your
trading account and you can dispute it.
MR JUSTICE FRASER: But you see this is why we keep going
round in circles. The disputing of a TC has, as
I understand it, the system, not the evidence, the
system occurred before the end of the branch trading
period in a notional example. Is that right?
MR CAVENDER: You can do. That can be done.
MR JUSTICE FRASER: I am not at the moment exploring
a scenario where a subpostmaster or postmistress accepts
a TC, decides that they are going to make good for cash
or they are going to ask for time to pay it, reaches the
end of their trading period but then goes into the next
trading period and then decides to dispute their TC from
six weeks earlier, I am talking about a contemporaneous
dispute for a TC.
MR CAVENDER: My Lord, in relation to that then what we have
is there is a period, and what tends to happen in
practice is you have a TC and it is open and you can do
something about it within the period, ask for more
evidence or whatever. When it comes to the end of the
trading period you have to make a decision, because you
can't roll over with an outstanding TC.
MR JUSTICE FRASER: That is rather the point.
MR CAVENDER: It then becomes part of any -- you accept and
settle centrally, subject to a dispute, and that is part
of normally what you do on rollover with that and any
other --
MR JUSTICE FRASER: The "subject to the dispute" in that
analysis is by phoning the Helpline.
MR CAVENDER: Indeed.
MR JUSTICE FRASER: Because that is the method by which one
raises a dispute.
MR CAVENDER: Indeed.
MR JUSTICE FRASER: And the branch trading statement is
created or signed or returned to Post Office as at the
end of the branch trading period.
MR CAVENDER: Correct, and that can be subject to other
deficits, other problems, not in relation to TCs at all
or possibly --
MR JUSTICE FRASER: Of course.
MR CAVENDER: -- and you can dispute that.
MR JUSTICE FRASER: When you say "you can dispute that",
some of the evidence that has been heard by the court
involves somebody thinking they have disputed it or
purporting to dispute it, but that dispute resulting
in -- how should I put it -- instigation of the debt
recovery process without the "dispute" necessarily being
resolved.
MR CAVENDER: Then that would be a breach of contract.
Obviously that wouldn't be permitted.
MR JUSTICE FRASER: But in accounting terms that disputed TC
which you acknowledge would be a breach of contract
would still form part, wouldn't it, of the branch
trading statement?
MR CAVENDER: My Lord, no.
MR JUSTICE FRASER: You say no.
MR CAVENDER: What it does -- the idea on rollover is to
return the branch trading statement to zero for the new
period. That is the whole purpose of it. So if you
have disputed items, they are then taken out of your
branch trading effectively, put to one side and either
they are disputed or they are not. If they are not, if
you agree to repay, they are still outside because you
want to return the branch trading statement to zero for
the following day.
MR JUSTICE FRASER: When you say "they are still outside",
do you mean they form no part of the branch trading
statement?
MR CAVENDER: Well --
MR JUSTICE FRASER: But they do form part of the branch
trading statement.
MR CAVENDER: Yes, the one you are closing. The one you are
closing they do, but the object is to get them out of
the branch trading period which is going to commence the
following day. So they are put on one side. Whether
you are going to repay them or dispute them, they are
put to one side. And, as we have heard, they may or may
not be subject to repayment agreement. They may be
subject to dispute.
MR JUSTICE FRASER: Right. Thank you. I don't need to
explore that any further with you. However, I do still
want a flowchart, please, from you both agreed, which is
not simply a reproduction of a contemporaneous document,
that sets out what the actual steps are agreed by both
parties in terms of options. If you are not agreed on
any of the particular components, then the document will
have to go into two and show what you say, Mr Green, is
the case and, Mr Cavender, you can explain what you have
just done orally in pictorial form.
MR CAVENDER: My Lord, do you want that to be limited to
transaction corrections or go into -- because the debate
I have had with you put that in context then of
shortfalls and how those two come together. You
probably want that, do you?
MR JUSTICE FRASER: I think that would probably be more
useful.
MR CAVENDER: Because TCs is only one very --
MR JUSTICE FRASER: I know it is. I know it is. So I would
like one for TCs and one for shortfalls, and it might be
that you can in fact agree the full content of both
those documents, but it might be that you can't.
MR CAVENDER: I would have thought we could.
MR JUSTICE FRASER: I would like to think you could, but who
knows. I have been wrong before.
MR CAVENDER: We will endeavour to do that. Going back to
what you are doing under 12 and 13, as I say, they can
rely on the normal rules, the common law rule of agent
not bound by his account if under duress or individual
circumstances, he can try and invoke equity to set it
aside. This is just the normal law. That is all
obviously at large. As I say, he can if he wants, if he
can show evidence and argument, he can in relation to
a particular account say it is mistaken in a particular
regard. He is able to do that. You can't just say:
well, my whole account, well, £8,000 ... what you have
to do is particularise and say, in relation to this
transaction or -- you do have to go into some
particulars of that. You couldn't just -- it is not
a global thing saying, well, it is mistaken. It is not
as simple as that. But there is a method of doing that.
So, in my submission, the Common Issue is limited
really to the question of the application of these
contracts as a matter of interpretation to the standard
duties of an agent when accounting to his principal. In
my submission, those duties apply with their full terms
and effect subject to the point that obviously matters
that the subpostmaster has registered contemporaneously
as being disputed are not subject to that principle.
There is nothing again new -- my learned friend is
quite fond in his submissions of saying everything I say
is new. If you look at the pleading, {B3/2/14} although
perhaps it could be clearer, it is the premise of our
pleading in relation to these matters that such matters
who obviously not be covered by the principle. If we go
to paragraph 39(6) in relation to TCs, you see what we
say at 39(6). The whole basis of our pleading is that
it comes out and is subject to dispute while the dispute
is resolved. It is no part of our case that meantime
that is part of an account stated. Similarly the
shortfalls at 44(3).
MR JUSTICE FRASER: 44.3?
MR CAVENDER: That is the wrong reference. 43(3) I think.
MR JUSTICE FRASER: Are you sure it is not 46? 46(3).
Disputing ... no.
MR CAVENDER: I think it is 43(3). {B3/2/17}.
MR JUSTICE FRASER: Yes.
MR CAVENDER: "... raising a dispute causes a block to be
placed on the value of the shortfall ... personal
account with Post Office. The block value is not
treated as a debt due to Post Office."
If the evidence shows Post Office has -- its system
has failed in some regard and it has gone chasing
people, it shouldn't do. It is not allowed to and it is
regrettable that they did in those cases, but that
doesn't alter the terms of the contract, it doesn't
alter the accounting principles but it is of course
a matter of regret that that happened.
MR JUSTICE FRASER: Yes.
MR CAVENDER: What we also say is that this approach to
agency and really approach to accounting is what also
this court did in Castleton, if we can briefly go to
that. {A1.1/30/1}. It is obviously not the most recent
case but it is a case involving --
MR JUSTICE FRASER: This is the 2007 one, is it?
MR CAVENDER: Indeed, but in relation to the SPMC. It is
tab 1 of the opening authorities.
His Honour Judge Havery QC. What he does here --
I don't know if your Lordship has read it recently. He
goes through in huge detail to all the transactions. He
actually takes the accounts home, I think he says, and
goes through over a relatively short period for all the
transactions --
MR JUSTICE FRASER: You are talking about the judge or the
subpostmaster?
MR CAVENDER: The judge, my Lord.
MR JUSTICE FRASER: He did rather like accounts.
MR CAVENDER: He liked these and went through them all
line-by-line.
MR JUSTICE FRASER: I'm not sure he necessarily needed to
tell everyone he had taken them home. This is the one
where the defendant was acting in person?
MR CAVENDER: I think it is. Obviously my Lord has read it.
But it is really at 39 {A1.1/30/1}. It recites the
relevant clause.
MR JUSTICE FRASER: Which paragraph are we in?
MR CAVENDER: Paragraph 39, my Lord. That is where he gets
into the contract, et cetera. I'm not taking you to it
but all the paragraphs before that set out in huge
detail -- go for instance to paragraph 32, about what --
it was open for a certain day and what happened to
£176 et cetera. It goes into huge detail. But then 39
is when he takes stock and looks at the contract. Then
at 40 really:
"I am satisfied substantially unexplained
deficiencies occurred in weeks 42 to 51 ...(Reading to
the words)... was not properly managed at the material
time."
So what he is saying is there are deficiencies
there. This was under the management effectively of the
postmaster and he therefore infers really that therefore
it wasn't properly managed and these were things for
which the postmaster was responsible under 12(12).
My Lord, one of the authorities --
MR JUSTICE FRASER: Am I invited to read the whole of this
authority in terms of its fact and its findings?
MR CAVENDER: My Lord, only as an exemplar of what would be
required -- not really, no.
MR JUSTICE FRASER: I'm not only going to read part of it
though, am I? To put 39 and 40 in context, I have to
read what actually happened, haven't I? Because
I don't think the burden of proof was in issue in that
case.
MR CAVENDER: It is in issue in every case. But you are
right, it was a litigant in person. So it wasn't
expressly --
MR JUSTICE FRASER: No, the identity of which of the two
parties had the burden of proof was not in issue.
Because the judge says that in one of the paragraphs,
I think. Let me just find it.
MR CAVENDER: I think in paragraph 1:
"It follows from being an accounting party ..."
MR JUSTICE FRASER: At the end of paragraph 2:
"In the event, the identity of the party on whom
lies the burden of proof is not important."
So actually you are right. It is not correct to say
it wasn't in issue but the judge considered it was not
important.
MR CAVENDER: If you look at paragraph 1 then, my Lord,
where he says in the second line:
"Accordingly, the burden of proof lies on
Mr Castleton to show the account is wrong. On that
point the law is clear."
MR JUSTICE FRASER: Yes, but that is the finding that you
are inviting me to make in this case.
MR CAVENDER: Indeed.
MR JUSTICE FRASER: And Mr Green is inviting a contrary
approach.
MR CAVENDER: Indeed. So that is an example. My learned
friend says, well, he can rely on evidence as to agency,
et cetera, and he relies on Garnac Grain. So can we go
to Garnac Grain in the House of Lords and see what it
actually says. {A2/14/8}. That is in volume 1, tab 4.
Because in the present case there is no dispute that the
postmasters are agents. That is admitted in this case.
What the contentions of the parties are about are the
legal consequences of that. What Garnac Grain deals
with is the issue as to whether someone is
an undisclosed principal. One gets that if one looks at
the holding on page 1132 opposite C. So we are in V1,
tab 4 at page 1132. In Garnac Grain, the second holding
where they say:
"There is insufficient evidence to support the
appellant's claim that Allied either expressly or
impliedly had appointed the first respondents to act as
their agents to enter into the contract with the
appellants on their behalf as undisclosed principals."
So what this case is about is whether or not someone
was an agent or not. One gets that also from page 1136
opposite D:
"The second ground was that in making a contract
...(Reading to the words)... Garnac were induced to
enter the contract by fraudulent misrepresentation."
It is in that context the "whether", the passage my
learned friend relies upon at 1137 is to be placed.
Where he just above C says:
"The relation of the principal and agent can only be
established by the consent of principal and agent
...(Reading to the words)... profess to disclaim it."
MR JUSTICE FRASER: Where are you reading from now?
MR CAVENDER: Below C on page 1137. This is the extract my
learned friend is fond of:
"... but the consent must have been given by each of
them either expressly or by implication from their words
and conduct. Primarily one looks to what they said and
did at the time of the alleged creation of the
agencies."
What we are talking about here is an oral or
implicit application of the undisclosed principal
principle. In the same way if you have an oral contract
or a contract from conduct, of course you look at the
whole of the conduct. But here we are nowhere near this
kind of area. We have an express contract of
appointment of agency and so, like any other contract,
it is interpreted in accordance with the rules of
contractual interpretation. You don't have regard to
how the relationship in fact happened in the same way
you don't have regard to, in a contractual case, how the
contract worked out in fact. In both cases it is
obviously impermissible.
So, my Lord, unless you have any questions on that
that is what I was going to say about agency and 12 and
13.
The next subject, my Lord, moving on, is to the
question of incorporation, that is obviously
incorporation of the terms of the contract into the
contract. If we can turn to paragraph 538 of our
closing {A/8/190} to see what terms we are talking about
here first of all. Because normally in arguments of
this type there is a particular onerous clause on the
back of a ticket or tucked away somewhere in small
print, as my Lord knows, it is that area, or terms have
particular effects. If one goes here to 538, what we do
is outline the terms there that are subject to this
allegation or argument. So rules and standards, classes
of business, accounts and liability, assistants,
suspension, termination and not providing compensation
for loss. The first question is: are any of those so
onerous and unusual as to be unenforceable, and,
secondly, if so, what steps was Post Office required to
take to draw those specifically to the attention of the
subpostmaster.
MR JUSTICE FRASER: Are the answers going to be the same in
respect of both the SPMC and NTC or do they ...
MR CAVENDER: They are different contracts, my Lord.
MR JUSTICE FRASER: I was going to say it is potentially at
least, isn't it, that some of them are and some of them
aren't?
MR CAVENDER: Indeed, but the case is put just globally --
MR JUSTICE FRASER: I know that is the way the case is put.
But I explored this with you yesterday and, certainly so
far as the losses clause is concerned, they are quite
different.
MR CAVENDER: They are different, yes. We say at 529 that
the relevant threshold is not close to being crossed.
These are ordinarily commercial clauses. They don't
need to be drawn specifically to Cs' attention in any
event. Cs had ample opportunity to consider the
clauses. If any special drawing of attention had been
required that would have been satisfied. In summary,
the clauses in question set out the core duties of the
SPM, maintain the highest standards in all matters
connected with branch and branch premises, and:
"... ensure the accounts of Post Office and stock
are kept in prescribed form, hold Post Office cash on
trust ... and not to make any private use of the said
cash on pain of possibility of prosecution."
Just standing back from those examples, how can
anyone sensibly say that they are onerous or unusual.
And yet that is said here. In (b):
"Set out some of the core potential liabilities of
SPMs such as liability for losses of cash and stock ..."
We know about those:
"Set out circumstances in which the agreement can be
suspended or terminated ... forfeit remuneration ..."
Et cetera. We will come to those separately in due
course:
"Make provision for further rules or
instructions ..."
In my submission, none of these begin to fit the
rubric of onerous or unusual. That test is set out in
Interfoto. I think my learned friend took you to that.
And we refer to the extract from Chitty at 543:
"Although the party receiving the document knows it
contains conditions ... (Reading to the words) ... the
disputed clause is not unusual or onerous."
And we give the extract from Lawson there. Then
O'Brien v MGN. Hale LJ said:
"The words 'onerous' and 'unusual' are not terms of
art. They are simply one way ...(Reading to the
words)... more is required in relation to certain terms
than others depending on their effect."
