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