Insurance


Cars - contracts of hire - general damages - hire charges - motor insurance - reasonableness - road traffic accidents - special damages - subrogation

Douglas Bee v Carl Jenson: CA (Civ Div) (Lords Justice Tuckey, Longmore, Sir Paul Kennedy):

13 September 2007

The appellant (J) appealed against the decision ([2006] EWHC 3359 (Comm), [2007] RTR 32) that the respondent (B) had been entitled to recover the full cost of hiring a replacement car after a car accident for which J had admitted liability.



J had driven his car into the back of B's stationary car. J admitted responsibility for the accident. B's car was undriveable and was taken to a garage for repairs. B's motor insurance policy provided that an insurance company (D) would arrange for a hire car to be supplied by a nominated supplier. D duly arranged for the supply of a hire car from a hire company (H). H provided the replacement car and charged D the sum of £610.46 for 21 days hire. D originally had an arrangement with a different hire company, but in return for D making a new overall agreement with H, H had made a contribution to the cost of D extricating itself from the previous agreement and had made a payment to an affiliate of D.



J's case was that B and D should give credit for the payment to the affiliate against their claim for the hire charges of £610.46. The judge held that they did not have to give credit for that payment. J submitted that the true cost of the hire of the replacement car was not £610.46 but only that sum as reduced by the payment made by H to D's affiliate, and that B was never himself liable to pay the hire charges since it was D, not B, which had rendered itself liable to pay for the hire charges and B could not recover for sums which he was himself never liable to pay.



B submitted that he was entitled to recover the reasonable cost of hiring a replacement car, even if that cost was payable and paid by his insurers rather than personally by him.



Held, B's liability for the hire charges was not relevant to the real issue in the case and it was not necessary to resolve the argument about his liability under his agreement with H. It did not follow from the fact that B was not liable for the hire charges of the replacement car, that he could not recover damages for the deprivation of his use of his car. There might be a question as to what the appropriate amount of such damages would be but, if he had in fact reasonably made arrangements for a hire car, there was no reason why he should not recover the cost of hire, whether or not he had rendered himself liable for the hire charges and whether or not the actual cost had been paid by him or somebody else such as an insurer or any other third party, Owners of the Steamship Mediana v Owners of the Lightship Comet [1900] AC 113 considered.



The real issue in the case was whether B could recover from J a reasonable hire charge reasonably incurred, or whether J was only liable for the true cost to B's insurers. B was, in principle, entitled to damages for loss of use of his car for the repair period, Dimond v Lovell [2002] 1 AC 384 applied, Lagden v O'Connor [2003] UKHL 64, [2004] 1 AC 1067 considered. If a claimant needed a car while his own car was being repaired, and that was due to negligence of the defendant, and the cost of hiring such a car was reasonably incurred, there was no reason why the tortfeasor should not pay the reasonable cost of that hire. If a claimant had the use of a hire car but did not have to pay for it, he could not recover special damages.



In the present case, where B did actually make use of a hire car, his general damages should be assessed by reference to the spot hire charge for a comparable vehicle. That was particularly so where the only reason why B had not himself paid for the use of the hire car was that he had paid a premium to his insurers to cover precisely the events which had happened. The fact that he was insured was irrelevant to his claim. His insurance might have the effect that, because he had not himself paid any hire charges, he was entitled to recover only general damages, but the tortfeasor was always protected by the requirement that the claimant could recover no more than the reasonable cost of hiring the necessary replacement. It followed that B was entitled to recover the reasonable cost of hire even though, having been fully indemnified, he would hold that sum for the benefit of D.



Appeal dismissed.



Barbara Dohmann QC, Jonathan Hough (instructed by Badhams Law) for the appellant; Christopher Butcher QC, Benjamin Williams (instructed by Burges Salmon) for the respondent.