The bar is high:
"Woodeson v Credit Suisse in the Court of Appeal
characterised it as requiring a clause which is onerous
in the Interfoto sense of almost being a penalty."
I can take you to Woodeson if your Lordship likes.
If I did, that is the part I would take you to. So that
is the bar; it is almost a penalty but not quite. That
is the degree of onerous and unusualness one needs to
get to even get this argument off the ground.
MR JUSTICE FRASER: The penalty would be unenforceable
anyway, wouldn't it?
MR CAVENDER: Quite right. It is one remove from penalty,
but it is that degree of unusualness or harshness before
this principle is being invoked. At 548 we deal with
Carewatch {A/8/193}. Mr Justice Henderson deals with
the same point:
"The relevant principle of law is it may in certain
circumstances be unfair or unreasonable to hold a person
bound ...(Reading to the words)... The issue may,
however, arise in other types of contract although it is
always necessary to have full regard to the context in
the respective bargaining positions."
So we say, against that background, the argument
these terms or at least some of them were too onerous to
be incorporated is hopeless. These are standard
commercial terms and a business-to-business
relationship. The parties are given these terms in
advance. Certainly in case of the NTC, that is the case
and, in the case of the SPMC, summaries of the terms
were given in advance. Remember the Serv 135 document.
There is every opportunity -- it is not a ticket case
where you are going through the barrier and you have it
on the back and it is some awful term in print and it's
raining and you've got no money and you have to say
"yes". We have all been there. It is not that. This
is very much a case where it is a commercial agreement,
and the parties were making a serious choice and they
knew they were.
MR JUSTICE FRASER: Yes, but that doesn't get round the
"onerous and unusual" part because even Chitty says: you
know you are getting a document with conditions in, the
question is the onerous and unusual ones have to be
drawn to your attention.
MR CAVENDER: Yes, those that are akin to a penalty.
MR JUSTICE FRASER: No, I understand, but the fact that they
were making a choice and they knew they were contracting
on some terms doesn't answer it.
MR CAVENDER: No, I accept that. I accept that. The next
issue then, if you go down this route, is adequate
notice and that is paragraph 560 {A/8/196}. We don't
have of course a clause-by-clause examination of any of
these, we just get a general core of the case, the
commercial reality. We see that at paragraphs 358.5 and
358.7 of the closing.
So we then come to Woodeson:
"Where the term at issue was contained in
a contractual document signed by the SPM incorporation
will follow almost inevitably (see Woodeson)."
And paragraph 46 says:
"When the contractual documentation is signed the
Interfoto principle has no or extremely limited
application. Signature shows the relevant SPM was aware
or could easily have made himself aware of the relevant
clauses and made a commercial choice to sign the
contract."
We rely there on Amiri Flight where
Lord Justice Mance, as he then was, says this and this
is important. We rely on it:
"Normally in the absence of any misrepresentation
the signature of a contractual document must operate as
an incorporation and acceptance of all its terms ...
(Reading to the words) ... I find it difficult to see
the relevance of the principle of Interfoto in
the present case."
Then we see:
"Even the absence of signature, providing the
relevant clauses and giving the SPM good time to read
them ... (Reading to the words) ... if he did not know
its terms, he could and should have done."
So if you know you are in possession of terms of
this type, then you have to read them, you can't just
not read them and be in a better position:
"The key is not even possession. Cs would have
known their contracts were likely to include, if not
these terms, then similar ones."
Dealing with their liability for losses, dealing
with their conduct. And:
"If the contracting party is in general terms aware
of a term or knew that it contains or it is likely to
contain terms of the type complained of ..."
That would be sufficient, and we rely on Allen
Fabrications for that principle. As we say:
"It is worth stepping back to consider the purpose
of Interfoto ... (Reading to the words) ... buried away
in the middle of a raft of small print."
It is in those situations where the principle might
apply, and even the Cs here, for all the points they do
make, even they don't suggest that this is what happened
here. We say these terms are not onerous and unusual,
nor have they been sprung upon the Cs as a surprise.
They are precisely the sort of terms one who expect in
the context of this kind of contractual relationship and
not hidden away.
So we say, summarising:
"A signed document leaves no or virtually no room
for Cs' arguments (see Woodeson). If there any extreme
circumstance in which a document is signed, it could
still leave room for Interfoto argument ...(Reading to
the words)... and being asked to sign a ticket handed to
him or a tourist required to sign a long print document
to hire a car at the airport. We say this case bears no
resemblance to those situations. It is a serious
business relationship entered into not on a whim after
an exhaustive application process with every opportunity
to obtain legal advice."
MR JUSTICE FRASER: Those submissions are more aimed at the
process for the NTC than the SPMC, aren't they?
MR CAVENDER: They are aimed at both. I was about to say,
in relation to the NTC, that is certainly the case and
some legal advice -- you will recall the instruction
booklet said "you are strongly advised" to take --
MR JUSTICE FRASER: That is for the NTC.
MR CAVENDER: Indeed. Absolutely.
MR JUSTICE FRASER: And they also signed the NTC and had to
send it back and it said that it was an offer and it
would be accepted on Post Office signing it and sending
it back.
MR CAVENDER: Exactly right. So on those I don't see the
argument applying at all. In relation to the SPMC
nonetheless --
MR JUSTICE FRASER: That was slightly more haphazard.
MR CAVENDER: I'm not sure that is entirely fair. It wasn't
as apple pie as the NTC but remember both in the SPMC
cases they sign a document agreeing to be bound by the
SPMC. So they sign a contractual document.
MR JUSTICE FRASER: I'm not sure that is exactly what it
says, but I know your case is that that is the effect --
MR CAVENDER: The import of it, yes. So they sign
a document saying they agree to and have read and
understood the terms of the SPMC. That is the legal
effect.
MR JUSTICE FRASER: I know that is what your case is but
that is not what document actually says.
MR CAVENDER: My Lord, no. We both know what it says
precisely, but we say that is its legal effect.
MR JUSTICE FRASER: Understood.
MR CAVENDER: We then apply those principles to these leads.
We say it is not in dispute that every lead, with the
probable exception of Mrs Stubbs, signed their agreement
to be bound by the terms of the relevant contract. We
say for such leads that is the end of the analysis.
That is if your Lordship accepts what I say about
signing the SPMC appointment document. And certainly in
relation to the NTC that is the case. And (b) we then
deal with Mrs Stockdale and Mrs Dar:
"Post Office further intends that the four lead Cs
who deny receiving copies in any event had or could
easily have obtained access to copies ...(Reading to the
words)... In each case the court accepts they either
received or had access to a copy of the relevant
contract."
There, my Lord, as you know -- and I cross-examined
about it boringly in terms of time -- each of them knew
there was something called the standard terms and the
SPMC which they were signing up to. And we say they got
it. We also say, if it wasn't there, they would
certainly have asked for it. But even if they didn't,
they knew they were signing up to a document and, if you
recall in cross-examination, they accepted broadly that
the kinds of terms -- they would expect terms to include
accounting for cash and stock and things of that kind.
So it wasn't as if the anticipation was them to enter
a contract about apples and in fact they were, when
signing and incorporating the standard terms, even
assuming they hadn't seen it, was in relation to pears,
it wasn't. This was a process over a period of months.
They did their own research. Part of my learned
friend's case involves the notion these people sort of
walked off the street as if they were going to buy some
sweets or something in a sweet shop and they just decide
to. These people were all serious business people who
decided to change careers in many cases, do their own
research, visit other post offices. So the notion that
they should be treated like the person going to the car
park, which is really my learned friend's case, and
being jumped by some sort of terms on the back of the
ticket doesn't really, in my submission, bear serious
scrutiny.
My Lord, is that a convenient moment? I am now
going through the individual lead claimants.
MR JUSTICE FRASER: 2 o'clock.
(1.00 pm)
(The short adjournment)
(2.00 pm)
MR CAVENDER: Good afternoon, my Lord. Before the lunch
break I was making submissions about the NTC contract
and the SPMC in relation to corporation, and I was
debating with your Lordship the differences between the
NTC and the SPMC and I was making the point that
Post Office's case as a matter of construction is that
both in the SPMC and the NTC there is incorporation.
Can I take you to the SPMC ones to see what my
submissions are on that. We need to go to bundle D1,
tab 1. I am using Mr Bates as the example here. This
is the first one. The other SPMCs are the same.
What you see behind {D1.1/1/2} is the letter of
appointment. This will obviously be familiar to
my Lord. This is the three-page document. "Your Copy,
"Mr Alan Bates. Conditions of Appointment for
Craig-y-Don". You are familiar with the terms. The
relevant ones of course, going across the page to page 4
of this document, is (6) {D1.1/1/4}:
"You will be bound by the terms of the standard
subpostmasters contract for services at scale payment
offices, a copy of which is enclosed."
MR JUSTICE FRASER: Where are you looking?
MR CAVENDER: 4.12(6). So that's saying:
"You will be bound by the terms of the standard
subpostmasters contract service at scale payment
offices, a copy of which is enclosed."
Two things are said within that. One is you are
bound by the standard subpostmasters contract, and
secondly it is enclosed. You could also say it is
available to you. At the very least we say it was
enclosed.
MR JUSTICE FRASER: And he says it wasn't.
MR CAVENDER: Yes, and I will come to the evidence on that
in a moment.
What he then says underneath that to the
Post Office, to the agency recruitment manager, is:
"I fully understand and accept these conditions and
agree to avail myself of the pre-appointment
introductory training."
Those conditions of course contain all the
conditions including condition 6. So in my submission,
reasonably clearly that is an incorporation,
a signature, of him agreeing to those terms and
conditions.
MR JUSTICE FRASER: Your case is it doesn't matter whether
they were in the envelope or not.
MR CAVENDER: Quite.
MR JUSTICE FRASER: I know that.
MR CAVENDER: But in terms --
MR JUSTICE FRASER: If they weren't in the envelope,
Mr Green's case is rather different, that he never got
them, or rather Mr Bates' case as explained by Mr Green.
MR CAVENDER: Indeed. But I say as a matter of law that is
not determinative --
MR JUSTICE FRASER: I know.
MR CAVENDER: And furthermore, particularly given they are
said to be enclosed. And if -- Mr Bates, if you accept
he didn't in fact get them and he didn't in fact ask for
them, that also of course would be relevant because they
are clearly available. So there is that point, if you
like, of construction as to the meaning and effect of
that document.
Then of course if you go to tab 2 to complete this
point you have the acknowledgement of appointment where
he agrees to be "bound by the terms of my contract".
{D1.1/2/1}
MR JUSTICE FRASER: That is rather different wording than
the other one.
MR CAVENDER: But you have to look at the two together and
that is confirmatory, if any confirmation is needed, in
my submission it is not, that contractually --
MR JUSTICE FRASER: I'm not sure that necessarily takes you
anywhere that the previous document doesn't because the
previous document is 31 March 1998, and that is the date
as I understand it that it is agreed he became bound.
MR CAVENDER: That is true.
MR JUSTICE FRASER: So what he signs in May, that is
I suppose at its highest, for you, evidential support --
MR CAVENDER: Exactly.
MR JUSTICE FRASER: -- for what you say --
MR CAVENDER: He knew back on the 31st, exactly so.
MR JUSTICE FRASER: But the terms of that particular
document are not quite so clear because they just say
"my contract".
MR CAVENDER: My Lord, yes. I do rely on it in the way you
anticipate, that that reflects his knowledge on the
31st.
MR JUSTICE FRASER: I know that.
MR CAVENDER: That he has a contract, firstly, the contract
referred to in the earlier document, he has signed it
and has agreed to it. And as you know, that was the
method in which the SPMC was introduced into the
situation.
MR JUSTICE FRASER: Sorry, when you say that, do you mean so
far as Mr Bates is concerned?
MR CAVENDER: And in relation to --
MR JUSTICE FRASER: As I understand Post Office's practice,
it generally was, and I might be wrong, that the copy
would be kept in the branch or should be kept in
the branch, an incoming incumbent or intended incumbent
could or would or should be expected to familiarise
themselves with its contents as part of their, to use
your phrase, due diligence.
MR CAVENDER: Indeed.
MR JUSTICE FRASER: But at some point it was supposed to go
into an envelope and be posted to the person after they
have been approved at interview.
MR CAVENDER: My Lord, yes --
MR JUSTICE FRASER: Is that an adequate summary?
MR CAVENDER: At the very least, as part of the appointment
procedure, they will get a copy in the envelope with
that letter, and that was the practice we have seen from
the evidence from quite early on.
MR JUSTICE FRASER: Yes. But depending on one's view of the
evidence, it was either the evidence that it was
invariably done, or the evidence that it was sometimes
done, or a specific example, some of the evidence, not
Post Office's evidence, is that it wasn't done.
MR CAVENDER: My Lord, yes.
MR JUSTICE FRASER: But that was the general approach.
MR CAVENDER: Indeed.
MR JUSTICE FRASER: That if you wanted to open a post office
and you were interested in or sought to examine in
detail your terms, it was up to you, or you had the
opportunity with the outgoing postmaster, to have a look
at their contract because that is where it would be
kept.
MR CAVENDER: That is the first time, and there are other
times down the road. And 31 March here is the final
time when it is enclosed with the letter.
MR JUSTICE FRASER: Yes. But prior to that when do you say
Mr Bates would have had it? You say that is the final
time.
MR CAVENDER: He would have had opportunity --
MR JUSTICE FRASER: Exactly, which I was attempting to
summarise, possibly inadequately.
MR CAVENDER: That is quite right. Going to Mr Bates, then,
and his particular position. His evidence was as we
summarise, going now to our closing submission at
paragraph 571 {A/8/199}.
MR JUSTICE FRASER: We're going back to where we were just
before 1 o'clock?
MR CAVENDER: Indeed. If we can keep out the documents,
though. I am going to make some forensic points on them
to test Mr Bates' evidence very briefly.
We summarise very pithily at paragraph 571 and
following in relation to Mr Bates. There are really two
points, two critical points on the question whether he
did or didn't receive the standard terms on the 31st.
There are really three points. One, we heard evidence
from the person in charge of the ladies in this area.
He said they were reliable and invariably, to his
knowledge, never had any complaints. Evidence that
in fact the envelope of course is much thicker with it
in and it would be a difficult mistake to make. So
there is that by way of background.
You then have the fact of Mr Bates and his demeanour
and expertise and experience. He is the man who noticed
one flag was missing from an envelope of 20, and then
writes back to ask for a discount for the one he didn't
get. No complaint about that but it does show, and my
learned friend laughs when I say this, he was a details
man. He is that sort of man who would notice and say
something if, as here, paragraph (6) says, "a copy of
which is enclosed" of the standard form contract, and he
wouldn't ask for it. {D1.1/1/4}
In my submission, my Lord, you should be -- you
should not accept that evidence. That is very unlikely,
having seen Mr Bates give evidence, having seen how he
interacted with Post Office, given his experience that
you have heard about, that in itself is unlikely.
