England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
CIVIL DIVISION
ON APPEAL FROM THE HIGH COURT
CHANCERY DIVISION(MERCANTILE)
(Her Honour Judge Alton
sitting as a Judge of the High Court)

		The Royal Courts of Justice The Strand London Wednesday 12 December 2001

Tuesday 12 December 2001

1. LORD JUSTICE SEDLEY: Mr Timbrell comes before the court today in person to apply for permission to appeal against a judgment adverse to him given in August 2001 by Her Honour Judge Alton, sitting as a Judge of the High Court in Birmingham.
2. Mr Timbrell brought proceedings against Colonial Mutual Group (UK) Holdings Ltd, a financial institution for which he had worked as a trainee. As the judge found, Colonial Mutual (as I will call it) in fundamental breach of contract failed to give Mr Timbrell the training it had contracted to give him and his resignation, in consequence, took place in circumstances which the judge held fully entitled him to resign. For a man in middle age, as he was, it was, I accept, a matter of real seriousness to find himself in this situation. He went to a new job with Sun Alliance but they dismissed him when they received Colonial Mutual's reference.
3. Mr Timbrell went to solicitors who brought proceedings on his behalf against Colonial Mutual for breach of contract and for negligence in composing his reference. The reference had given two main reasons for Mr Timbrell's departure: first restructuring, which the judge found was untrue but was not the cause of Mr Timbrell's eventual dismissal by Sun Alliance; secondly, outstanding debts of something over £2,000. If such debts fell within the LAUTRO rules, putting it shortly they made Mr Timbrell unemployable by Sun Alliance or by anyone else in financial services.
4. The judge held that the debts, which were themselves not in dispute, did fall within the LAUTRO rules. The reasons are technical and I will turn to them in a moment so far as they raise questions of law. But if she was right, that was an end of the claim, because the assertion that Mr Timbrell had an outstanding relevant debt to Colonial Mutual was not objectionable if it was true and was the reason for the dismissal by Sun Alliance. There was no further possibility of establishing that, even if the debt was true and fell within the rules, it was not Mr Timbrell's but Colonial Mutual's fault that the debt had been incurred. The reason for that is this. By the time of trial, Mr Timbrell had fallen out with his solicitors. He did not consider, he tells me, that they had an adequate grasp of the issues. But acting in person he had not appreciated the need to produce acceptable evidence of consequential losses and, in particular, of a shortfall in his income consequent on Colonial Mutual's failure to train him, which would have enabled him (and he would have had to prove this too) to clear the debt before he resigned.
5. It may well be that Mr Timbrell was led into a false sense of security about this and other matters of consequential loss by a pre-trial hearing at which figures were agreed: a period of 41 months for the duration of loss and a rising rate, starting at £1,000 and rising to £1,500 a month, of loss; giving a maximum of something like £40,000. It is a misfortune of litigation that litigants in person can acquire a false sense of security in this way and think that they do not have to prove things which they still do have to prove.
6. What was worse in the present case is that following the pre-trial hearing Colonial Mutual offered Mr Timbrell £20,000, which they raised before trial to £29,000. Mr Timbrell thought that they should go higher and went on to trial when they refused to do so. It may be that he was too confident that he would get at least £29,000, possibly more, and was oblivious of the risk of which he is now, I am afraid, only too aware, that he might end up with nothing.
7. What happened at trial was that he did fail on the question whether Colonial Mutual was an organisation to which the LAUTRO indebtedness rule applied. If it was not such an organisation, then it may well have been arguable that the reference was given negligently in a respect which, in contrast to an alleged restructuring, really was responsible for the loss of the job with Sun Alliance. The rule in question is rule 3.5A(5). I will read it out from the LAUTRO rule book:

"A Member shall not appoint any person as a company representative unless the Member is satisfied on reasonable grounds that the person is not indebted to any other Member or to an associate of any other Member, to any other authorised person, to any exempted person, to Lautro or any other recognised self-regulating organisation or a recognised professional body, to the Securities and Investments Board or to the Investors Compensation Scheme Ltd or to any person who has made a loan or otherwise advanced credit to the person in question by reason wholly or partly of that person being the appointed representative or company representative or introducer representative of the Member."

8. This was the rule that tied Sun Alliance's hands, requiring them to dismiss Mr Timbrell if it applied.
9. Sun Alliance was, but Colonial Mutual was not, a LAUTRO member. That is the critical fact which Mr Timbrell now relies on in relation to the answer to the key question: was Colonial Mutual an exempted person within the LAUTRO rule that I have quoted? Section 44(1) of the Financial Services Act 1986 says:

"An appointed representative is an exempted person as respects investment business carried on by him as such a representative."

10. Mr Timbrell does not contest the judge's finding that Colonial Mutual was an appointed representative of an IMRO authorised company, namely Colonial First State Fund Managers (UK) Ltd. It was so registered with effect from 1 April 1993 and it does not matter if, as Mr Timbrell has suggested (probably rightly) is the case, it was only registered some time later.
11. Nor does it matter, as the judge herself explained, that Colonial Mutual was IMRO regulated rather than LAUTRO regulated. That seems to me to be beyond argument. The relevant exemption is from financial regulation, not from financial regulation by one or other regulatory body. The statutory purpose has been described by higher courts, both here and in Scotland, as in essence to prevent the employment in the financial services industry of somebody who already owes money to a previous employer in the industry, and Mr Timbrell has throughout recognised that that is so and is important. One can readily see why, and I will not quote the passage of his written argument in which Mr Timbrell shows clear awareness of it. The identity of the regulating body cannot make any difference for this purpose. Mr Timbrell has pointed, at page 39 of his very well-prepared bundle, to a letter from an official of the Financial Services Authority which, I have to say, I think is misleading; but such a letter cannot change the true position in law. It is Sun Alliance's LAUTRO membership which counts here, and it is the regulation, albeit by IMRO, of Colonial Mutual which makes the debt to it a debt to an exempted person.
12. I cannot say, in the circumstances which I have described, whether Mr Timbrell would necessarily have succeeded, even with legal representation. This point of law I think was a real stumbling block, but it is a tragedy for him that he has emerged empty-handed from proceedings in which he might have recovered at least a substantial sum of money to see him on his way. It is a matter of constant regret in these courts that litigation sometimes turns into a gambling transaction of this kind, but it is the way these things work and I am afraid Mr Timbrell has played and lost. The judge's findings are clear. In so far as they are on fact they are unappealable, and Mr Timbrell does not seek to appeal them. Her decision on the legal relevance of Mr Timbrell's debt to Colonial Mutual is correct and I am afraid that I see no realistic prospect of success in allowing Mr Timbrell to come to court on a full hearing to argue otherwise. Indeed, if he were to be given permission to appeal and were to lose, as I have explained would be the almost inevitable outcome, he would face a colossal bill of costs which would blight his life. For that reason too it is better that the case should end here, extremely sympathetic though I am to Mr Timbrell's situation.
13. In case it helps him in the future, I will direct that this judgment be transcribed at public expense and supplied to him.
ORDER: Application refused. A copy of this judgment to be supplied to the applicant at public expense. (Order not part of approved judgment)