Negligence



Accounts - assumption of responsibility - auditors - duty of care - financial reporting - fraudulent misrepresentation

Man Nutzfahrzeuge AG & anor (claimants/respondents) v Freightliner Ltd (defendant/part 20 claimant/appellant) & Ernst & Young (a firm) (part 20 defendant/respondent): CA (Civ Div) (Lords Justice Chadwick, Dyson, Thomas): 12 September 2007
The defendant and part 20 claimant (F) appealed against a decision ([2005] EWHC 2347 (Comm)) dismissing its claim against the part 20 defendant firm of auditors (X).



The claims arose out of the fraudulently-managed accounts of a company (E) that had been acquired by the claimant (M) in the main proceedings.



M had acquired E from another company (W). E's financial controller had manipulated E's accounts and falsified financial information for several years pre-dating the acquisition activity. X were E's auditors, and had carried out audits of E's accounts in the two years between W acquiring E and selling it to M. It was accepted by X that, had the audits been carried out with proper skill and care, defects in the accounts would have been identified. E's financial controller took part in W's negotiations with M, and represented that E's accounts were accurate.



After M had acquired E, W was itself acquired by F, and it was common ground that F was responsible for any liabilities incurred by W. Accordingly, M sought to recover from F all the losses it had incurred in the purchase and maintenance of E, and succeeded in that claim. F's part 20 claim against X was for an indemnity against any liability it might be held to have incurred to M.



The judge held that X were not liable for the loss sustained by F by reason of breaches of duty in carrying out the audits. The issues for determination in the present appeal were whether X undertook a special audit duty to W (or, so far as was relevant, to M) in respect of representations which might be made by E's financial controller as to the accuracy of E's accounts to which their audit statements related; and whether, having found that it was foreseeable that W would rely on the accuracy of the accounts in its dealings with M, the judge had erred in holding that it was not foreseeable that the nature of E's financial controller's participation in the negotiations would give rise to W incurring a liability to M for fraudulent misrepresentation.



Held, it was within the scope of X's general audit duty to protect E from the consequences of decisions taken by E on the basis that the accounts were free from material misstatement, including misstatement caused by fraud. Had it been necessary to decide the point, the court would have decided that it was within a special audit duty owed by X to W to protect W from the consequences of representations and warranties made in the share purchase agreement, including representations and warranties which had been made fraudulently.



However, the relevant question was whether X undertook a special audit duty to W in respect of representations made by E's financial controller to M as to the accuracy of E's accounts to which their audit statements related. The judge had been correct to find that X did not assume responsibility to W for the use which E's financial controller made of E's accounts in the context of his dishonest assurance to M that the accounts were accurate, Customs and Excise Commissioners v Barclays Bank Plc [2006] UKHL 28, [2007] 1 AC 181 applied. There was no factual basis for a challenge to the judge's finding that it was not foreseeable by X that W would make any representations as to the accuracy of E's accounts which went beyond those contained in the share-purchase agreement.



E's financial controller was an employee of E; he was not an officer or employee of W. There was no reason for X to think that W would allow a position to arise whereby it was exposed to liability for extra-contractual representations made by E's financial controller. Furthermore, mere foresight was not enough. Even if X could have foreseen that W might allow a position to arise whereby it was exposed to liability for extra-contractual representations made by E's financial controller, it could not be said that the judge had erred in finding that X did not provide their audit statement with the intention that the accounts to which the statement related would be used in that context. It was impossible to conclude that X, rather than W, assumed responsibility for the use by E's financial controller, on behalf of W, of the information which X had provided to W.



Appeal dismissed.



Geoffrey Vos QC, Andrew Twigger (instructed by Clifford Chance) for the part 20 claimant; Justin Fenwick QC, Simon Salzedo (instructed by Linklaters) for the part 20 defendant.





Criminal Law



Insanity - M'Naghten rules - mental health - wounding with intent - moral justification

R v Dean Johnson: CA (Crim Div) (Lord Justice Latham, Mr Justice Royce, Mr Justice King): 9 July 2007
The appellant (J) appealed against his conviction for wounding with intent to cause grievous bodily harm.