MR JUSTICE FRASER: That is ignoring, though, I think the
presence of other documents which went with the same
document.
MR CAVENDER: Which I am now coming to. His explanation for
that is, in my submission, incredible.
MR JUSTICE FRASER: Incredible?
MR CAVENDER: Incredible, namely that the two-page
document -- that is why I kept it open -- at
paragraphs 1 to 13, which in every respect is exactly
the same as the contractual document from paragraph 4.1
and following, exactly the same.
MR JUSTICE FRASER: Which document is this?
MR CAVENDER: So when you compare the so called two-page
document --
MR JUSTICE FRASER: At the moment all the common screen is
showing is your closing.
MR CAVENDER: You have got the hard copy?
MR JUSTICE FRASER: I do have a hard copy, but I am just
wanting to make sure I am looking at exactly the same
documents because some of them are quite similar.
MR CAVENDER: I see. So can we go to {D1.1/1/5}.
MR JUSTICE FRASER: Yes. Conditions of appointment.
MR CAVENDER: This is the two-page document put in in error
for some reason, I don't know how Mr Bates got it,
but --
MR JUSTICE FRASER: You don't know how Mr Bates got it?
MR CAVENDER: No. That was the evidence, if you remember.
MR JUSTICE FRASER: Well, it has definitely come from the
Post Office at some point.
MR CAVENDER: Of course, it is not suggested that -- but he
says this came with it and he thought this was the
standard subpostmasters contract.
MR JUSTICE FRASER: Yes.
MR CAVENDER: Testing that, if you look at paragraph 1 of
this two-page document headed "Posters and Advertising",
then "Quality of Service", "Signage", et cetera, over
the page {D1.1/1/6}, down to "Queueing Area", "Counters
Club". All of that, apart from "Personal Service" at
the bottom, I'm not including that. All of that is
precisely the same as -- can we go to, please
{D1.1/1/3} --
MR JUSTICE FRASER: It is not precisely the same because it
has different numbers. But the heading and the wording
is the same.
MR CAVENDER: My Lord, yes, precisely so. The content is
the same. The only difference is the personal service
bit.
Now, Mr Bates said in evidence he spotted that at
the time. He knew that at the time that they were
completely the same. That in my submission makes it
very unlikely indeed, to the point of incredibility,
that he thought that in fact the same document, with the
addition simply of "Personal Service" at the bottom, was
in fact -- at paragraph 6, "the standard subpostmasters
contract for service at scale payment offices, a copy of
which is enclosed". He can't rationally have thought
that.
MR JUSTICE FRASER: I know that is your case and that is a
point I have to resolve.
MR CAVENDER: Indeed.
MR JUSTICE FRASER: But whether it were enclosed or not, so
far as Mr Bates is concerned, as you observed yesterday,
there will be some who did get it.
MR CAVENDER: Quite.
MR JUSTICE FRASER: And there may be others who didn't. It
is therefore sensible, and I think you are inviting me
to, and I would intend to do this anyway, to address
each alternative, regardless of any specific finding on
Mr Bates, to say what would flow if it were in and what
would flow if it were out. Otherwise that is going to
be the greatest utility in the group litigation.
MR CAVENDER: I couldn't agree more and we have said that
from the beginning. My Lord is right. But I am dealing
with Mr Bates here.
MR JUSTICE FRASER: I know that, but that is effectively
a point that I have to decide, a point of fact in his
specific case.
MR CAVENDER: Correct.
MR JUSTICE FRASER: If it were not in the envelope, if my
finding is that it were not in the envelope, what do you
say the consequences of that would be?
MR CAVENDER: That he would still be bound because he had
signed to say he understands and accepts these
conditions and agrees to them. He knows there is
an existence, something called the standard
subpostmasters contract that has been identified as
a particular document. It is in existence. He is able
to get access do it, indeed he has been offered a copy
so the writer thinks. On his Lordship's presumption he
hasn't fulfilled it and it is not in the envelope, but
that would be nonetheless legally binding.
The second point on Mr Bates himself personally is
the account he gives as to when he got it, because
my Lord, if you say it wasn't at this stage you have to
make a finding when he got it and in what circumstances.
In my case he got it here. What is his case when he got
it? Well, it is incredible for the reasons I outlined
in cross-examination. And he has constructed that case,
it's been constructed, and he has overreached himself
because clearly to write that letter saying that the
terms are voluminous and complex and there might be
other things hidden away in the document, he must
logically, and I think my learned friend probably half
accepts this, he must have had the SPMC when he wrote
that letter.
MR JUSTICE FRASER: "That letter" being -- just remind me?
MR CAVENDER: If one goes to 577B, the letter is the
4 August 1999 letter at {E1/17/1}. This is 4 August.
This is before Mr Bates --
MR JUSTICE FRASER: 1999.
MR CAVENDER: Indeed. He says he didn't get the SPMC until
later that month. We can see from the content of this
in the fourth paragraph:
"Somewhat anxious I may have lost almost one years
holiday entitlement. I have consulted my contract,
section 4, absence on holiday substitution allowance,
and unless it is hidden away elsewhere in the contract
then there is no mention at all about outstanding
holiday being lost if not taken within the holiday
cycle. The whole of the section on holidays is not only
very wordy but it is extremely vague in its content and
would certainly not win any awards with the Plain
English Campaign."
So what is absolutely clear, in my respectful
submission, from that, the writer of that paragraph must
have had possession of the SPMC. Because when you go
to -- and I'm sure your Lordship has looked at this in
terms of the SPMC, the holiday entitlement section is
two or three pages and could be described as wordy. The
only notification this witness had at the time on his
case was the Serv 135 document, two pages long, it's
just three --
MR JUSTICE FRASER: Which has section 4, absence on holiday,
and I think is at {E1/9/1}. Is that right?
MR CAVENDER: Yes, that is right, my Lord. So you see there
that is the extent of -- and that can't be described as
long or wordy, it can't be described as "in a document
where there are other things hidden away in other parts
of the document".
So in my submission, that is --
MR JUSTICE FRASER: That doesn't necessarily mean he had it
as of 31 March the year before.
MR CAVENDER: It doesn't. But what it does show he has
constructed a case --
MR JUSTICE FRASER: I know that is what you say.
MR CAVENDER: -- around that. The question is why has he
done that? He has also done it in relation to
the two-page document and the three, in my submission --
MR JUSTICE FRASER: I know. But that is where one then gets
into a difficult area, which was explored yesterday,
which is you are inviting me not to make any findings --
MR CAVENDER: My Lord, no. No findings on --
MR JUSTICE FRASER: The credibility of the witnesses.
MR CAVENDER: No, I didn't say that, my Lord. I said you
could make findings in relation to credibility arising
out of the contractual formation, et cetera. I was
talking about the falsification of accounts and things
like that. If Mr Bates had falsification of accounts in
the front of the case I would be saying you can't have
regard to that. But this is straightforward. This
isn't going to prejudice -- say Mr Bates was a lead
claimant --
MR JUSTICE FRASER: He is a lead claimant.
MR CAVENDER: -- in the third trial, in the breach trial.
Let's assume that. Nothing you say about him here about
whether or not he did or didn't accept -- didn't receive
certain papers has any bearing on that.
MR JUSTICE FRASER: I imagine you would accept what I am
about to suggest or ask you that there is nothing in
relation to any of the witnesses on either side that --
there is nothing in the nature of the issues that I am
considering now that means I would not be able to try
the third trial.
MR CAVENDER: This is the sensitive point, my Lord, I think
I have been --
MR JUSTICE FRASER: Is what you just said a one-way
submission, I can about the claimants but I can't about
Post Office witnesses? Because that will take me out of
the ball game for the third trial.
MR CAVENDER: Quite the reverse. I was very careful
yesterday to say I am seeking no findings on what we
would say was disreputable and dishonest conduct on
certain of the lead claimants. I'm not asking you to
make any findings or make any comments about it. That
doesn't mean to say you cannot make findings of
credibility relating to whether someone received
a contract or not without relying upon evidence -- let's
say Mr Bates was a case where there as clear
falsification of accounts and there was a debate about
receiving the contract. What I am saying is you should
hold back and not make any findings on credibility on
the falsification point as support of points on whether
he received the contract. It's contracting issues on
the one hand and breach issues on the other.
MR JUSTICE FRASER: Rather than hold you to oral submissions
on what might prove to be quite a careful distinction,
after this afternoon I would like you to frame, please,
in careful and as precise terms as you wish to, how you
say I should draw the line in terms of credibility of
witnesses generally. Because it is not a secret that
regardless of what happens in this trial, there is going
to be another trial and probably two more trials, and
a lot of the same witnesses are going to appear in those
later trials.
MR CAVENDER: Correct.
MR JUSTICE FRASER: It is a very unusual situation to be
asking a judge to draw some sort of a distinction on
credibility when credibility is in issue on some of the
matters I have to decide on the Common Issues.
MR CAVENDER: Yes, it is very odd. And it is because,
without trying to rub salt in any particular wound in
any particular direction, this is a result of having all
this breach evidence in. We had to test it to try and
ensure that the court wasn't given a misleading
impression, but I am now saying, I said all along right
from the beginning, that you are not in a position to
make findings on, say, falsification of accounts because
that is not what this trial is about. We have not had
full disclosure on it. It would be unfair.
Of course half of me on this point would say, yes,
of course I want you to make findings on that.
Mr Abdulla did this, and the cheque in the till and all
the rest of it. But my Lord --
MR JUSTICE FRASER: I understand the point exactly. I would
just like you to frame it in a single submission or two
or three sentences.
MR CAVENDER: Yes.
MR JUSTICE FRASER: So that I have something against which
I can measure my approach.
MR CAVENDER: My Lord, yes. It is quite subtle and it is
not easy. Do you remember yesterday when I said this,
or maybe the day before, it amounts to not taking the
witness evidence of the lead claimants at face value.
There is another story. Without making findings --
MR JUSTICE FRASER: That is a different point, though.
MR CAVENDER: I'm not sure it is, because that is as far as
I think you can take the other evidence. Because you
can't make findings on it, in my submission. I'm not
sure if you are accepting that or not. And if you do,
you do, with whatever consequences flow from that. But
in my submission you don't need to for the purposes of
this trial, but if you did it would have an implication
on credibility for these kinds of issues: did you or did
you not receive the contract?
I'm saying you don't need to, I'm not asking you to,
but that doesn't mean to say I don't want you to
decide, in my submission, Mr Bates is not telling the
full story or the true story about what he received in
the envelope.
MR JUSTICE FRASER: In a way Mr Bates -- each of them falls
to be considered differently because there are different
factual issues on the contract formation with each of
them.
MR CAVENDER: Indeed.
MR JUSTICE FRASER: All right.
MR CAVENDER: So what I say is he is clearly -- obviously
Mr Bates is a very nice man and he no doubt believes --
he probably believes what he is saying is true. I say
that in my closing. He has been involved in this case
for so long that he has created this narrative and I'm
sure he subjectively believes it to be true, but it is
not true in my submission.
If you also remember the correspondence when he
started getting into difficulties with the Post Office
and started writing letters, almost like a letter of
claim, he didn't mention he hadn't got his contract. It
comes on very late in the day once he gets into the
group litigation, the lawyers and everything else. That
is when this point is born, and then we get this story
as to how it is you explain he didn't get the contract.
He over-reaches himself in two distinct ways: one is
by pretending the two-page document, he thought -- an
intelligent man, a details man -- in fact it was the
standard Post Office contract and so didn't ask for
a copy. That is incredible. And then he says he
received it not, then but at the end of August, and he
received it as a result of the inquiry he made in that
letter of 4 August when it is obvious from the wording
of that letter he must have had the contract at that
time. Question: if he didn't get it on 31 March when
did he get it? There is no evidence to that, there is
no case as to if it wasn't 31 March when was it.
You will also recall Yam Seng, paragraph 8, about
witness testimony. Mr Justice Leggatt, another of his
particular things he is keen on.
MR JUSTICE FRASER: I'm not sure I need Yam Seng to direct
me towards the fact that memory can be very subjective.
MR CAVENDER: Indeed. And unreliable. Mr Justice Leggatt
in that case, and also in the Mike Ashley case as well,
there is a whole passage of it --
MR JUSTICE FRASER: It is probably -- the Mike Ashley case
is complete free rein to the judge's views on memory.
MR CAVENDER: Indeed. Quite. I'm not allowed to mention
that case and I haven't done so.
MR JUSTICE FRASER: Oh, were you in that one as well?
MR CAVENDER: I can't remember.
MR JUSTICE FRASER: I read that at the time and it is very
interesting, but it doesn't say anything that almost all
judges know, that just because a witness believes
something to be the case it doesn't mean it is the case.
Whether that applies in Mr Bates' case or not is
something I am going to have to come to a view on.
MR CAVENDER: Indeed. So that is Mr Bates.
Mrs Stubbs. We deal with her at 578, she can be
dealt with more briefly. Obviously that was a very
particular odd and sad situation which doesn't really
have any parallels. You can see what we say about that,
particularly about the 23 September notification.
I think that is the only one where there is a dispute
between the parties as to when they say the contract was
entered into because that is the date we select, and my
learned friend has the date of takeover, I think.
MR JUSTICE FRASER: Remind me at the end about dates of
contract formation because that is something for the
little shopping list.
MR CAVENDER: I can do that now --
MR JUSTICE FRASER: No, we will do it for all six of them at
the end, because on some there is an issue, on others
there isn't.
MR CAVENDER: Mrs Stubbs. I don't say much more about that.
Mr Sabir, 584. He was -- the SPMC, he had the same
routine as Mr Bates in terms of contractual position.
Recall of course, as we say in 584(a) {A/8/205}, he was
sent a summary of the terms that would apply. So here
we have telling them the terms that would apply in
advance, and you then have written acceptance of the
subpostmasters contract, and then the words:
"You will be bound by the terms of the standard
subpostmasters contract for services at scale payment
offices ..."
And the letter also stated that his employment pack
included a copy of the SPMC and asked him to give it is
"utmost attention".
Then on 19 July we say:
"... Mr Sabir signed the conditions of appointment.
His signature to confirm that 'I, Mohammad Sabir, fully
understand these terms and conditions'."
He also signed the acknowledgement of appointment in
the same form you have seen before.
MR JUSTICE FRASER: Yes.
MR CAVENDER: In terms of his evidence of whether he did or
did not, 587 summarises the evidence on this {A/8/208}:
"His evidence, in the end, was that he simply could
not remember whether any number of things had happened
or not:
(a) As a general matter, he stated that he could not
remember events at this distance in time: 'how can I
remember twelve years things? I can’t remember
everything.'
"(b) He could not remember whether he received the
summary of contractual terms (despite having admitted
receiving them in his witness statement).
"(c) He could not remember whether he was taken
through the extracts from his contract.
"(d) He could not remember whether he received a
copy of the contract, either for Cottingley or for
Crossflatts."
Of course in this case you would have to believe he
didn't get it either time because there were two
processes gone through in close succession, Crossflatts
and Cottingley.
You will remember, 588, Mr Haworth's evidence that
he would have emphasised that it was a contract for
services. He said he ran through a summary of the
contract, including termination, obligation to account
and things of that kind.
We say at 589 {A/8/209}:
"Moreover, even Mr Sabir's evidence that it was
possible he had not received a copy of the contract did
not stand up."
We make the point here about his oral English and it
is -- you heard him give evidence and it did seem that
sometimes, particularly early on, his language wasn't
particularly good when I used particular words, but then
other times when I was putting thing to him, his command
of the English language seemed to improve somewhat.
MR JUSTICE FRASER: It might have been the different
language you were using.
Where you say in brackets "notable for its
variability", are you inviting me he was relying on
a claimed weak grasp of English, or are you just
pointing out that from time to time he seemed to
understand some questions better than others. Because
one is to impugn him and the other is not.
MR CAVENDER: My Lord, yes, that is certainly the impression
I think the court should reach.
MR JUSTICE FRASER: Which one?
MR CAVENDER: That he was in fact able to speak English
reasonably well and on occasions decided, for whatever
reason, not to do so.
Then Mr Abdulla at paragraph 590.
MR JUSTICE FRASER: Yes.
MR CAVENDER: Again, same story on the contract, in terms of
the contractual documents, ie signature of conditions of
appointment, see paragraph (c) of 590 and then the
acknowledgement of appointment at (d) {A/8/210}.
We say in relation to Mr Abdulla, his credibility is
not so nuanced that he did clearly lie, and lie
brazenly. You recall when I put to him various letters,
and we say this at 592, we have the references there, he
claimed he had read the first and second paragraphs of
the letter and that is all he had read. Then I took him
through the contents of that letter. So, yes, maybe
three, maybe four, and when I turned over the other side
he was clearly engaging in a process of deciding not to
remember things that were contrary to his interest.
As we say at the end of 592:
"He first claimed not to have read any of the
transfer day documents and then he did admit he had read
the key documents."
All these references are to these points I am
reading from 592. He was the gentleman who said it was
definitely true that Christine Adams and
Christine Stevens were the same person and he said it
was not possible they were two different people, and you
know the end of that investigation.
I think the next sentence is very much on the
borderline in terms of he doesn't believe it was wrong
to have told Post Office he had cash in the branch when
he did not and put an undated cheque in the till in case
he was caught --
MR JUSTICE FRASER: That is on your borderline really. That
is why I was exploring it with you.
MR CAVENDER: Exactly, I agree. I think it was probably the
wrong side of the line.
MR JUSTICE FRASER: So do you want me to cross that out?
MR CAVENDER: Let me put it in my document. That is a good
testing ground because that really is right in the
middle of that particular debate.
MR JUSTICE FRASER: So the part -- yes.
MR CAVENDER: Then we say he claimed to have called the
Helpline frequently, but when the logs were put to him
he said he gave up and stopped calling. That is
the right side of the line, for instance.
So we say Mr Abdulla's evidence on whether he
received the contract should be viewed in that context.
He knew the relationship would be governed by a written
contract, he accepted he was looking for that contract
to be provided at some point. In those circumstances,
we say obviously he would have asked for a copy if he
hadn't received one:
"He tried to answer this by saying he did not need
a contract because everything was 'perfect' and
inconsistently claimed he did ask why he had not
received the contract (which was new and obviously
untrue)."
Then we set out in 594 and 595 the other things
about the interview process.
Then we say at 596:
"In this context, the submission that Mr Abdulla's
contract was not fully incorporated lacks reality."
And we make the point about the version of the SPMC
that I can leave.
Then we come to Mrs Stockdale and Mrs Dar. You
recall these were both on NTC {A/8/213} where of course
there is advice that people are strongly advised to take
legal advice and the whole contractual set up in
relation to NTC is much clearer, much fuller and much
less able for anyone to suggest, in my submission, that
the relevant contracts were not incorporated.
MR JUSTICE FRASER: That might have been a result of
a policy decision or acceptance by the Post Office that
the way in which the SPMC had been dealt with was
unsatisfactory, because there were some internal
documents that suggested some of the subpostmasters were
unaware of some of the terms of the SPMC. It seems to
have been a reform.
MR CAVENDER: My Lord, yes, but remember -- I don't think
that is quite right, maybe in the background there were
rumblings, but remember this was a whole new roll out of
a new process and as part of that the NTC -- that is
what it was in terms of network transformation, so it
wasn't --
MR JUSTICE FRASER: The mechanism of forming the contract
was changed as well.
MR CAVENDER: Everything was changed. It was a completely
blank bit of paper and they started again, really, and
they obviously, as we know, offered certain people the
chance to join the new -- and others they didn't. It
was a whole reformation of the Post Office and how it
was operating.
MR JUSTICE FRASER: I know. But I am talking about
contractual formation.
MR CAVENDER: As part of it, you are right. It was much
more developed, formalised and improved. There is
no doubt about that. But that doesn't mean to say --
just because you improve something it doesn't mean to
say what was left before was non-contractual or
ineffectual.
MR JUSTICE FRASER: I am aware of that.
MR CAVENDER: The other thing about these particular
individuals of course is that they weren't
unsophisticated. They were in varying degrees -- had
experience, and I went through it in detail with them,
of commerce, of -- in some cases, Mr Bates' case,
contracts, other people it was running businesses or
being involved in businesses. They weren't people who
were straight out of school or naive. I constantly put
that in my submission and the court should so hold.
They did have availability for legal advice. They did
have to take legal advice, most of them, on the purchase
of a subsidiary business. Just pause for that thought,
these people were buying an independent business with
all that goes with that, so they are those sort of
people.
And in terms of knowledge of particularly the
deficits, the unders and overs, three of them I have
notes of particularly accepted they had some knowledge
of what were called unders and overs colloquially.
Mr Bates in his witness statement at paragraph 21,
Mr Sabir at Day 3, page 85, lines 17 {Day3/85:17} to
page 86, line 1, and Mrs Stubbs Day 2, page 163 lines 11
to 14 {Day2/163:11-14}, Mrs Stubbs in her case through
her experience of a post office. So that is
the background to the incorporation argument on the
facts.
My Lord, unless you have any questions on
incorporation I was then going to move to the question
of suspension which is Common Issue 14. In terms of our
closing, it is at page 148, {A/8/148}. It's a quicker
way of getting these points. At page 148 you will see
the issues on suspension.
MR JUSTICE FRASER: Where are we going?
MR CAVENDER: My closing.
MR JUSTICE FRASER: Can you give me the paragraph number?
MR CAVENDER: Paragraph 421, just above 421 {A/8/152}.
MR JUSTICE FRASER: Yes.
MR CAVENDER: You will see there are two issues on
suspension. One is an issue on construction, 14:
"On a proper construction of the SPMC and NTC, in
what circumstances and/or on what basis was Post Office
entitled to suspend ..."
Then two clauses of the SPMC and NTC respectively.
64.13, that is obviously a reference to the relevant
implied term. That is why I am going to deal with the
implied terms in relation to subject matter as I said
I would this morning, and this is my learned friend's
implied term which he says should be incorporated:
"Not to suspend Claimants: a. arbitrarily,
irrationally or capriciously; b. without reasonable and
proper cause; and/or c. in circumstances where the
Defendant was itself in material breach of duty."
They are the three elements of the implied term he
asked to be incorporated.
It doesn't stop there, however, because at 421 we
outline that in addition to that implied term ...
alleges based on the Individual Particulars of Claim
that the express contractual terms were limited
additionally in the following ways:
"(1) Post Office could not suspend on a 'knee jerk'
basis, and (2) Post Office could not suspend without
first giving 'fair consideration to all relevant
circumstances and to whether or not to suspend the
claimant even if the threshold for doing so was
established'."
Does my Lord see that?
MR JUSTICE FRASER: Yes.
MR CAVENDER: So those are the basket of issues on
suspension based on the express term first, and then
coupled with the implied terms at 64.3, and those also
on the same subject arising from the IPOC.
MR JUSTICE FRASER: The IPOC one isn't separately identified
in the Common Issues, though, is it?
MR CAVENDER: My Lord, no.
MR JUSTICE FRASER: There is no knee-jerk one in the Common
Issues.
MR CAVENDER: No, quite. This is an addition.
MR JUSTICE FRASER: But the fair consideration of all
relevant circumstances may just be a different way of
saying not capriciously, arbitrarily or irrationally.
MR CAVENDER: Who knows. The IPOC one, to be fair, is said
to be a matter of construction as we say here. But
whether you could actually get there by way of
construction is another matter.
MR JUSTICE FRASER: I know that. But insofar as -- I am
taking the Common Issues as an agenda for questions to
be answered in this trial.
MR CAVENDER: Quite.
MR JUSTICE FRASER: And all of the different ones dealing
with suspension are identified in Common Issue
effectively 2 and 14 together, probably.
MR CAVENDER: Exactly. It's 64.13 one, yes. We say that
actually the terms of the contract rule unsurprisingly
at 423, section 19, clause 4:
"... may be suspended if that course is considered
desirable in the interests of the Post Office Limited,
consequence of ..."
And then we set out the grounds, (a) being arrested,
(b) having proceedings, (c) irregularity or misconduct
where he holds appointment, et cetera:
"... are admitted or are suspected and are being
investigated."
In relation to that, we indicate at paragraph 429 in
this closing {A/8/154} that it might at most be implied,
if your Lordship felt it appropriate, that --
MR JUSTICE FRASER: It is difficult to see that the
Post Office would be arguing that it was positively
entitled to exercise a suspension irrationally.
MR CAVENDER: My Lord, yes. But that is not of course --
forensically that is how my learned friend put it.
MR JUSTICE FRASER: I know. But you can appreciate my
point, I think.
MR CAVENDER: Of course. And that is why, as we say in
paragraph 429, we suggest at most you might, given that
kind of point my Lord makes, is that the decision to
suspend should be reasonably based on one of the three
grounds I have just outlined. That would be permissible
and something I would not argue against if your Lordship
were minded to do it.
Then 424, the NTC, you can see the relevant wording
is:
"... to be necessary in the interests of Post Office
as a result of ..."
There being a whole list of grounds and this one
being, 15.1.3 being the relevant one here:
"... insolvent ... suspect the operator ...(Reading
to the words)... including any financial irregularities
or misconduct."
Cs' case on this makes no attempt to look at those
words as a matter of construction and say what they
should mean. It really proceeds on the basis there are
no words and incorporates and states how the right to
suspend should in fact operate. Not by saying you ought
to include a word here or a word there or -- their
starting point is not one of construction.
So for instance when in 426, and these are the
construction ones:
"... knee-jerk ... fair consideration of all
relevant circumstances (where relevance is [not]
defined, only in negative terms) ..."
That is not a process of construction. These are in
truth, although it says it is, further implied terms, if
they are anything.
There is nothing in the contractual words to suggest
Post Office would have to give fair consideration. On
the contrary, the words used indicate in the SPMC that
the Post Office has to reach a view if suspension is
desirable in its interests and necessary under the NTC
for one of the stated reasons.
And reading from 427, we say {A/8/154}:
"It would be commercially absurd for Post Office
...(Reading to the words)... Cs contend was required."
So if you take the example of someone going on
an audit, £8,000 is missing, postmaster can give no
credible or other explanation as to why that is.
You can't fully investigate at that stage obviously, but
you must be entitled to suspend because you are
preventing further leakage in the word or theft of cash
in a case where there is dishonesty.
Similarly if there is rank incompetence, they don't
know what they are doing and they are losing cash by
reason of that, you have to protect yourselves from that
too, from that side of the -- you can't allow that state
of affairs to continue. You certainly can't have
a construction or implied term that prevents you doing
so. And the Post Office must in those circumstances, in
my submission, have the right, because that would be
desirable under the SPMC or necessary under the NTC.
And whilst I accept that under the SPMC the desirability
in terms -- sorry, the decision should be reasonably
based on one of those grounds, and hence not arbitrary,
irrational, capricious or without reasonable cause, and
obviously properly related to one of those grounds,
given that there is no need in my submission for any
further tinkering with that clause.
MR JUSTICE FRASER: What is meant by the phrase "in
the interests of Post Office"? Does that mean
commercial interests? Does that mean reputational
interests? Does it mean any type of conceivable
interest?
MR CAVENDER: Yes, legitimate. It wouldn't be -- it's in
their legitimate interests as a business.
MR JUSTICE FRASER: Legitimate interests as a business.
Right.
MR CAVENDER: The other point, my Lord, we say at 430, again
it's very much up to your Lordship but I won't argue
strongly against it, is if, as we say, we might argue
with some force the power to suspend the subpostmaster's
remuneration during the period of suspension, and we
would accept there is a strong argument there to say
that that should be -- should not exercise that power
dishonestly or in arbitrary, capricious or irrational
manner. If you remember the evidence from the
Post Office, the witness said he would never do that,
and if there was no good reason for the suspension, as
it turned out, that he would be minded to repay. Again,
I won't argue against, if your Lordship felt it
appropriate, a cog of that type on that particular
right.
We then deal in the following part attacking the
idea of -- put forward by the claimants about you can't
operate this if Post Office's conduct, you were in
material breach. You can imagine a case where you might
be in material breach in a particular way, for instance
say you had not paid fees for some reason. That doesn't
mean to say if you then go in and find there is theft or
whatever you couldn't suspend the Post Office. You
would be in material breach of contract because you
hadn't paid for whatever reason, there might be some
dispute as to something. But quite why the fact that
Post Office might be in material breach would prevent
you exercising the right to suspend is beyond me.
432. Basically the case put forward by my learned
friend again is on employment grounds. He observes that
employment contracts, employers' right to suspend
employees should not be based on reasonable grounds and
he has some cases for that. We say it is wrong for
a number of reasons. First, you can't just extrapolate
at will from employment law to these contracts. This is
a business-to-business relationship, at least in very
large part, even in my learned friend's case.
The businesses which Post Office contracts with are
sometimes individuals, sometimes they are small business
people. On the other hand there are thousands of
branches run by large corporates or who run multiples
branches. And 433, you see the reference there,
{Day7/156:1}.
So you can't sensibly in my submission, and my
learned friend runs away from this point, but assuming
the contract means the same for everyone more or less,
then you can't proceed upon the basis of the lowest
common denominator. Some of these people are
companies -- sorry, some of the contracting parties are
companies, others are multiples, and others are
obviously businesspersons.
Then we say:
"Second, even in employment contracts ...(Reading to
the words)... should be implied."