At the time of the offence, J had been leading an independent life, living in a block of flats, but suffering from delusions and auditory hallucinations. Armed with a large kitchen knife, J forced his way into a flat where the victim (V) lived, shouted very aggressively and proceeded to stab V four times. Following his arrest, J was assessed by two psychiatrists who diagnosed him as suffering from paranoid schizophrenia. At trial, they agreed that, although J had not been diagnosed at the time of the incident, he had been suffering that disease of mind at the time in question. They also agreed that at the time, J knew that his actions were against the law; however, one psychiatrist asserted that J did not consider what he had done to be wrong in the moral sense.



A preliminary hearing was held to determine whether the jury could properly be asked to consider a special verdict of not guilty by reason of insanity. The judge concluded that there was no proper basis for doing so since J knew that what he was doing was against the law.



Following his conviction, J was made subject to a hospital order without limit of time under sections 37 and 41 of the Mental Health Act 1983. J submitted that on a proper reading of the M'Naghten Rules, he was entitled to a verdict of not guilty by reason of insanity on the grounds that, although he knew that what he was doing was against the law, on the basis of his mental condition at the time he felt there was a moral justification for doing so.



Held, although the issue was one of great importance, the court could only assess verdicts of not guilty by reason of insanity in light of the M'Naghten Rules. The difficulty in the present case was that insanity was a defence where '[a defendant] was labouring under such a defect of reason, from disease of the mind, as not to know the nature and quality of the act he was doing, or, if he did know it, that he did not know what he was doing was wrong'. It was the latter part of the phrase that provided difficulty in relation to J. The issue was the meaning of 'wrong' in the context of J's behaviour. There were only two cases that had touched upon the issue and both were decided in the context of a defendant knowing that his conduct was morally wrong, but not appreciating that it was against the law and was, therefore, the issue in the present case reversed, R v Windle (Francis Wilfred) [1952] 2 QB 826 applied and R v Codere (Georges) (1917) 12 Cr App R 21 considered. Although there had been a highly-persuasive argument for extending the scope of the defence in the Australian High Court in Stapleton v R 86 CLR 358, it was unequivocally held in Windle that the meaning of 'wrong' was that it was contrary to law and did not have a vague meaning that might vary according to the opinion of different persons whether a particular act might or might not be justified. Further, despite there being evidence that on some occasions the courts had been willing to adopt a more flexible approach to the issue, the strict position remained as stated in Windle.



Appeal dismissed.



E Lowry (for the appellant); G Ladenburg (for the Crown).





Partnership



Conduct - estoppel - holding out - implied agreements - partnership agreements

James Daniel Lewis Greville v Marnie Louise Venables CA (Civ Div) (Lords Justice Pill, Thomas, Lloyd): 19 July 2007
The appellant (G) appealed against an order declaring that he had not carried on a business in partnership with the respondent (V).



V, who had formed a personal relationship with G, started an equine business. From the outset of their relationship, G was involved in various ways, including lending monies for the business. G claimed that a year later, following discussions, he and V orally agreed that they would carry on an equine business in partnership with the financial investment in the venture to be provided by him, and that each would have an equal interest in all of its assets. From the date of the purported agreement, the business was conducted with substantially increased stud activity, G was actively involved in it and provided financial support, and V dealt with the book-keeping, administration, publicity and advertising. On a website and a business card, both V and G were named as proprietors.



Their personal relationship eventually deteriorated and a preliminary issue as to whether there had been a partnership was decided in V's favour. The judge, finding that G had wished to be a partner in the business, but that V had never agreed, held that there had been no oral agreement as alleged and no partnership had been formed on any other terms after the date of the purported oral agreement. G submitted that the judge had failed to appreciate that a partnership could be implied from conduct as an alternative to being derived from express agreement; there had been a partnership by estoppel; and he should be provided with an opportunity to amend pleadings to raise a different case in support of partnership.



Held, an inference of an implied agreement for a partnership might be legitimate if V and G had not addressed in express terms what the basis of their business co-operation should be. However, if, as in the present case, they had addressed the subject expressly, including discussing whether there should be a partnership, but had not reached any agreement because one party declined to agree to the proposal of partnership made by the other, then the suggested inference would contradict the express dealings and discussions between the parties, Blackpool and Fylde Aero Club v Blackpool BC [1990] 1 WLR 1195 and Phillips v Symes (Stay of Proceedings) [2002] 1 WLR 853 considered.