That is from McClory v Post Office where David
Neuberger QC, as he then was, at the top of 152
{A/8/156}:
"There is no general obligation on an employer to
act reasonably ...(Reading to the words)... lack of
clarity in wording of the terms."
There is no actual lack of clarity in these terms,
and even if there were, that wouldn't be a warrant to
rewrite the clauses.
Thirdly, they seek to rely upon the implied term of
trust and confidence in Gogay v Hertfordshire. But
of course this is in the employment context where the
implied term of trust and confidence reigns. It doesn't
reign here, in my submission. The Lord Justice said:
"The question is whether ...(Reading to the
words)... such as to destroy or seriously damage the
relationship." {A/8/157}
MR JUSTICE FRASER: I think the word "required" should be
"did not permit". The implied term didn't require
conduct such as to destroy. It was to prohibit or not
require.
MR CAVENDER: My Lord, you are quite right. That was a case
of course about suspension and allegation of sexual
abuse, and recorded an allegation of that where you have
other factors when you are recording as fact something
as a ground for them. It's misbehaviour of that kind.
So we say for the reasons set out above there is no
generally implied term of trust and confidence here so
the employment context is neither here nor there.
We say also it is worth emphasising C's case is not
merely the power to suspend must be exercised
reasonably, they in fact argue for a multiheaded term
which includes both unwarranted specific provisos, ie
material breach thing, and unwarranted (inaudible)
thresholds, whether or not the relevant threshold for
doing was established. I don't know what that means,
I don't know how as a matter of contract you could
possibly imply a term on that basis, saying there is
a threshold for it, but even if you are going to
exercise that somehow, there are some other relevant
considerations that are not in the contract, I'm not
telling you what they are, but must have regard to them.
None of it makes sense at all.
There is no shred of support for a term of that kind
in any authority you have been shown and in my
submission it is completely unprincipled.
Even in McClory and Post Office, top of 153 now
{A/8/157}, the judge emphasised:
"... in rejecting an attempt to imply a term that
the employer should give full reasons for the
suspension ...(Reading to the words)... that is more
than even the judicial process would demand and cannot
be achieved by implying terms."
That is what we say about suspension.
MR JUSTICE FRASER: Yes.
MR CAVENDER: Termination. On the same page we set out
there the various contentions in this area. So 15:
"On a proper construction of the SPMC and NTC, in
what circumstances and/or on what basis was Post Office
entitled summarily to terminate?"
And 16:
"On what basis are you entitled to terminate on
notice without cause?"
And 64.14 is the suggested implied term:
"Not to terminate arbitrarily ...(Reading to the
words)... material breach of duty."
So it's very much a re-run of the suspension
arguments. As you will know, summary termination, 438,
section 1, clause 10:
"The agreement may be determined at any time in case
of breach of condition or non-performance of obligation
..."
And 16.2 of the NTC {A/8/158}:
"... may terminate ... immediately on giving notice
to the operator ..."
And 16.2.1 to 16.2.16, there are four grounds of
those set out here. The relevant one here:
"Commits any material breach of the provisions of
the agreement or any other contract arrangement ...
These terms expressly permit termination for cause,
subject only to the express limitations in them.
"Cs position ...(Reading to the words)... on a knee
jerk basis."
So that comes in as well. This should be rejected,
we say, for much of the same reasons on suspension.
In relation to section 1, clause 10, the short
answer to C's argument is that a clause which entitles a
party to terminate a contract (inaudible) in material
breach is generally interpreted to mean material breach,
ie repudiatory breach, see Lewison clause 17,
paragraph 17.16. We say that is supported here by the
use of the phrase "breach of condition". That is
repudiatory breach, that is an objective test, and there
is, we say, therefore, no basis for interpreting the
clause in the way suggested by the claimants. Nor is
there any necessity to subject it to the implied terms
to the same effect. It's a bog-standard, well-known
provision in the contract for termination or
repudiation. Nothing more, nothing less. Unvarnished.
And there is no reason for this court to even touch it.
443, we do the same for the NTC. It is exactly the
same reasons.
As we see at 446, we extract from McClory v
Post Office {A/8/159}:
"An employer does not have to act reasonably when
exercising his express or implied right to determine
a contract of employment."
So that is 15.
Going to 16, termination on notice {A/8/160}.
Earlier on I took you to the case of Geys which was
a case of termination on notice, three months' notice,
in circumstances where pejoratively you could say he
didn't deserve it and it was done cynically in order for
the bank employer to obtain a benefit, windfall, namely,
the last slug of his £2 or £3 million in bonus he
wouldn't get because he wasn't employed at year-end.
That is how the clause went. Not so much as a wrinkle
on the face of the Supreme Court that the bank could do
that, providing they followed the right procedure.
There is nothing inherent within exercising a notice
that there is any good faith or reasonable or other
requirement.
MR JUSTICE FRASER: It all depends on the terms of the
contract.
MR CAVENDER: Of course. But it is a contractual right.
What my learned friend, remember, here, is doing, he is
not saying it depends on the terms of the contract, he
advances the case that you should imply certain cogs on
that right, and he says the contract should be construed
in a way, in my submission, that it doesn't really -- it
can't possibly bear.
At 448 we set out the provision of six months'
notice.
As we say in 449 {A/8/160}:
"In addition to the implied terms alleged at 64.14
and the alleged provision on knee-jerk, Cs contend ..."
There's an additional further one here:
"... termination could not be given without
Post Office applying conscientious consideration to
whether to terminate and what period of notice to
give ..."
You can see we set out what they say. We say quite
simply, as a matter of contract, there is no basis for
any of this. The words of the contract are clear.
There is no ambiguity in the language. This is a common
provision in a contract for termination on notice.
To take a capability type situation. Say you have
someone who is not dishonest, so you can't say that they
have repudiated the contract, but they turn out to be
useless. You try and retrain them, try and help them,
but they are absolutely useless and you want to get rid
of them, quite reasonably. You give them three months'
notice and that must be an entitlement in the commercial
contract to do that and not for it to be hedged around
with all these cogs and obligations.
The other point to remember here, my Lord, is the
right to terminate in both these contracts is mutual.
Both the postmaster and the Post Office can terminate on
three or six months' notice, and it is Mr Sabir I think,
if you remember, quite early doors on, whether it is
Crossflatts or -- did give notice to terminate. He
didn't make enough money, he accepted in evidence, if
you recall.
What is good for the goose must be good for the
gander here. My learned friend doesn't deal with that
side of the coin as to if there are any cogs on these
rights, they must be mutual. Once you realise that, the
whole thing becomes fanciful.
MR JUSTICE FRASER: Yes.
MR CAVENDER: Then we -- at 453 {A/8/161} we say:
"If the court were to read ...(Reading to the
words)... many other contracts which use the same
language."
Going back to Richard Salter QC, the deputy judge in
Monde, where he says:
"The purpose of the contractual right to terminate
is to give the party on whom ...(Reading to the
words)... to consult anyone's interests but its own."
It may be that the Post Office, if it sees fit, may
decide not to fully enforce a right in a contract, as
in fact turned out to be the case in some cases. That
does not alter the terms of that right. It may be that
to preserve goodwill or whatever, both the postmaster
and the Post Office will agree for the postmaster to
stay in post until someone suitable has been identified
by the postmaster or by Post Office. That doesn't alter
the legal rights. The fact that the goodwill wants to
be maintained is not a surprise, and my learned friend
says, well, how -- it's one of his grounds for trying to
attack these terms.
But the goodwill and the investments my learned
friend relies on so heavily, they are not wasted. The
whole idea of the replacement SPM in times of difficulty
is to maintain the goodwill for the benefit of the
postmaster as well as obviously the Post Office, and
they can then pass that on and sell that business to
another postmaster in the way that they bought it. So
this idea that there are huge investments and that is
inconsistent with the express terms of the contract in
my submission is significantly overblown, and in fact it
is a question of -- Mr Sabir himself, he -- you couldn't
say Mr Sabir had fully earned out whatever it was he had
invested at the time he gave notice. It was very early
doors. He had decided to get out and he must be
entitled to do that, otherwise, to ask Mr Green
rhetorically, how does he say these rights work against
Mr Sabir? Can he not give a notice to terminate?
Because that must be the logical impact of what he says
but he never, in my submission, faces that.
Then we at 455 focus on the idea that the
termination should not follow reasonable correspondence.
Again I don't know what that means.
We deal with the capability issue over the top of
158 {A/8/162}, and then we make the point by reference
to Geys at 457.
So what my learned friend is doing here in this
respect is going even further than the employment
contract. He is very fond of saying it is an employment
context when he fancies it. In this respect he doesn't
fancy it because if you look at something like Geys,
where there is a three-month notice provision and they
make it and no one suggests there is any kind of cog on
that, and as I say there, what he is trying to do,
although silently and perhaps not intellectually
honestly, is introduce a concept by way of common law
that you can't have an unfair termination of contract.
It's a bit like statute through the Employment
Rights Act 1996, of course it has a right not to be
unfairly dismissed. There is no such common law right
not to have a contract unfairly terminated. That is not
the law of England. And there is no other grounds to
seek to import it now.
My Lord, I see the time. Is that an appropriate
moment for a break?
MR JUSTICE FRASER: Yes, I think it is. Until 3.15 pm.
(3.06 pm)
(A short break)
(3.21 pm)
MR CAVENDER: My Lord, there are three points outstanding.
There's the true agreement Autoclenz point, then the
Unfair Contract Terms Act point briefly, and then
finally the Post Office's agent point. So they are the
three points I am going to deal with in the remaining
time, and I won't take all the remaining time.
Autoclenz then. If we can go to paragraph 458 of
the closing is where we summarise the argument.
{A/8/164}. Common Issues 17 and 18.
17 reads:
"Do the express written terms of the SPMC and NTC
between Post Office and subpostmaster represent the true
agreement between the parties as to termination ..."
And Autoclenz is relied upon.
If not, was the true agreement between parties as
alleged by the claimants at paragraph 71.
So if they lose on construction/implied terms, this
is their fallback position in relation to the term as to
notice, and it's limited to that.
They also seek to deploy this agreement, we say in
459, as an additional purpose, to contend Post Office
cannot terminate without giving notice such as the court
may hold reasonable. So they're trying to use it for
that purpose too and they say not less than 12 months in
that connection.
So the Cs are arguing when you stand back there's a
clear gap up rectification not bridgeable by the
ordinary processes of construction or the implication of
terms (or indeed rectification), and the contract as
agreed was not the true agreement between the parties
in fact. We say this is a highly unorthodox submission,
and the court really shouldn't look beyond the written
terms of the parties to find the true agreement, and we
rely there on what Lord Neuberger says in Secret Hotels2
v HMRC at paragraph 31 where you will see he outlines:
"Where parties have entered into a written agreement
...(Reading to the words)... parties' respective rights
unless it is established it constitutes a sham."
{A/8/164}
My Lord of course knows what a sham is. And 426,
Chitty helpfully explains what that is and we have the
bits highlighted in the middle:
"... an agreement may take effect ...(Reading to the
words)... and not an employee." {A/8/165}
That of course is the example of Autoclenz itself.
Can we go to Autoclenz which is in volume 1, behind
tab 27. I think my learned friend took you to that very
briefly, the bit that ... The judgment of Lord Clarke in
particular at paragraph 32 merits study. {A1.1/39/1}
MR JUSTICE FRASER: 32.
MR CAVENDER: Paragraph 32, yes, where he is quoting from
Lord Justice Aikens {A1.1/39/11}:
"... stressed ... the importance of identifying what
were the actual legal obligations of the parties. He
expressly agreed ...(Reading to the words)... intentions
or true expectations of the parties because of the risk
of construing too much from what were the private
intentions of the parties."
My Lord, that in my submission is really the
important focus here. Once you realise that this is
a sham principle and the Supreme Court here is saying
you don't look at the subjective true intentions of the
parties, then the point becomes very easy. My learned
friend hasn't even put forward what the sham contract
was and what it was meant to be, and it is very odd to
say it is a sham in relation to one aspect only. In
Autoclenz, the whole thing was about whether they were
employees or --
MR JUSTICE FRASER: They were described as subcontractors
but they were actually -- well, in law they turned out
to be employees.
MR CAVENDER: Exactly. But here my learned friend is just
identifying one aspect of it, just one term, which is in
itself odd conceptually. Everything else was fine and
agreed and true but in this one respect it wasn't, so
that already is really beyond the pale.
And secondly, there is no suggestion that
Post Office didn't think it had the right, and
occasionally did use the right, to terminate on three or
six months' notice. In fact that is the very complaint
made by Mr Bates, for instance, that that is exactly
what they did.
So normally a sham is where the contract says one
thing, and no one intends that to be how it should be,
there is some other intention hidden, often for a tax
reason, and that is the true arrangement or contract.
That just doesn't fit with this point, the way it is
put in this case. It is put because they don't like the
three or the six months, but there is no sham here. It
is just that they don't like it and they think it
operates in a way that is contrary to their interests.
We outline this at 467 of the closing. We say at
468 {A/8/168}:
"The court's role is to determine to what was
agreed."
And we say the first and normally last port of call
would be the four corners of the contract, but in either
case we say the purpose of the exercise to identify the
actual legal obligations as agreed, not to displace them
by reference to what one party would like the agreement
to mean or what the usual practice of the parties may
have turned out to be. It is much more of that kind of
case. In fact, Post Office didn't always hold to three
or six months, and nor did the postmaster. Sometimes he
gave notice and stayed on longer. Why? Not because he
was obliged to do so but because his commercial
interests suited him to wait until such time as he got
someone else to take over the business. All perfectly
reasonable. It doesn't make the agreement a sham. It's
behaviour that's perfectly explicable by reference to
the respective commercial interests. It doesn't alter
the meaning of the contract.
The fact that one party doesn't always enforce
a contract in a particular way doesn't mean to say it
reserves the right to do so, and there are legitimate
grounds for doing so, say on notice, and I gave the
example of the capability. So it is not as if it is
a sham. It is not having a right or, in Autoclenz,
a status which isn't real. You may hope not to
terminate on notice very often. You may hope not to
have use that very often. You have the right to and
sometimes you will, but that doesn't alter the content
of the contract, it doesn't make it a sham. And
Autoclenz, in my submission, is really limited to, and
you've seen Chitty and the other works on this, it is
really relating to status. And if you look at what
Lord Clarke says, that this isn't going to be rolled
out, this principle, into other contracts.
Then we say at 470 more specifically it's very odd
for them to argue termination provisions only. Cs have
not identified any conduct on the part of Post Office
from which it could be sensibly inferred what the true
agreement was as they allege. As I say, they just
suggest it was termination consistent with the terms set
out in written agreements rather than inconsistent with
the terms they now allege. Obviously there is no
analogy with the stark contrast between Autoclenz and
the written terms and the facts on the ground.