The judge had examined what V and G had said and done, and had been entitled to conclude that they had not intended to agree upon a partnership. Given the domestic relationship between them and the dealings between them before the date on which G claimed a partnership had been agreed, there could be several different legal analyses and explanations for their dealings in relation to the equine business. Partnership by estoppel was not a true alternative basis for a claim that G and V had carried on business in partnership together. In the absence of the actual but inconclusive discussions, the holding out would be strong evidence in support of an implied agreement, but given the discussions between G and V, holding out was irrelevant to the issue of partnership. There was no pleaded case of a representation by V to G, relied on by G to his detriment, that there would be a partnership between them. It was not necessary or appropriate for the judge to consider any other basis on which a partnership might be proved. It would be wholly inconsistent with the basis upon which the matter had proceeded for G, having lost on the facts of the one case actually advanced, to be allowed a second chance.



Appeal dismissed.



Catherine Newman QC, Alexander Winter (instructed by TG Jones & Associates) for the appellant. Simon Clegg (instructed by Breakwells) for the respondent.





Legal Profession



Conditions - jurisdiction - practising certificates - professional bodies - solicitors

Re A Solicitor (No7 of 2007): CA (Civ Div) (Sir Anthony Clarke, Master of the Rolls): 26 June 2007
The appellant solicitor (X) appealed against a decision made by the Solicitors Regulation Authority (SRA) of the respondent Law Society granting him a conditional practising certificate.



X had practised in partnership with another solicitor. Following an investigation by the Law Society, X and his partner were reprimanded after being found guilty of a number of breaches of the Solicitors Practice Rules 1990. X's conduct was referred to the Solicitors Disciplinary Tribunal, which suspended him from practice for a period of three months, but did not impose any conditions on his practising certificate.



The SRA subsequently granted X a conditional practising certificate, which provided that he was only permitted to act as a solicitor in employment or partnership or as a member, office holder or shareowner, and only after being granted prior approval by the SRA.



Furthermore, X was required to inform prospective employers or partners of the conditions and the reasons for their imposition, and to refrain from acting in a training capacity for any trainee.



X submitted that it was inappropriate and disproportionate of the SRA to impose conditions on his practising certificate and that it should have accepted the decision of the tribunal that such conditions had not been necessary. He argued that his practising certificate should be issued without conditions or that, alternatively, the condition requiring approval of the SRA should be removed.



Held, the SRA had a well-established regulatory jurisdiction to impose conditions which were based on the need to protect the interests of the public and the reputation of the profession. The fact that the tribunal was under a duty to consider whether to impose conditions by way of a penalty was a significant factor which the SRA had to take into account when exercising its regulatory function and deciding whether conditions should be imposed on a practising certificate. However, it could not be put any higher than that. The role of the SRA was separate and distinct from that of the tribunal, which had a punitive and disciplinary function, Camacho v Law Society (No1) [2004] EWHC 1042 (Admin) considered. It was clear that the SRA had given consideration to the decision of the tribunal not to impose conditions.



Given the background of the case, it was entirely reasonable and proportionate for the SRA to then decide to impose a condition which prevented X's sole practice as a solicitor, and in all the circumstances it was reasonable to conclude that he would need some support. The condition that X was only permitted to act as a solicitor with the approval of the SRA was also entirely reasonable and proportionate in all the circumstances. It was easy to understand why X might feel that such a requirement would perhaps cause him some difficulty. Nevertheless, the SRA could only refuse approval for a good reason, and if the firm or entity X wanted to join was without any regulatory or other history, there seemed no reason why approval would be denied.



Once he had found such employment and had practised subject to the conditions for a reasonable period, there was no reason why the SRA should not remove the conditions in the future. On the basis that there was to be such a condition, there was no proper objection to the remaining conditions.



Appeal dismissed.