As we say in (c):
"Even if Cs were to plead and prove that Post Office
did not enforce the termination provisions as drafted,
this fact would also be consistent with the Post Office
adopting a practice more in favour of the SPMs."
And we see by analogy the Pimlico case.
"The fact that one party acted more ...(Reading to
the words)... not part of the true agreement."
At 471 we track the language of Lord Clarke in
Autoclenz {A/8/169}, and we say the SPMC and NTC are
ordinary contracts or commercial contracts, they are not
in the special species of contract of employment
contracts and relationship. My Lord will know, if you
have done much employment law in the past, the question
of status of employees from ready mix concrete onwards
about the control tests and the various elements of it
has been hotly contested for many years. Autoclenz is
if you like in that line of authority, showing that if
you pretend it is one thing and in fact it is another
then the law won't recognise that. It is really no more
or less than that. It has nothing to do with this case
and in my submission the point really goes nowhere.
MR JUSTICE FRASER: Yes.
MR CAVENDER: That is true agreement, my Lord. Now unfair
contract terms. That is at paragraph 601. {A/8/214}
The points here are slightly more fundamental and they
are in my submission reasonably clear.
So 601, page 209, were any or all of the terms
identified in Common Issue 5 unenforceable pursuant to
the Unfair Contract Terms Act 1977. The first point to
note in passing is that is a whole swathe of clauses.
It is the main operative clauses in the agreement. So
it is not identifying any particular one saying this is
unfair, they are saying they are all unfair for common
purposes, ie the main ones we have been dealing with.
We say both of those -- the contention they are is
without merit at all. We set out section 3 of UCTA
at 603, and at 604 we say they must satisfy two
threshold requirements. That, first, they were dealing
with Post Office written standard terms of business, and
two:
"The clauses complained of purport to entitle
Post Office ...(Reading to the words)... or no
performance at all."
We say they don't satisfy either of those. We say
true it is these are standard terms. That is true. But
they are not standard terms of the Post Office's
business, because that requires you to establish what
the Post Office business is. The Post Office business
is the selling of stamps, postal orders if they still do
it, financial services and things of that kind. Whilst
they do that through the agency of postmasters, that is
not their business, and so these are not the standard
terms of their business, and there is authority in Court
of Appeal in Commerzbank v Keen and some other
authorities that support that contention.
It is quite interesting here because Commerzbank v
Keen is actually an employment case involving bankers,
and here my learned friend says but that is an
employment case so somehow the principle is different
when you have agents. In my submission, when you look
at the reasoning in that decision it applies here. You
have to identify what the business of Post Office is,
and it is -- if you ask someone in the street what is
the business of Post Office, the reasonable man, he
would say, "Well, it is where I buy my currency for
holidays, take my post, et cetera." He wouldn't say the
business of Post Office is employing postmasters.
So we then deal with Commerzbank v Keen: volume 1,
tab 20. {A1.1/29/1}.
MR JUSTICE FRASER: Where are we going in here?
MR CAVENDER: Volume 1, tab 20, decision of
the Court of Appeal.
MR JUSTICE FRASER: Yes, Commerzbank.
MR CAVENDER: Exactly. We'll start probably at ...
MR JUSTICE FRASER: 101?
MR CAVENDER: From the conclusion alone, I think we can,
my Lord, yes {A1.1/29/18}:
"I do not see how it can be argued with any real
prospect of success that under such a term for
remuneration Mr Keen 'deals as consumer' with the Bank.
As a matter of principle and of construction of section
3 I have been assisted in reaching this conclusion by
the analysis of Professor Mark Freedland in the 2nd
edition of his work The Personal Contract of Employment.
I agree with his general conclusion that:
"'This body of regulation is of marginal application
to personal work or employment contracts ...'"
Et cetera. And he sets out the fairness of that.
But in 103:
"For similar reasons I have reached the same
conclusion on the issue whether Mr Keen contracted on
the Bank’s ‘written standard terms of business’ in
relation to the provision in the discretionary bonus
scheme requiring him to be in the employment of the Bank
at the date of payment of the bonus.
"104. As Morland J pointed out in Brigden the
relevant business in that case, as in this case, is the
business of banking. The terms as to the payment of
discretionary bonuses were not the standard terms of the
business of banking. They were the terms of the
remuneration of certain employees of the Bank, such as
Mr Keen, who were employed in part of the Bank’s
business."
So too, my Lord, in my submission here, namely, the
subpostmasters were retained as agents as part of the
postmasters' business of supplying postal services,
post office services, foreign currency and the like to
members of the public.
So the first requirement in section 3 of the Unfair
Contract Terms Act is not satisfied. Secondly, if you
go to paragraph 617 of our closing, the second threshold
requirement {A/8/216} is that there is an entitlement to
render substantially different contractual performance
in relation to the impugned terms than that contracted
for. As we say, when we look at those contractual terms
they do not entitle Post Office to render contractual
performance different from that which is reasonably
expected on those terms or render no performance.
A number of those terms are not focused on Post Office
at all. The contractual provisions in question place
obligations and liabilities on SPMs. A number of the
terms listed entitle Post Office to update amended rules
and instructions.
And then Paragon Finance v Nash says:
"There is no relevant obligation on the claimant and
therefore nothing that can quality as a contractual
performance for the purposes of section ...(Reading to
the words)... expected of the party who relies on the
term, the key word is 'performance'."
So we say exactly the same reasoning applies here.
Updating the rules applicable to SPMs does not change
Post Office performance obligations, it changes the
SPM's obligations. The final set of relevant terms deal
with the Post Office's ability to suspend and terminate
contractual relations with SPMs. These are terms which
delineate the duration of contractual obligations rather
than a stripping or neutering of Post Office
obligations. So take in particular the six or three
month termination for these purposes, and we cite Chitty
here:
"It seems unlikely that a contract term ...(Reading
to the words)... would fall within paragraph (b) or, if
it did, would be adjudged not to satisfy the requirement
of reasonableness."
That was a passage approved by Lord Justice Dyson in
Paragon. We also then refer to other case law that
agrees with this.
I think my learned friend took you to the
Sir Thomas Bingham quote. At 625, quoting
Mr Justice Morland in Brigden {A/8/218}:
"... it is not a contract term excluding or
restricting liability of the defendants in respect of
breach of contract ...(Reading to the words)... no
performance in respect of any part of their contractual
obligation (emphasis added)."
So you can see the argument, he is trying to
characterise a three month or six month notice provision
as one which -- under which Post Office in this example
is deciding to render no or substantially different
performance when in fact it is -- the effect of it is
which the subpostmaster no longer has to provide
performance. This is not an area, in my submission,
where the Unfair Contract Terms Act on the authorities
attaches. They don't fall within 3(2).
We then at 628 rely on Barclays Bank v Marsh where
Lord Justice Dyson rejected, at paragraph 21, an
argument on 3(2)(b) {A/8/219}:
"In my view, that is directed at
contracts ...(Reading to the words)... does not require
any contractual performance from Barclays Mercantile at
all."
Cs set out the category of terms, 629. They say:
"... enabled Post Office to render a contractual
performance substantially different ..."
And we set out at 629(a) through to 630 why that is
wrong. We also say at 631, when you look at this and
stand back from it, 3(2) is designed to catch terms,
reliance on which contradicts one party's contractual
expectations. Those expectations will be usually
grounded in other terms of the contract. The examples
given in Chitty are a travel agent who sells a cruise on
a vessel then relies on a clause to change the vessel, a
force majeure clause.
So that is an obvious example where the performance
is on vessel 1 but there is a clause allowing you to go
on vessel 2. That is a clear example of entitling one
party, if there is term that allows it, to render
substantially different performance, particularly if
vessel 2 is not as nice as vessel 1, and a force majeure
clause entitling one party clause entitling one party
not to provide the contractual performance which would
otherwise be expected of him. In those cases, the terms
of the contract generally would entitle you to expect a
certain level of performance which the impugned term
departs from dramatically.
We say my learned friend's case gets nowhere near
that. They say that their expectation grounded in what
was said them before the contract was entered into. And
they authority for the proposition that exceptionally it
can be a pre-contractual representation or promise that
creates the contractual expectation. That is true. To
take an example: Post Office said before the contract
was agreed, don't worry about this clause saying you can
be dismissed summarily, you can't. That might answer
this point.
But C's evidence taken at its highest comes nowhere
near saying that. Their assertions about
pre-contractual discussions and mood music was
comforting, that post Office hoped each relationship
would be (inaudible) and work profitably. As became
clear, this is what the lead claimants meant when they
referred to next page of the partnership, working
together, things of that kind.
They are not on any view in my submission
pre-contractual contradicting the precise contractual
terms they are complaining about. They are really
saying a mismatch between what they hoped and thought
the contract would say and what it actually says. As we
say, that is not a legitimate argument.
In support of this proposition is Hodges. We
outline there the facts of that. And really the bullet
point at the end, they had not claimed to be entitled to
render a contractual performance substantially different
from that reasonably expected of it. We say exactly the
same is true here.
Finally at we 642 {A/8/222} rely on JP Morgan and
Mrs Justice Gloster, as she then was:
"Terms which simply define the basis upon which
services will be rendered and confirm the basis upon
which the parties are transacting business are not
subject to section 2 ... otherwise every contract which
contains contractual terms defining the extent of each
party's obligation would have to satisfy the requirement
of reasonableness."
We say termination provisions and these other
provisions dealt with fall within that category as well.
If we are wrong about all that we set out at 644 and
following why these terms are reasonable. My learned
friend hasn't set out in relation to each term whether
the threshold has been fulfilled, the two thresholds, or
reasonableness, so I am not going through reasonableness
in detail on them all. You can see what we say and you
can see these are terms in a commercial contract that
are not out of kilter or out of expectation though they
are not unreasonable. These are commercial people who
have entered into these agreements, the opportunity to
take legal advice if they wish to do so, and as we said
at (inaudible) they are unexceptional. There is no
inducement by the postmasters to enter into this. If
they didn't want to, they wouldn't have to enter the
contract.
And as we say at 651 {A/8/224}:
"The court assesses the issue of reasonable at the
time the contract is made and not by reference to what
has happened during the course of the contract with the
benefit of hindsight."
That was Mr Justice Flaux in Shared Network. So we
rely on that too.
Finally, my Lord, Post Office as agent, issues 10
and 11. Post Office is not the agent of subpostmasters,
the postmasters are its agent, there is not an agency
going the other way, nor could there be. Firstly, the
premise is a false one because the agency tries to get
into the area in which the postmasters aren't concerned,
namely, the client relationship. Commercially they are
not involved in that. They have no liability in
relation to that as I recite in opening and
Angela Van Den Bogerd says in her witness statement --
The high water point, and maybe the only point at
this point, finds its way into Angela Van Den Bogerd's
witness statement. If we can turn that up.
MR JUSTICE FRASER: Whether a witness says they are or
aren't an agent doesn't really much matter, does it?
MR CAVENDER: That is what occurred to me. But what
occurred to me also, if you read the rest of that
paragraph, which is why I was going to take you to it.
MR JUSTICE FRASER: Let's go there but I'm not sure it adds
to the sum of human knowledge.
MR CAVENDER: Bundle C, C2, tab 1, paragraph 80.2. My
learned friend's favourite. What he reads out, this is
{C2/1/24}, is that Post Office handles this on behalf of
the subpostmaster, and he goes "Ha ha, therefore you
must be an agent. That is what you are saying, isn't
it?"
If you read on two paragraphs down, 80.4:
"It would be contrary to the overall scheme of the
subpostmaster relationship. Nobody at Post Office who
say that it effects customer transactions on behalf of
subpostmasters or that Post Office acts as the agent of
subpostmasters in recording and processing
transactions."
MR JUSTICE FRASER: What I mean is whether nobody at
Post Office would say that or whether everybody would
say that. It doesn't make much difference, does it?
MR CAVENDER: I agree.
MR JUSTICE FRASER: It is the construction of the agreement
and the relationship if there is anything outside the
agreement.
MR CAVENDER: My Lord, that is exactly right. But that
seems to be the foundation for it, which in my
submission is also flawed.
My Lord, I think there are various bits of
housekeeping I think now. That is the end of my
submissions. Perhaps you will hear from my learned
friend or ask me questions now.
MR JUSTICE FRASER: I have a couple of questions but I just
need to check whether any of them are other than
housekeeping, if they are I will deal with all the
housekeeping together. (Pause)
This goes to notice really. It might be you haven't
got anything to say on it more than you have said
already. But Mr Green made the point that so far as
notice was concerned, the evidence demonstrated that, as
he put it, I might be paraphrasing, this might not be
the exact words, an outgoing subpostmaster could be or
was forced to stay in post longer than they wanted until
the Post Office was ready to effect the transfer, was
the exact phrase he used. Is there anything you want to
say particularly about that?
MR CAVENDER: In my submission, the evidence didn't show
that. What it showed was, where there were those
examples, was that the postmaster, in order to maximise
and maintain his goodwill, was arranging commercial
arrangements with Post Office as to timing. You can
describe that as being kept in position if you like.
But of course it doesn't -- the legal rights of the
postmaster to give three months' notice or six months'
notice and walk, there is no doubt about that, we have
evidence had no heard that isn't the case. We have had
evidence that in practice both sides sometimes decided
that wasn't in their commercial interests. So
I don't think it helps in terms of -- to really take the
argument any further.
There is no suggestion there is some variation of
contract or some -- there is no case along those lines
that somehow there was a change to the contractual
rights. There is some evidence that in practice to
maintain goodwill that the postmaster stayed in
position. He didn't have to.
MR JUSTICE FRASER: Didn't have to but, notwithstanding
unhappiness about it, would be co-operative about the
transfer date.
MR CAVENDER: In order to main his goodwill, I surmise.
MR JUSTICE FRASER: All right. The only other point is a
rather more wide-ranging point and this might be putting
an obvious point. It is part of the reason I asked for
these six. It seems to me on the evidence that
the amount of material that was presented for the first
time, even on the Post Office's case, to the incoming
subpostmaster on branch transfer day couldn't possibly
be read in a day. I make that observation simply
because I know how long it would take me to read those
six files in a day.
Am I being unfair if I come to that conclusion?
I appreciate your submission would be on the contract it
doesn't much matter.
MR CAVENDER: That, and also do you have enough time to know
what the documents are, the nature and quality of what
is behind the index or spine. For instance the manual,
or when we look at them, there are all sorts of oddities
there. But it is clear from the face of the document
often what it deals with. True it is you wouldn't, and
wouldn't want to, frankly, read every line in those
documents. They are I suppose one can say reference
documents that are there that are incorporated, but for
you to read the detail as and when if you want to, or
need to, to check on certain detailed matters. I very
much doubt down the road in terms of contractual
relevance.
So it doesn't matter, in my submission, whether you
reach that conclusion or not. It depends how I suppose
you approach it. In terms of, say, the Serv 135
document we have seen, that emphasised in advance
certain specific terms. The IRS 110 for instance is
almost a receipt type document for the lever-arch files
of documents, the contents you have. But I'm not sure
contractual, my Lord, that one gets very much from --
and here the allegations aren't of breach of
paragraph 14 of the foreign currency, or whatever it
might be in the bundle you are talking about, or -- that
isn't in issue.
MR JUSTICE FRASER: But it still comes down to the mechanism
of contractual formation.
MR CAVENDER: It is part of it, yes. But in many contracts
you have reference to very large amounts of documents,
it doesn't mean to say the contract isn't properly
formed, and which is why you have I suppose the
principle that if there are any important terms within
such a situation you couldn't rely on some document
tucked away somewhere for some significant term.
Serv 135 is an example where that wasn't done.
And in fact when you look at the subpostmasters
contract in the NTC, they are relatively straightforward
documents. The terms we talk about, clause 12(12), and
the termination provision, clause 4.1 and the
termination from that, they are all -- they are the main
terms we are talking about, really. There are two terms
in each and they are not hidden away anywhere.
Relatively obvious.
And so it is not a case, in my submission, where
people have been made to sign things and import
obligations in a way that is unfair or doesn't
incorporate them or give them due notice. The fact
there might be other detail and instructions in the
background in my submission is neither here nor there.
MR JUSTICE FRASER: The importing of obligations is
a separate point. But so far as the evidence on branch
transfer day, quite a lot of the evidence was they were
effectively made to sign things in the sense that
certain documents were presented to them in a rush
referring to other documents, which, in this instance,
are obviously quite lengthy, which they couldn't
possibly be expected to read on that occasion.
MR CAVENDER: My Lord, no, I accept that. And I think the
evidence was there were I think six or seven, but there
were --
MR JUSTICE FRASER: Six or seven documents.
MR CAVENDER: Had to be signed.
MR JUSTICE FRASER: I think one of the witnesses said 12 but
some were duplicates but six or seven were the number of
different documents.
MR CAVENDER: We know what two or three of those are. ARS
10 single page, the appointment page single page. And
although some of them gave evidence that it was rushed,
some of it wasn't rushed. They had a whole afternoon
and it wasn't until the following morning the thing was
going to open. So it was a varied picture.
At the end of the day I'm not quite sure where this
takes you because if I am right on the SPMC and the
signature of that document, the appointment document,
the terms and conditions, that is what we are disputing
in this trial. If we were disputing or someone was
disputing some obligation in appendix 15 of one of
the manuals, then I could see your Lordship's point.
But here, given this isn't a public inquiry into the
whole of the contract and all the details, in my
submission it doesn't seem of first relevance but -- and
the other point of course is that all this is
post-contract on the claimants' case. And on our case
indeed. Both parties say that the contract was formed
at the signing of the terms of appointment. All that is
before the takeover of the branch which is often --
sometimes a week or two after, sometimes a month or two
from memory.
So again I am not entirely sure what contractual
relevance it has --
MR JUSTICE FRASER: It is part of the picture of how the
incoming subpostmaster takes control of the branch.
MR CAVENDER: That is true.
MR JUSTICE FRASER: There is undoubtedly the involvement of
the Post Office on that day.
MR CAVENDER: Indeed.
MR JUSTICE FRASER: And there are a number of documents and
formalities that are completed on that day.
MR CAVENDER: That is true.
MR JUSTICE FRASER: It would be rather artificial completely
to ignore it. You are right, it might not necessarily
feed into any of the points on construction on the
actual terms for these Common Issues, but if one is
dealing with contract formation it would be odd
completely to ignore it.
MR CAVENDER: My Lord, yes.
MR JUSTICE FRASER: And I note that the Post Office seemed
to have, as you put it, improved or reformed its
procedures generally anyway between the SPMC and the
NTC.
Right, unless there is anything else you would like
to say about that.
MR CAVENDER: There are some other housekeeping points
I will report to you on but I think my learned friend
wants to reply.
MR JUSTICE FRASER: The final point to you, which is not for
an answer now but is yet again something I need, I am
afraid, and I know for some of the claimants it is the
same, the same date, but the two of you will have to
liaise. I would like on a single piece of paper,
please, in respect of each of the six lead claimants,
just the date on which each side contends the contract
was in fact formed. That is just to save me tracking
through the hundreds of pages to work out the date
myself. So no submissions, literally just calendar
dates.
MR CAVENDER: I think it is all agreed apart from
Mrs Stubbs.
MR JUSTICE FRASER: I think it is as well but I would just
like it in black and white in one place as a ready
reckoner. Monday by 4.30 pm would be fine.
MR CAVENDER: Did you want primary and alternative --
MR JUSTICE FRASER: If you have primary and alternatively
cases put them in. If you want, you can put a reference
to the paragraph in your closing where I need to go to
to look for more detail but I want a ready reckoner page
with the dates.
Thank you, Mr Cavender. Mr Green.
Reply submissions by MR GREEN
MR GREEN: My Lord, I won't detain you long. Just in
relation to the point your Lordship raised with my
learned friend just now about the branch transfer day,
we respectfully say it does have quite an important
bearing on the Common Issues. Because my learned friend
has submitted that the contract made no contractual
alteration of the accounting obligations of the
subpostmasters. That is not correct. Both the SPMC at
section 12, clause 4 and the NTC at 3.6.1 both imposed
an obligation on a subpostmaster to account, in
the latter case as the Post Office may require in
accordance with the manual, SPMC, I can't remember the
exact words but broadly similar terms.
Neither of those documents when received would
reveal to the subpostmaster how they were in fact going
to account in the way about which your Lordship has
heard evidence. So that question can only be determined
by your Lordship working out what the reality of that
accounting obligation was under that term, as
Post Office on the facts require it to be, and that is
why it is factually relevant. But it is also
significant that that in fact does turn it into a car
park case where you learn what the reality of that
obligation is after you are not just committed to going
into the car park, but parked.
MR JUSTICE FRASER: I'm not sure I really need to decide
whether it is or isn't a car park case but I realise you
are using that as shorthand.
MR GREEN: I am grateful.
MR JUSTICE FRASER: Certainly Mrs Stubbs and Mr Bates and
the other claimants would probably express a degree of
lay surprise that it either was or wasn't a car park
case.
MR GREEN: I understand the point. I was referring to the
Shoe Lane point.
Your Lordship will note that 3.6.1 in the NTC and
3.6.3 in the NTC at {E5/137/38} made provisions first as
Post Office may require, and then in the case of 3.6.3:
"In accordance with the provisions contained in
the Manual ..."
Capital M. And your Lordship has the definition of
the manual to which we have gone before on page 64 of
that document. With a capital M it is very wide.
{E5/137/64}.
MR JUSTICE FRASER: This is the same point you just made.
MR GREEN: That's just a point of detail on that point.
My Lord, then in relation to the evidence that
your Lordship asked my learned friend about just now,
about the position of outgoing SPMs, if your Lordship
could look at page {A/6/89} or internal page 85 of our
closing submissions, we have dealt with this point at
paragraph 195. My learned friend asked what would
Mr Sabir say rhetorically, when he was making his
submissions earlier on.
We know what he would have said rhetorically because
he took care to set out his evidence in his witness
statement that he was told, so we see:
"However ..."
Halfway down in the right margin:
"... Post Office told me I had to stay in post at
Crossflatts."
And that evidence was not challenged at all. And
thereafter we set out the other evidence in relation to
that point.
So that is that one.
There is a point of correction in relation to
Autoclenz -- two short points of correction. In
Autoclenz they weren't employees, all they were -- it's
perhaps quite an important point. They weren't
employees, they were limb B workers who fell within the
limb B definition because they rendered person service
and because of mutually of obligation. So they weren't
actually employees, that is quite important to note.
Secondly, Lord Clarke actually expressly rejected
the submission made on behalf of Autoclenz that the
classic sham doctrine was the right approach.
MR JUSTICE FRASER: Yes.
MR GREEN: Then in relation to UCTA, two short points. One
is my learned friend conflates the business of operating
the network of sub-post offices with the serving of
customers. It doesn't cease to be Post Office's
business to operate the network when Post Office itself
operates some Crown branches itself. Similar to
Burger King operating franchises but possibly operating
a few itself as well.
The second point in relation to UCTA. My learned
friend said the claimants' case at its highest didn't
reveal any conduct about rendering a different
performance. One only needs to look at the example of
the National Lottery terminal, it wasn't a promise or
a representation pre-contractually, it was an actual
obligation contractually imposed upon Mr Bates that he
have a terminal in a prominent position which, after he
had then built that up, was taken away from him.
MR JUSTICE FRASER: Yes.
MR GREEN: My Lord, the only other points we have from
earlier, we put in a list as your Lordship suggested.
Can I hand up a copy of that with the three pieces of
homework we were set which we have uploaded to Opus.
(Handed)
MR JUSTICE FRASER: Thank you very much.
MR GREEN: Your Lordship should have there --
MR JUSTICE FRASER: I have four documents, is that right?
MR GREEN: That is correct. So one should be the SPMC and
claimant companies. Your Lordship has probably
appreciated they are not multiples like WH Smith.
I think that phrase was just used casually by my learned
friend but they are not multiples. And it looks as if
there aren't any SPMC companies.
MR JUSTICE FRASER: Yes.
MR GREEN: Then there is --
MR JUSTICE FRASER: Just give me one second. Where am I to
put these? (Pause) You have spirally bound all yours?
MR GREEN: We did.
MR JUSTICE FRASER: Yes.
MR GREEN: That is the first one. The second one was just
to identify the Elizabeth Stockdale disclosure
correspondence which your Lordship asked for.
MR JUSTICE FRASER: Yes.
MR GREEN: And the third one was to make a list of documents
referred by claimants --
MR JUSTICE FRASER: Internal documents about Horizon.
MR GREEN: Yes. We have limited it only to the ones that
were actually directly referred to in the transcript.
MR JUSTICE FRASER: Good.
MR GREEN: Then the reply points your Lordship will see we
have set out briefly. I don't want to go to any of
them.
MR JUSTICE FRASER: I wouldn't let you.
MR GREEN: I am grateful.
MR JUSTICE FRASER: I will read them.
MR GREEN: There is only one other point which I wanted to
explain, a phrase my learned friend found difficult to
understand which was the hollowed out agency point.
My Lord, that is a reference to the lack of choice the
agent would have about the content of the account to be
rendered, taken together with the admitted functions
that we have referred to in our opening and closing
submissions. So if that phrase is not clear, that is
all it means.
Unless I can help your Lordship further ...
MR JUSTICE FRASER: No. You are going to do a document
between the two of you about dates.
MR GREEN: Indeed.
MR JUSTICE FRASER: I just want to make it clear to
everyone, not to you two because I know you will know
this, just because I know lots of the personnel and the
claimants are in court. The resolution of this case is
not going to depend on who has the last word, as I have
said before. So no one should be anxious that the fact
that their side has been the one that spoke last makes
any sort of difference at all because it doesn't.
Mr Cavender.
MR CAVENDER: My Lord, despite what you just said, can I say
something?
MR JUSTICE FRASER: Yes.
MR CAVENDER: The homework that my learned friend gave you,
the SPMC and claimant companies, fine. In relation to
the correspondence, what he has done is sought to
extract various parts of those letters but unfortunately
he has quoted selectively. So for instance bundle
{H.2/8/1} misses the following paragraph which says:
"We note the information in the documents should be
largely known to your client through operation of the
branch."
So although he has tried to be helpful,
unfortunately he has cut off relevant parts.
MR JUSTICE FRASER: There are only seven I think. I think
the H.2 reference is an Opus reference, is that right?
MR CAVENDER: Yes.
MR JUSTICE FRASER: Well, there is an Opus reference for
each. I will read the full letter in each case that has
been referred to.
MR CAVENDER: I'm obliged. And in relation to
the documents, similarly he was just meant to be
producing just a list, again no doubt trying to be
helpful.
MR JUSTICE FRASER: Which documents are we talking about
now?
MR CAVENDER: The next bit of homework. He has extracted
certain parts of the document but not all of them.
MR JUSTICE FRASER: When you say not all of them, you mean
not the whole contents?
MR CAVENDER: Exactly, and not all the relevant ones. If
you look for instance at {G/7/3}, the quote misses the
beginning of the paragraph which says:
"Discrepancies in branch are typical as a result of
cash error over the counter."
He has obviously not done this on purpose --
MR JUSTICE FRASER: I did actually ask him to extract
a quotation.
MR CAVENDER: Did you, my Lord?
MR JUSTICE FRASER: But there are 23 of those and I will
read them all. They all have Opus references.
Housekeeping
MR CAVENDER: I am obliged. In terms of housekeeping on our
side, I think today although (inaudible) report to you
the results of the attempted break into that, we haven't
been able to.
MR JUSTICE FRASER: I don't think you have to report to me.
I think I ordered that if you couldn't get into it,
I should just have a witness statement.
MR CAVENDER: That's by Monday, my Lord, and we will do
that. Just so you know we have tried --
MR JUSTICE FRASER: I will just have the witness statement.
MR CAVENDER: I am obliged.
In terms of homework on my side, so I am clear, we
are going to provide a short note in no more than two
pages in relation to the Australian law article.
MR JUSTICE FRASER: If you want to. It might be you don't
want to.
MR CAVENDER: I am sure we will want to.
MR JUSTICE FRASER: I read it at the time in respect of
something else. I'm likely to read it again. If you
have any particular observations, you have --
MR CAVENDER: So there is that. Also we can provide a one
paragraph on where we say the line is on evidence of
credibility.
MR JUSTICE FRASER: Yes.
MR CAVENDER: And particular focus on that one line in
the witness statement, that kind of trust --
MR JUSTICE FRASER: I just want a clarified, finalised
version of what you say I should be doing, or not be
doing.
MR CAVENDER: There is the one page my learned friend and
I can produce which is the list of dates.
MR JUSTICE FRASER: Yes.
MR CAVENDER: There is also the document my learned friend
and I can produce outlining the processes for TCs and --
MR JUSTICE FRASER: Flowchart.
MR CAVENDER: Flowchart.
MR JUSTICE FRASER: Yes. You think that is it.
MR CAVENDER: That is it.
MR JUSTICE FRASER: I would also like, I haven't asked
either of you for this although it is scattered in each
your submissions in a variety of places, literally
Common Issues numbered, not reproduced, just with the
stark answer that you say should be given to each of
them. You have given me the answers in a variety of
places but I just want a ready reckoner.
MR CAVENDER: In terms of timing for any and all of that?
MR JUSTICE FRASER: When would you like?
MR CAVENDER: I think of those probably the document that we
agree in relation to TCs and -- is likely to be the most
burdensome, the rest are fairly --
MR JUSTICE FRASER: Just tell me how long you would like.
MR CAVENDER: Two weeks, my Lord? I think you suggested two
weeks for something.