P Fortune for the appellant; J Goodwin (instructed by the Law Society) for the respondent.





Education



Local education authorities - parental wishes - public expenditure - schools - special educational needs - statements

O v (1) Lewisham London Borough Council (2) Special Educational Needs & Disability Tribunal: QBD (Admin) (Andrew Nicol QC): 11 September 2007
The appellant (M) appealed against a decision of the Special Educational Needs and Disciplinary Tribunal refusing to amend the statement of special educational needs for M's son (S) to reflect the school that she preferred for her son.



S was an 11-year-old with severe and complex difficulties. His statement of special educational needs was amended when the time came for him to transfer to secondary school. The local education authority (LEA) identified a maintained day special secondary school as the school where S would be placed. M wished S to go to a maintained special school which was primarily residential.



M appealed to the tribunal, which held that S did not require a residential setting and that to place him at the residential school would constitute over-provision and an inefficient use of resources under paragraph 3(3)(b) of schedule 27 of the Education Act 1996, since it would involve approximately £20,000 more per year of reckonable costs than a placement at the day school.



The tribunal did not accept that it should bring into account the cost of respite care, amounting to about £16,588 per year, provided to M by the local authority as part of its social services obligation under the Children Act 1989 while S was a day pupil.



M submitted that section 9 of the 1996 Act, which the tribunal had considered, had a wider scope than paragraph 3(3), under which the local authority could only take account of the costs and any savings as an LEA when considering 'the efficient use of resources'; that 'public expenditure' under section 9 was not confined to costs or savings to the local authority as an LEA but would also include savings on the costs of respite care; that if the tribunal had had proper regard to section 9 and the evidence about cost savings, it might have concluded that the residential school should be specified for S.



The LEA submitted that section 9 did not fall to be considered where the issue was which of two maintained schools should be named in a statement of educational needs, and that public expenditure in section 9 did not have a wider meaning than resources in paragraph 3(3).



Held, section 9 did still apply even where the parents' preference was for a school in the maintained sector, C v Buckinghamshire CC [1999] BLGR 321 and Oxfordshire CC v B [2001] EWCA Civ 1358, [2002] BLGR 279 considered.



Public expenditure in section 9 was not confined to the expenditure of the LEA. On the face of it, the words of the statute were not so confined. An LEA could call for assistance from a local health board, primary care trust or local authority when it needed help in the exercise of any of its functions, and there was no reason why the help should not take the form of information as to the costs of services which that other authority would incur or would save if the parents' choice of school was adopted.



Parliament had maintained a distinction between the functions of an LEA and a social services authority, even though both sets of functions might be entrusted to the same entity. However, LEAs and the tribunal should inform themselves of the full picture and adopt a holistic approach in accordance with the natural meaning of the term public expenditure in section 9, namely that it was concerned with the impact of a parent's choice on the public purse generally and not exclusively with the cost to the LEA, W v Leeds City Council [2005] EWCA Civ 988, [2005] ELR 617 applied and S v S County Council [2002] EWHC 1808 (Admin), [2003] ELR 78 not followed. For the LEA or tribunal to take account of savings to the local authority's social services budget did not require the tribunal or LEA to go beyond the legislative framework. The interpretation of the word 'resources' in paragraph 3(3) did not require an interpretation of section 9 which confined 'public expenditure' to expenditure by the LEA, B v Harrow LBC (No1) [2000] 1 WLR 223 considered.



Although the focus of the LEA or tribunal was on the child's educational needs, the child's non-educational needs were not alien concepts and the statement could include non-educational provision which the LEA was satisfied would be made available by some other body.



It was implicit in the tribunal's decision that it did not consider section 9 to be relevant. If the tribunal had taken account of the evidence that the cost of the residential school was very considerably matched by savings on other public expenditure, it was possible that it would have specified the residential school. Since the result would not inevitably have been the same if the tribunal had properly directed itself in law, its decision was quashed.



Appeal allowed.



David Wolfe (instructed by Maxwell Gillott) for the appellant; Mark Roscoe (instructed by the local authority solicitor) for the respondent.