MR JUSTICE FRASER: I might have done --
MR CAVENDER: I think you said --
MR JUSTICE FRASER: What day is it today?
MR CAVENDER: Thursday, my Lord.
MR JUSTICE FRASER: A week on Monday is the 17th. So
4 o'clock on the 17th, that is slightly less than two
weeks. It is a mechanical exercise only, it shouldn't
be very difficult.
MR CAVENDER: I am obliged.
MR JUSTICE FRASER: If I were you I would do it this evening
but that is up to you.
That then brings me on to my next point, which is
the only outstanding point, and I'm not trying to be
funny. I am obviously going to reserve judgment.
I will produce this as quickly as I can but it is quite
a lengthy job. It is likely to be at some stage
in January.
I also, as an outstanding point, had to give you
a date for a CMC for round three. I have not given you
a date yet but I said it would be in January. It is
going to be 31 January.
I also said that you would have to address your mind
to a single joint expert for round three, I thought it
was likely to be a forensic accountant but it is going
to be a single joint -- I am going to be approaching
this from the basis of, in the first instance, ordering
a single joint expert on matters of quantum. You will
have to, before 31 January, address your minds (a) to
who that is going to be, and (b) any relevant directions
that you are seeking in January.
MR CAVENDER: What about the prior point, my Lord, that we
have debated. I'm not sure you have ruled on as to when
the third trial is going to be and what it is going to
be of.
MR JUSTICE FRASER: I have ruled on when it is going to be.
I gave a date, and this is in an order already, or if it
isn't, it should be. There is a date in October --
MR CAVENDER: I don't believe -- we discussed it twice
I believe. I may be wrong. I haven't seen an order
with that in. We had two discussions --
MR JUSTICE FRASER: I am sure I gave you dates because I had
an inquiry from one of your clerks saying was it
a fixture or was it a window.
MR CAVENDER: I am looking blank because I am blank.
MR GREEN: I don't recall your Lordship giving us a date but
we definitely knew it is going to be in the autumn
rather than the summer. I'm not sure we actually had
an actual date.
MR JUSTICE FRASER: I am pretty sure you did.
MR GREEN: It may be that none of us have realised that that
was the date if a date was mentioned. It may be our
fault.
MR CAVENDER: I think you may have gone so far to say when
you are available, and there was a mention of it, but --
MR JUSTICE FRASER: I did order a date, I am pretty sure.
MR CAVENDER: I am pretty sure you didn't actually order it,
but anyway --
MR JUSTICE FRASER: I will have to go and check what it is
because it is actually in the court diary, and at least
one counsel's clerk contacted -- from memory, I think it
was the 10 October, but it might have been a week or two
after that. At least one counsel's clerk if not two
different sets of counsels' clerks contacted my clerk
about two weeks ago and said is it a fixture or is it
a window and how many weeks was it?
MR CAVENDER: It might have been my clerk if some other
inquiry came in and I said you had indicated you were
going to list it in October.
MR JUSTICE FRASER: Okay. The answer that went back out
from my clerk, because she showed it to me before she
sent it out, was: it is a fixture, and that is the date.
So there is a date, but I will check what it is and
I will get it redistributed.
MR CAVENDER: The next question, my Lord, is what it is
going to be a trial of. We have debated but you haven't
ordered that, I don't think, as to how many people,
which people, and how we are going to arrive at that
conclusion.
MR JUSTICE FRASER: You told me last time if I was going to
do round three in 2019 it could only be some or possibly
all of these six.
MR CAVENDER: Correct.
MR JUSTICE FRASER: Then you can -- and it is to resolve
them completely, all the outstanding issues.
MR CAVENDER: Yes.
MR JUSTICE FRASER: So you therefore need to address your
minds between now and 31 January as to whether it is
going to be all six or, if not, which number fewer than
six and which of the six.
MR CAVENDER: My Lord, yes. That raises the point that
between the end of January and October is eight months
which isn't very long.
One of the points we have written -- can I hand up
a letter that we have sent I think today, it deals with
the question of limitation. (Handed). All we are
saying is limitation in some of these cases arises.
There is nothing really exciting about it other than to
raise the issue and say this would need to be dealt with
quite early on, because my learned friend's pleaded case
is concealment or fraud to extend the limitation period,
and obviously normally in the way of pleadings that is
put in reply.
If we don't have a CMC end of January and pleadings
whenever, we are not even going to have a pleading on --
MR JUSTICE FRASER: I thought there were Individual
Particulars of Claim already for these six.
MR CAVENDER: No. You are right there are, but there is no
proper pleading worthy of the name on breach issues,
they just tell a story very broadly. There are no
pleadings worthy of the name that could be taken to
trial and have disclosure given on them and things of
that kind. The first thing to be done is the case
properly pleaded by whichever leads your Lordship
choose. This letter seeks to outline where we are on
the pleadings and to say can work be done quite early by
the claimants identifying what their case is on
limitation.
One way of doing that, of course, is to put it in
the Particulars of Claim, because obviously they have
got the Individual Particulars of Claim, they have the
generic pleadings. But if, as is normal, this is put in
the reply, and say we have the CMC end of January, they
are ordered to provide detailed pleadings within, say,
four or six weeks, similar for defences. And then the
reply they take the limitation point that it is --
because in the defence obviously we will take the
limitation point, and in the reply they will say no
under 32.1(c), fraud, mistake, things of that kind, and
we will need to start preparing, looking at that
evidence, which will be quite difficult in a very short
period of time.
So what I am suggesting really, I don't know what
the letter says in detail, is they should put their plea
of limitation --
MR JUSTICE FRASER: Or relief from the primary limitation
time bar.
MR CAVENDER: Exactly, put the particulars in the
Particulars of Claim so we can then deal with that
defence early doors and know what precisely is said.
MR JUSTICE FRASER: The actual steps for round three are
what? And I'm not going to tolerate a war of attrition
bogging everyone down into umpteen rounds of pleadings
because October 2019, as you have pointed out, is not
that far away.
So it is going to be rounds of pleadings, it is
going to be appointment and report of a single joint
expert on quantum.
MR CAVENDER: Disclosure before that.
MR JUSTICE FRASER: Let's put disclosure --
MR CAVENDER: There is quite a lot of disclosure --
MR JUSTICE FRASER: I am putting disclosure off-stage right
at the moment.
Pleadings. Appointment and report of single joint
expert. Evidence of fact. Those are the three headline
point really, aren't they?
MR CAVENDER: There is only one exception or addition, and
obviously the Horizon trial isn't here yet and I don't
know what is going to be happening or what the
judgment --
MR JUSTICE FRASER: I don't think anyone does yet.
MR CAVENDER: My Lord, no. But in terms of planning to
cater for it, you can imagine a case in which you would
want a mini expert report on certain lead claims as to
how those Horizon issues in fact applied to the
individual claimants being tested. Maybe that is going
to be done par excellence in the Horizon trial or it may
not be, I don't know.
MR JUSTICE FRASER: You have already both got Horizon
experts, haven't you, IT experts?
MR CAVENDER: We have, but it depends how granular that is
in terms of --
MR JUSTICE FRASER: When are those expert reports being --
MR CAVENDER: The first round are in. But what I am talking
about more, my Lord, is that has been done across the
piece.
MR JUSTICE FRASER: But only for these six.
MR CAVENDER: Yes, but it is generic, as I understand it,
that trial.
MR JUSTICE FRASER: Yes.
MR CAVENDER: So there is a gap between whatever is said in
those reports and your Lordship's findings and saying an
individual case --
MR JUSTICE FRASER: But insofar as there were such a gap,
that would be need to be addressed by the experts who
are already engaged for Horizon.
MR CAVENDER: Correct.
MR JUSTICE FRASER: So it is effectively a supplementary
report that would be round three specific.
MR CAVENDER: Exactly so.
MR JUSTICE FRASER: I don't think, looking at the outline of
that, that is going to be impossible to achieve for next
autumn. I know you have said disclosure is a
substantial exercise.
MR CAVENDER: My Lord, yes, it is tight, but it is do-able
for a couple, I'm not sure it is do-able for six.
MR JUSTICE FRASER: That is the main question which you
between the two of you, together with your teams, have
to decide between now and January.
MR CAVENDER: My Lord, ultimately it may be for the court
because --
MR JUSTICE FRASER: If you can't agree it will be.
MR CAVENDER: Particularly because the whole investment of
this is for the benefit of the 557. It is not for
people to choose their favourite case, especially as we
know a bit about them now. They need to be the most
useful cases. So it may be if we can't agree we will
have to justify, if you like, our choices by reference
to coverage and the kind of issues that will be
determined within them, rather than my favourite or
something of that kind. It's not often you get that in
group litigation. The court will identify the criteria
that it wants to cover, and you have the population of
claims, and you then put forward your best one or two to
cover that and the court says "I agree with this one
because it has this and that requirement and the other
one doesn't, or there are no documents on that one for
some reason".
And the court chooses why because it is a group
litigation, it is the court's process, and it can't be
just what the claimants or defendants decide are the
best claims. Because both are investing in the whole
and you have to get --
MR JUSTICE FRASER: That is why usually one would agree.
These parties generally or collectively in this case, so
far as I am concerned having seen it for a long time,
can't really agree on very much.
MR CAVENDER: I'm not sure that is entirely fair. We
certainly agreed the population of the issues, we agreed
from the population of claims, 557, it was pared down.
MR JUSTICE FRASER: Mr Cavender, the agreement of the
issues, as in the Common Issues, which I think was
a process started by me before you were involved, took
quite a lot of effort and a very, very considerable
degree of push back from the Post Office about doing it
at all. In fact, the Post Office didn't want a trial at
all this year.
So when I say they can't really agree, it is not
a specific point aimed at you, it is just in terms of
group litigation there are two different approaches.
There is a constructive co-operative approach where the
parties generally collectively agree the most helpful
and cost-effective way forward, and there is a more
attritional approach. I am hoping that the former of
those two will apply for round three but I obviously
have to cater for the fact it might not.
MR CAVENDER: Certainly from my perspective, and I think my
learned friend would agree, we have tried to do that.
It is a complex case and we don't agree on everything.
But certainly from my involvement I found it to be
co-operative, and I have been involved in a huge amount
of group litigation and this has been no different, and
I will continue to do that, obviously.
MR JUSTICE FRASER: What, therefore, is probably helpful for
you to know is whichever of the lead claimants you
decide between you or present to me as options to be
decided in January, it is going to be how many and, if
it is fewer than six, which number fewer than six. In
an ideal world you would agree that but if you can't
I will decide that on the 31st.
Round four is going to be at some point in the early
part of 2020 and this is going to be a rolling process
every term.
MR CAVENDER: Just so we have some idea, my Lord, it is
always nice to know. What is round four going to be?
MR JUSTICE FRASER: If you decide fewer than six for
round three, it will be the remainder up to six will be
round four. If you decide all six as round three then
you will have to come up with something else that is
going to be suitable for round four, or I will do it.
MR CAVENDER: I am obliged. We will try and agree.
Does your Lordship have any view to help us as to
what the optimum number from a management point of view
and -- have you listed this for four weeks, the trial
date?
MR JUSTICE FRASER: I am sure I have.
MR CAVENDER: Talking to my learned friend, we think it will
take rather longer than your Lordship seems to think in
terms of debate earlier, earlier on in the trial. So
from my own perspective I think I don't think six would
be possible in that time.
MR JUSTICE FRASER: How many do you think would be possible
in four weeks?
MR CAVENDER: I would have thought two or three. Maximum of
four. Obviously we have the NTC and the SPMC to cover.
We need to cover --
MR JUSTICE FRASER: There is no point doing fewer than two,
and you need one SPMC and one NTC.
MR CAVENDER: Minimum of two, maximum of four probably.
MR JUSTICE FRASER: All right, two to four.
MR CAVENDER: What does my learned friend think about this?
MR JUSTICE FRASER: I think he is still worrying that he has
to do something by a week on Monday. It is not a big
job, actually, and I did ask you to do it last week.
Right, Mr Green.
MR GREEN: My Lord, we didn't express a view about it being
these six lead claimants. That was my learned friend's
observation. For our part we think for it to be most
useful in resolving the group as a whole it should be as
large a number as possible, as we can possibly do.
Obviously the largest number we can do is six but we do
share some concern about whether we can get through six
full cases.
MR JUSTICE FRASER: Choose a number smaller than six then.
I don't want to come across as abrupt or unhelpful but
it is a major piece of litigation, I am tasked with
resolving it.
MR GREEN: We are aware of that.
MR JUSTICE FRASER: And I know it might come across as a bit
of steamroller but that is what I am going to do. So if
you were concerned six is too many, choose a number
smaller than that.
MR GREEN: I understand the parameters, my Lord, I am just
explaining where we were. I thought your Lordship was
asking where we were --
MR JUSTICE FRASER: No, Mr Cavender was inviting you to
contribute your initial view --
MR GREEN: It will be more rather than less, subject to what
we can actually get done.
MR JUSTICE FRASER: You mean greater rather than fewer. So
you mean some number greater than two and up to if
possible six.
MR GREEN: Indeed.
MR JUSTICE FRASER: Mr Cavender says two to four and you are
saying possibly three to six.
MR GREEN: Something like that.
MR JUSTICE FRASER: It doesn't take Einstein to see there is
a degree of overlap between those numbers. I would have
thought three or four is possible but who knows. Maybe
it will only be two. You seem both agreed six is
probably too ambitious.
MR GREEN: We would like to consider it because
your Lordship has asked us to give an answer in January
and consider it before then. We would like to do that.
MR JUSTICE FRASER: My regret is that that CMC is going to
be on 31 January, not earlier. But the reason for that
is I'm going to try and get -- I want to get the actual
judgment out as soon as possible. If I put it in on
14 January it will blow a hole in a window which, at
some cost, I have managed to carve out for myself which
I am not anxious. Although I am devoting it to the
Bates case, I would rather use it on the Bates judgment
than the Bates CMC.
MR GREEN: We completely understand that.
MR JUSTICE FRASER: Is there anything else now?
MR CAVENDER: My Lord, no. That is everything.
MR JUSTICE FRASER: Thank you everyone, and I mean everyone,
not just counsel but solicitors as well for all their
help and their work. Thank you very much to the people
who have been providing the electronic trial bundle and
to the transcribers.
I will produce this as soon as I can. If it is
before 31 January, in draft, there is the possibility
I think of -- or the necessity for some discussion on
terms of embargo, given the group action nature. If
that arises you will get an email from my clerk and
I will just be inviting observations, but obviously the
embargo is going to be rigorously enforced, and insofar
as it is necessary to change it at all to make sure that
that is in fact the case then that is what I am going to
do.
Anything else? Thank you all very much. I hope
everyone has a very nice Christmas.
(4.30 pm)
(The Hearing Concluded)
